subject: Flipping Houses - Deals That Dictate Success [print this page] Flipping Houses - Deals That Dictate Success
I built my business base in San Antonio, and since have flipped houses across the country. My system works all across the nation in different markets, with different houses. I'm not relegated to just one market or one state. Others elsewhere also have the opportunity to tap into my system.
Regardless of where I flip, the basic principles are the same: find motivated sellers, solve other people's problems, buy at a discount, control costs, and use different selling strategies.
WHEN FLIPPING, BUY A PROPERTY, NOT A MARKET
I don't buy anything at full price. Whether it's a car or house, there are always people offering a discount and a deal.
Let's say you find a house that in a good market is worth $600,000, but in a slow economy is worth $450,000 and you can pick it up for $280,000. Does the market dictate what you do or does the property dictate what you do?
Properties and the deal dictate how you do business. It is not the market that dictates it. Markets do not dictate my power to buy a property. The property dictates whether to buy.
FALLING REAL ESTATE MARKETS
In a falling market, the house will not be worth the current market price after six months. Your best insurance is to buy it extremely under value, so even if you lose some equity, at least you will not be upside down on the property.
The slower the market, the more undervalued you want to buy properties. You want to buy houses that are 50 cents, 40 cents, or even 30 cents on the dollar. That's an insurance policy against paying thousands to hundreds of thousands of dollars out of your pocket.
Let's say you live in San Francisco. Maybe your house is worth $800,000 now. But as prices decrease, your house might be worth $650,000 in a year. What I suggest you do is look for a deal for $450,000. Buy that house and sell the one you are living in.
REAL ESTATE INVESTMENT INSURANCE
I know some of you are reading this and saying, "You can't find those kinds of deals!"
Oh, yeah? They're easier to find than in hot marketplaces.
I would pick up a deal in the $400,000 range. Then I would do a short sale through a bank because those sellers get very, very motivated.
Your $800,000 house already has equity in it. I suggest putting it on the market for about $680,000, or 15 percent to 20 percent under market value so you can move it and pull out that equity.
I suggest buying a property that's greatly undervalued because it would be like having an insurance policy. Because of that insurance you do not have to lose tens, and possibly hundreds of thousands, of dollars in equity. Make that move quickly, before everyone else wises up and does the same.
Maybe your property will sit on the marketplace for a while. But if your property value has gone up 100 percent say, over the last four years, taking a 20 to 25 percent discount now still leaves you with a 75 percent gain. Then find another property that is valued at 40 to 50 cents on the dollar. You have now insured yourself against losing tens to hundreds of thousands of dollars.
You can find deals like this. With the rising number of foreclosures, the market is becoming flooded with motivated sellers and the banks are going to become even more motivate to sell. If you know how to structure short sales and buy the right way, you will be able to find those deals.
