So you want to flip a home. Yeah, well, you and everybody else.
“Just more than 207,000 homes were flipped in 2017, according to a new report from Attom Data Solutions, which defines a flip as a property bought and sold in the same 12-month period,” said CNBC. “That is the highest number of flips in a decade. The number of people or companies flipping homes, 138,410, also jumped to a decade high.”
And therein lies the problem. With so many homes flipping and home flippers competing for the same properties, how does one even go about finding a place to buy these days?
We have some ideas.
Work with a savvy real estate agent
This is key because your exposure to distressed properties will be limited. Also, a savvy real estate agent may have connections—the kind of connections that could find you a flip before it hits the market.
Keep your eye on really distressed properties
Pass by an eyesore on your way to work every day? Is there a house down the street with an unkempt lawn and noticeable deferred maintenance? You never know what’s going on inside, but your Realtor may be able to find out. You could be in the right place at the right time to get a great deal and even help out someone who needs a hand by getting them out from under the home before it’s taken by the bank.
Go where the projected growth is
It may already be too late to score in a place that’s on one of those fastest-growing cities lists. Prices may have appreciated past the point of potential profit on a flip, and inventory is likely low. Instead, pay attention to cities that are projected to be on the rise so you can get in before everyone else does.
Look for estate sales
“What they could do to make it easier is combine the two. You know, Mr. Kline died yesterday, leaving behind a wife, two children, and a spacious three-bedroom apartment with a wood-burning fireplace.” — Billy Crystal’s Harry on the difficulty of finding a place in NYC in When Harry Met Sally
Turns out Harry was on to something. If you’re looking for a house to flip, you have to get creative. Poring through the MLS for a house may yield a winner here and there, but the competition from other would-be flippers is gonna be fierce. That probably means that if you do find something flip-worthy, you may end up paying more because you’re bidding against other people, and that will reduce your potential profit. Does that mean checking the obits? Probably not. But estate sales…now that’s another story.
Check in with landlords
Are there any rentals in your neighborhood? Maybe one of the owners would be willing to unload an underperforming home. Maybe that same individual doesn’t want the hassle of getting it ready for sale.
Don’t be afraid of the city
Dingy downtown areas in many cities across the country have turned many a would-be real estate investor into a flipping pro. In many cases, these buyers took a chance on an area that many would have described as “iffy.” Investors often call these “transitioning areas” and some pros, like Christina El Moussa from Flip or Flop, go right ahead and call them bad neighborhoods. These areas can provide great bang for the buck if you choose right.
“It seems like one year a particular neighborhood will be really ‘bad’ with a lot of vacancies and a high crime rate,” said El Moussa on Real Estate Elevated. “The next year the crime rate will be a little lower, and there’ll be fewer vacancies. The year after that, it’ll be an affordable neighborhood, and before you know it, people are paying a lot of money to get houses in the area.”
Don’t be afraid of the suburbs
Have you heard? The ‘burbs are hot, even with millennials, who many thought would always embrace the city lifestyle. One thing millennials want, however, is an updated, move-in ready property (unless they’re flipping, too!). You can grab their attention with a well-done property in a nice family neighborhood.
Watch for moving trucks
There’s a scene in the Sex and the City movie where Miranda, in searching of a new apartment in New York, runs into a building to inquire about a vacant apartment because she saw men loading up a moving truck out front (Apparently, all of our best ideas for finding a flip should come from movies filmed in New York!). While no one is recommending you go running into a home as someone is moving out, the moving truck is something to look out for in target neighborhoods. Someone who’s moving out under curious circumstances—no one in the neighborhood knew the home was for sale, it’s late at night, etc.—is someone you may want to pay attention to. It could be a foreclosure situation or some other opportunity you want to take advantage of before someone else does.
Look at auctions and foreclosure listings
“The first step in successful fix-and-flipping is finding the profitable property in the first place. You can call it investor’s common sense to look for properties in the best areas selling at low prices,” said Do Hard Money. “However, many new real estate investors come up empty-handed month after month until they finally give up in frustration. This is because they’re all doing the same thing: they’re looking in the same place. Most of the new flippers look on the MLS for potential properties. Dare to do differently. Look for properties by lesser-known means, such as foreclosure listings, estate sales, short sales and real estate auctions.”
Check the schools
Don’t have kids? Doesn’t matter. Your buyer may, and that means the schools are important. And, in truth, even buyers who don’t now or may never have kids still seek out good schools because of their positive impact on home values. “If you’ve found an affordable home in a neighborhood that’s on its way up, your next step is to research the local schools,” said Money Crashers. “Homes in good school systems sell faster, and command higher prices, than homes in mediocre or poor school systems. Use websites like GreatSchools, SchoolDigger, and Niche to see rankings and reviews of local schools.”