Right now in our market here, it’s tough to find deals — for flips especially. We have a lot of people interested in flipping properties, whether they know what they are doing or not. And we also have a hot market, with homes not staying on the market long and buyers willing to pay a premium price for a premium product.
This week we made offers on nearly 10 properties. We’ve gotten several, but I’ve also had several come back with this:
- Highest and best buyer paid $10k more
- Highest and best buyer paid $30k more (!!) than we offered
Are these people NUTS!?
I’m all about getting deals and making money. As a matter of fact, the month of May was my best month in real estate, ever. But I am not going to sacrifice a reasonable return and a margin of safety in a deal to try and squeeze a tiny profit margin out of a crappy deal.
Don’t do it.
Now, who is to say those buyers paying $10k more (and $30k more) weren’t doing things totally different than us? Maybe they were doing smaller rehabs. Or not as nice ones. Or not tearing out walls. Or maybe they had their own in-house construction crew and could do their rehabs more cheaply than I can do mine. I liked both of those houses, and dang it — I wanted them both.
So where are places to go during times like these, when the market is so tight, and deals are hard to find?
How to Estimate Rehab Costs!
Estimating rehab costs accurately can make or break your real estate business, and it takes years of experience for even the best rehabbers to master the art. However, you can expose yourself to less risk and get more accurate with your projections by learning how the pros think when estimating construction costs.
4 Expert Tricks for Finding Flip Deals in a Tight Market
1. Look into the houses that have been on market for a long time.
Sometimes we look at a property and make an assumption that we can’t buy it because its original listing price is higher than what we would pay. By taking note of properties you would really like or even going ahead and touring them and making your spreadsheet for what you could pay, you’ll develop a list of properties you can continue watching. Sometimes after the initial barrage of showings on a property like this, the property may have more defects than the buyers will willing to pay, so it sits.
2. Keep an open mind.
Right now we have certain areas we love to buy in for flips, but we have begun doing homework in a variety of other areas that are ripe for flips and have more options available to purchase. Just don’t get yourself worked up on deals without really doing homework on the area, understanding what is available, what is selling, their days on market, and sales price to list price.
Once you have an idea of where you might want to buy, make sure you go drive the area. Get a feel for what the neighborhood is like and a good sense of the properties surrounding the potential flip deal. Make sure it is a place that has properties not just for sale, but that are SELLING.
3. Consider other ways you can flip a property.
Along with one of my partners, we are starting to acquire properties that we can pay just a bit more money for, rehab for rental/flip, rent out for several years, and then have multiple exit strategies to get out of the properties in the future. You don’t have short term capital gains this way, and you have the passive income and depreciation on the property.
I am not suggesting you OVERpay for the properties. I am just suggesting you may be able to put yourself in the best position by being willing to rent for 1-3 years on something, and then consider the multiple ways you could exit that asset in a few years.
4. Ask people.
Seriously. I get a lead off Facebook probably every other week. Why? Because I ask. I’ve bought houses off Craigslist. I ask other agents I know who know of motivated sellers. And I have a trusted group of people around me who know what I am looking for and call me when something comes up. You have to keep asking for deals. Otherwise, someone else will eventually be asking — and they will get the deal instead.
Go Get Your Next Deal!
Getting real estate deals together, putting a house under contract… that’s easy. Keeping your deal together on budget and in time, and making a solid rate of return — that is when you have to work hard and make sure you are making your money when you first close on that property. Have your game plan in place, and execute. Know what you are willing to pay, and don’t go over. Be willing to pull the trigger, but also be willing to walk away.
Real estate investing is about making money, but it’s also about not losing, too. When you decide to go into a deal with a partner or with others, make sure you aren’t so excited to get a property purchased that you pay too much money and you skimp on holding costs or your cushion. You are just setting yourself up for failure.
Stick to your criteria (beds/baths/location/size, etc.), stick to the ARV and all in percentages or amounts you are looking to make (say, $30k or whatever you are looking to make on your flip deals), and then execute!
Investors: What tricks do you have for finding deals in a tough market?
Leave your comments below!