Yes, you can still make a ton of money flipping houses, but the downside of a real estate market where it's profitable to flip is that good flip candidates are hard to find. The reality on the ground is that in those areas of the country, banks are frequently able to get market value for foreclosed properties--something unheard of a couple of years ago. So there really aren't that many steals and deals out there, but if you are in this business, you've got to be resourceful and get creative in finding properties.
Love Your Realtor
Thriving flippers know that networking with the right realtors is one of the keys to being successful. Lots of realtors specialize in distressed housing and have the relationships with the financing companies that flippers don't, and will let you know when an interesting property is getting ready to hit the market. The really good realtors rehab houses to make them sellable (and finance-worthy); if you have private financing and can take a property out of circulation before the realtor has put any money into it, then you're the hero to everybody involved.
Research the Market
Simple logic dictates that hot flips are in hot markets and, as outlined above, buying way below market value just isn't going to happen. So go back to your realtor and ask for some market data on the emerging markets in local real estate--a subdivision or two removed from the areas with a day or two marketing time. You can get data on marketing time, price listed relative to price sold, and contract to close time--all factors near and dear to the heart and wallet of a flipper. And if you're willing to invest your money, or someone else's, and expect a solid return, you should do as much research and gather as much data as you can. Lenders love borrowers who have lots of market stats at their fingertips.
Look for housing trends (right now Mid-Century ranches have a shelf life measured in hours) and economic development news, school zones, and infrastructure. Also, drill down to specific zip codes or subdivisions. Doing comprehensive research gives you the advantage of knowing where second-or third-time buyers are going. That's why schools, commute times, and the closest Target matter. Another consideration is that not all flips are distressed--lots of those coveted ranches and bungalows have had one owner and are just dated.
Cultivate Your Contacts
When you've got a few flips behind you, even if you're a DIY pro, you've got a network of vendors. Leverage those relationships--these contractors, electricians, plumbers, landscapers, and other subs are better than a magic 8 ball in letting you know where the action is. One of the tenets of Flipping 101 is to get to know the foreclosure attorneys in your area, but take it a step further and get to know estate and family law attorneys as well. Estate attorneys deal with out-of-town heirs and dated and or run down properties--the perfect cocktail for a flipper. Family law experts deal with divorces and selling the residence is part of the property settlement, so fast is usually preferable to profitable.
Private financing provides you with a tremendous advantage over buyers who use more traditional banks. At the closing table everyone is a cash buyer (nobody comes in with poker chips or seashells) and even the guy who isn't financing isn't walking around with the funds in a checking account. When you have a relationship with private money you can access the money for a transaction within days instead of weeks, and you're working with people whose entire business model is based on short-term lending, not car loans or checking accounts.
When you're ready to streamline your flip financing, contact us at Center Street Lending for more information on how to make sure your flips don't flop.