8 Ways to Find Great Areas to Flip Houses & Quick Sale Real Estate Tips

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We completed a successful flip in a high end blue collar area and it went perfectly.  It was a 70% LTV deal and we made a nice annualized return (tip #5).  The property was in a suburb just outside of a great rental area, we categorize this area as a high end blue collar area (tip #1), which is perfect for flips and/or rentals.  There, REO sales are in the $30k range with retail sales ranging from 80-130K, which shows a great discount for REOs (tip #2).  There was only 1 for sale property in the neighborhood compared to 4 sold comps (tip #3) and there was definite pride of ownership with few rentals (tip #4). 

5 Tips for Finding Great Areas to Flip Properties:

  1. Target high end blue collar areas – These areas can be perfect for flips and don’t have too much competition like the nicer suburbs.  Many call them transitional areas and they are often just outside the rental areas or areas that are not as nice. 
  2. Seek out large differences in REO prices vs retail sales prices – If there is a large difference in REO sales price vs retail sales price, then you could have found a great area.  In this case we have REO sales in the 30s and retail sales 80-130K – a difference which is great.
  3. Look for a good ratio between Sold comps vs For Sale comps – Make sure there are close to as many sold comps as there are for sale comps.  Too many for sale properties and too few solds does not suggest a quick and high sale.  It suggests a lot of competition that will drive down your sales price and lead to a longer time on market.
  4. Make sure you’re around homeowners with pride – Make sure there are not too many rentals and there is pride of ownership, where owners take good care of their properties.  If this is not the case then the area is likely better for rentals instead of flips as long as it is not a warzone.
  5. Focus on annualized return – It is very important to focus on volume and an annualized return.  A 5% return in 1 month is a 60% annualized return where a 15% return in 6 months is only a 30% annual return.  If you can flip it quickly then do a quick analysis on annualized return as there are no guarantees you can sell it for more in the future.

We actually have another property under contract in the same neighborhood as the one I already mentioned, but this one we project to be in for 10K less; additionally, it is bigger and has one more bath then the other property.  It could be like the first flip, plus $20K profit.  Again there is only one for sale property and there are now five sold comps (tip #3).  We want to sell this one quickly in order to focus on annualized return then do another flip (tip #5). 

Here is what we plan to do.

3 Tips for Quick Sales:

  1. Weekly price reductions – We want activity all the time.  So to keep our property in front of buyers agents, we do a small $250 weekly price reduction.  It is small enough that it is not going to hurt our bottom line too much, and it has worked brilliantly as it did with our flip above.  We had 4 times the showings and it only took 2 price reductions to get our offer.
  2. Give free stuff – On this next flip we plan to offer a free flat screen TV for a sale by X date, 1-2 weeks out.  It will cost up to $1000 but that is fine with us if we get that quick sale at or near our asking price.
  3. “List High Rehab Drop” – I will explain this more below but you list the property at the highest for sale comp during rehab then when rehab is done you drop it to your initial asking price and market a huge price reduction.  It can produce a really fast sale which is incredible for annualized return.

This last quick sale tip we are really excited to try and I believe it could work.  For this deal a realistic salesprice is $90K.  We are only going to be in around $50K so $90K would be a tremendous profit especially if we can sell it fast. Oour initial listing price is $90K after reviewing the last 6 months of comps, but during rehab we wish to list it for the highest for sale comp. 

So, I went digging for comps hoping to find something $110K or above and could not believe what I found.  If I go back another month to 7 months, there were sold comps for $114K and $127.5K. You could throw a baseball and hit the roof of both houses; one is across the street and two down, the other is directly behind the house across the street.  Even more good news though, our property compares favorably.  We have an extra bath compared to the 114K comp and we are bigger and with an extra bath then the $127.5K one, everything else near even.

We don’t have to use a for sale comp, rather we can use a sold comp, 2 to be precise.  Now our high list price during rehab actually may get some activity as the price points in the neighborhood can support it.  But we are not expecting activity.  We plan to complete rehab in 1 month and drop the price to around 100K.  Then we will market this huge $27.5K price reduction: “will go fast, bring all offers, free flat screen tv if sold within 10 days from now, fully remodeled, etc etc etc.”  This could work.  In fact, we think it will work.  And if it doesn’t work we are still $10K above our initial listing price and can start with the weekly $250 price reductions as we normally do.  Basically there is no disadvantage to trying this strategy.  We may get some questions and objections from buyers agents but that means there is still activity that we may not have otherwise had.

We expect to flip this property in 6 months to be conservative.  But 4 months is a very good possibility by implementing our quick sale strategies.  With rehab taking 1 month, if we get a quick sale we could flip this in 3 months.  After closing expenses we expect a 40% return since the numbers are so great on this one.  With our conservative expectation of 6 months this is an 80% annualized return which is astronomical!  But if we do get a quick sale in 3 months we could be looking at a 160% annualized return which is unheard of.  We have our fingers crossed; we will be proactive and make the best informed decisions to make this deal go as smooth as possible.

I hope this true story and these tips are helpful.  What quick sale strategies do you guys use?  And how to you target areas prime for flips?

Photo: srbyug

About Author

Ryan is the founder of Real Return Real Estate™ , a company focused on buying property at extreme discounts, selling and renting with cash flow.

4 Comments

  1. Hey Damian. We are priced so high during rehab that we do not expect any activity. If we do get calls we explain it will not be ready until X date. Now if we do get a ton of activity then maybe we don’t drop the price, or drop it less. What we are looking for is a swarm of salivating buyers after rehab when we drop it. Ideally that creates multiple offers and a bidding war but one offer and a quick sale at or near the dropped listing price will tremendously improve our annualized return.

  2. Ryan, is there a follow-up post to this one? I would love to hear how it all turned out in the end and which parts of your strategy worked (as well as which ones didn’t!). Sorry to be so late to the party, but just getting my feet wet in this world. Thanks.

  3. Hey Stuart,

    We did one $250 price reduction then we had about 8 showings and the property sold. We did the same on 5 more deals and 4 sold not as fast. Unfortunately 2 escrows feel through on the 5th property, both times the bank pulled the loan at close which was extremely frustrating. So the price reductions did in fact work. I would consult your agent first to make sure this is a good strategy in your market. Some markets get multiple offers in the first 3 days so if you price it right it will go fast.

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