Profit Generating Tips For House Flippers
Based on a report from RealtyTrac, house flipping can be a very profitable business! (In case you didn’t already know)
Investors averaged a gross profit of $76k per flip on homes flipped in Q3 2014, a 36 percent gross return on the initial investment. I spoke to some of our regular investors that we work with and they were willing to share some of their tips. Here are some of the top profit generating strategies from our most successful clients:
LIVE WHERE YOU WANT, INVEST WHERE IT MAKES SENSE
Get better deals by diversifying and opening a new market. You may not want to more there, but thats ok. Look for places where you can use your existing network and the type of deal supports your exit strategy. Many investors move to the market they plan on investing in, but it’s not essentail if you have your plan in place and have a good support network.
YOU DO THE SOURCING, THEY DO THE REST
Become a wholesaler and assign the contract to another buyer who will close on the property. Find out what investors want and get proficient in determining the repair cost and the After Repair Value (ARV). You can even offer your property deal to other wholesalers. We work with many of our clients this way.
REMOVE FINANCING CONSTRAINTS, RETAIN THE UPSIDE
Expand your exit strategy by considering buy and hold. It allows you to build up cash flow but you need to be prepared to be a landlord.
Alternatively, you can offer seller financing and often receive a higher return than rental, an inflated sale price, and a sizable downpayment from the buyer without having to deal with being the landlord. Talk about having your cake and eating it too!
LEVERAGE MORE, PUT MORE VALUE ON VALUE!
These last two tips were the most common among our clients. Maximize the loan amount without sacrificing interest rates. Compare the Loan-to-Value and the Loan-to-Cost offered by each lender that you are considering. It can really hurt your deal when you later discover you could have saved that $5,000 in interest payments if you spent a few more hours looking at different lending options.
LOWER YOUR COST OF CAPITAL
Stop paying 3+ points and $1,000’s in fees. Typical Hard Money Lenders are a thing of the past. We and many of our clients that we’ve referred to LendingHome are saving thousands with low rates and points, no junk fees, and a speedy close process.
Apart from the rehab cost, the biggest single cost in this business is the cost of money so any help in minimizing that will improve the bottom line and turn a decent deal into a great deal. If you think we’ve missed anything, I’d love to hear from you.
Hopefully some of these tips come in handy for you and help you to take down more properties, expand your business and obviously for us all to be able to do more business together.
So what are you waiting for? Go make some money!