Many real estate investors who are interested in making money in today’s market believe that the days of making “fast money” in real estate are over. However, this is not true. While it is undeniably harder to “flip” houses in today’s market, many real estate investors have developed highly effective systems that enable them to turn houses around quickly without putting any money down or even having to take title to the property.
Today’s market is ideal for long term investors because prices are so low that the “buy and hold” or “buy and rent out” strategies are becoming extremely popular. However, you can still flip houses – if you know the requirements for this in your local area. There are several things to consider. First of all, you need to know what other investors, who are buying and holding, are willing to pay for properties. Generally, they will want to pay 70 percent or less of market value. This means that you need to get your properties under contract at less than 70 percent (and preferably at 60 percent or lower) of market value if you want to be able to sell them quickly for a profit.
Next, you need to know the legal ramifications of flipping in your area. Some real estate investors flip short sale houses. Getting a house via short sale is a great way to get a bargain-basement price on it. However, some states have made it illegal to flip short sales, or they compel the short sale buyer to “season” the property by holding it for a period of time that can be months or years. Also, some lenders will refuse to short sell a house if they know that the investor buying it does not plan to keep it. Some will even file fraud suits if you make too much money on a short sale! Although this is just one example of a type of transaction that can be “flipped,” it demonstrates clearly the myriad complications that can arise during the process. You need to be certain that you understand all of your responsibilities to both the homeowner and your buyer – and how to limit your liability to the greatest extent possible in order to protect yourself and your deal.
Once you have identified these pieces of information, you are ready to flip in today’s market. All you have to do is track down leads on houses that have owners likely to sell for your “magic number,” which, as we discussed, will likely be 60 percent or less of the market value of your house. There are a lot of ways to find these homeowners, including posting bandit signs targeting distressed homeowners and sending out yellow letters to people who are more likely to be interested in selling properties at a discount, such as absentee landlords or people who have recently inherited property.
Flipping properties is a great way to generate “fast money” in real estate. However, it, like anything else, requires a system. You may have to ask some questions and make some mistakes – particularly if you opt not to get training or hire a coach to help you. Most people who succeed in flipping in today’s market are very dedicated and pay close, close attention to details. They also do not try to force deals or “make the numbers work” when things do not appear to fit into their local requirements or their flipping equation. With careful research and a methodical process, you can successfully flip multiple properties a month in today’s market.
