Flipping Houses

Fix and Flip Tips: 5 Ways to Ensure You Turn a Profit

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20 Articles Written
aerial view of houses and culdesacs and tree-lined streets

Fixing and flipping properties is a great strategy for many real estate investors. It is action-packed, provides a quick return on your money, and can be fun if you like fixing things up. Most importantly, it can provide a good return if you are smart about the property you select and the improvements you make.

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Unfortunately, there have been some recent reports suggesting returns on fix and flip are getting squeezed.

If fix and flip profits are really declining, it is more important than ever to get smart when it comes to finding, selecting, and improving your fix and flip investments. So, if you aren’t discouraged by the trend of declining profits and still want to get into the fix and flip game, here are some suggestions for finding a good property that will produce decent returns.

How to Find Homes to Fix and Flip

1. Choose the right neighborhood

Start local or with a market you know, especially if you are a beginner. When you live, work, or have connections in a real estate market, you will have the inside track on which areas are on the upswing and which are not.

Starting local also means you will save time and money. You’ll spend less time on travel, and you’ll know where to get the best deals on supplies, etc.

Related: The Best Kept Secret for Finding Off-Market Deals

2. Select the right property

If you are new to flipping, a good place to start is with the most liquid products on the market. These tend to be condos (in certain markets) and single-family homes at median price points.

In light of the current affordable housing crisis, a good bet is to focus on modestly priced, clean, bright starter homes. As much as possible, try to find properties that already have popular features and layouts.

Another tip is to search for real estate that requires moderate renovations, as opposed to more extensive ones. It is a lot less costly to update flooring, countertops, and paint than to start tearing down walls.

No matter how experienced a flipper you are, you will always run into surprises. If you don’t keep the unexpected to a minimum, your profits can quickly disappear.

3. Pay attention to market conditions

Even if you stay local and know the neighborhood, it is a good idea to pay attention to the stats on market conditions. Make sure to familiarize yourself with:

  • Pricing and condition of comparable properties
  • Average number of days properties are on the market
  • Property taxes

4. Know your numbers

Speaking of numbers, the better you are at estimating costs and expenses, the better you will be at projecting and realizing your profits. There are many tools and resources to help you estimate costs and expenses, but there is no substitute for experience.

The more properties you flip, the better you will get at making estimates. When starting out, you’ll want to be conservative in your calculations, pad your expenses to cover the unexpected, and stick to your budget.

Related: Flipping Houses: The 5 Best Fix & Flip Financing Options

5. Seek properties and submit offers—aggressively

Even if you don't think you'll get the deal, go ahead and submit an offer if you find a property that meets your requirements. If you've been in real estate for any amount of time, you know that deals can fall through at any moment, for many different reasons.

For example, the other buyers may not have the money lined up or they may have too many deals in the works. But if you don’t make an offer, you won’t be able to take advantage of opportunities as they arise.

Home Improvement / ladder, paint can and paint roller

Where to Find Deals

So, what are the best ways for fix and flippers to find properties? Here are a few resources you can, and should, consider when looking for a house to flip:

  • Auctions
  • REO
  • Short sale
  • Traditional (MLS)
  • Seller direct
  • Competitor fix and flippers (maybe they have too many going on or the timing of funding doesn’t work, so they may be able to pass it on to you)
  • Mom-and-pop owners

I’ve had success targeting mom-and-pop investors who own multiple properties. Sometimes these owners are tired of the work required to manage everything. Other times they have run into financial difficulty and are ready to offload.

Many don’t want the hassle of selling properties one at a time, so they are open to negotiating. I have been able to get great deals on dozens of these properties—as much as 15 percent below market.

To find these types of owners, buy a list of properties with absentee owners (owners with a mailing address different from the property itself) and look for owners who show up more than once on the list. These will be owners of multiple rental properties.

Conclusion

Fix and flip can be a great strategy for real estate investors—but it isn’t always as easy as one might expect. You need to do your homework, know your numbers, and have some patience. When you do, flipping can be a great source of income.

Once you get your formula down and find the deal sources that work for you, make sure you don’t get complacent. Be aware that the best sources for fix and flip properties can change with market conditions, so monitor and adjust as needed.

Questions? Comments?

Let’s talk in the comment section below. 

Ian Colville is the Managing Partner of CCM Finance. Ian is a native of Minnesota (born in Rochester). He brings both a formal education (BA in Economics and MBA) as well as industry experience to ...
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    Henry Hogeterp Flipper/Rehabber from Grand Rapids, MI
    Replied 3 months ago
    I'm just getting started in my real estate adventure and the financing is proving to be the biggest hurdle to overcome in getting started. It seems like a chicken or the egg dilemma. When you find a deal the seller wants to see you have financing ready to go. But when you talk to financiers (so far I've just talked to hard money lenders, and FHA lenders) they want you to come with a deal in mind. Which comes first the financing or the deal? I want to check out private lenders more. I'm working on improving my credit score to give me a better shot as well.
    M. Ian Colville Lender from Minneapolis, MN
    Replied 3 months ago
    Any hard money lender should be willing to give you a pre-approval letter without too much hassle. They are in the business of helping people get deals done so I recommend finding one that is willing to solve this problem for you quickly.
    Jeff Bosaw Rental Property Investor from Saint Louis, MO
    Replied 3 months ago
    Hi Ian, Could you explain the process of buying lists of absentee owners? Where do you acquire this? Do you need to go into each municipality to get this info? I was thinking of searching rentals on local searches like craigslist or market place and message or call people whose number shows up more frequently. Might be just a property management company but maybe they could relay a message to the actual owners.
    M. Ian Colville Lender from Minneapolis, MN
    Replied 3 months ago
    Jeff - This is an easy one. Here is where we get our lists: https://www.listsource.com/quick-lists/absentee-owners.htm I have no affiliation with List Source. I just use their lists. Call them if you need help building search parameters on the site. They are helpful.
    Ron Galam
    Replied 2 months ago
    a great way to engage in real estate with top agents https://ronandesti.com/ they are the best you can find in Los Angeles and San Fernando area