Pittsburgh-based investor and house flipper John Walker of Turnkey Investment Properties His business partner, Jim Auten, typically carries about 10 flips with him at any given time. When interest rates were low and business was booming, that number doubled.However, due to high prices and low inventory, many colleagues flippers Get out of the market.
“This is a case of the last man standing right now,” Walker says.
According to recent Bank of America research, it’s a scenario playing out across the country, with sellers holding on to the status quo for fear of falling victim to low mortgage rates. Approximately 80% of US mortgage balances have interest rates below his 5%.
“This is a needle in a haystack scenario, with margins thinner than ever,” Walker said. “You’re buying high and trying to push the price up. complete Go to any length to make a profit. The good news is that there is very little product on the market, so a successful flip will generally find a buyer. Still, you need to be very careful on the purchasing and construction side to make a profit. ”
Northern New Jersey-based flipper Shaheer Williams luxury urban development I am a 30 year veteran of the real estate industry. He regularly does some flips. And he says the current market is the tightest it’s ever been.
“At this point, my advantage over a lot of new flippers is my reputation,” Williams says. “Other indicators such as construction cost and purchase price don’t leave much room for negotiation, so we win deals based on our track record and connections.”
Looking to flip a home but worried about the risks? Here are some tips from Walker and Williams to minimize risk and stay afloat in a tight real estate market.
1. Use private money instead of foreclosure
build a long-term relationship with private lender Instead of asking for monthly payments, you get paid once the deal closes, which reduces the stress of shelling out money in the middle of a downfall.using deed in lieu of foreclosureThe financing agreement includes a guarantee that the property will revert to the lender if the deal doesn’t go through, so the flipper’s personal funds aren’t tied up in the project, giving investors peace of mind.
Mr Walker said: “We don’t mind paying 10% to 12% as personal money because we know there are no headaches or additional hurdles to jump through. We fund it 100%. We always deliver results, even if rising interest rates hurt our profits.”
2. Always closed
“Real estate agents come to me first with deal information because they know I’ll close the deal,” Williams says. “In this business, your reputation makes all the difference. You make your money on the buying side, so when a good deal comes along, real estate agents need to know that the buyer will walk away without any problems.” there is.”
3. Fine-tune your renovation to save costs
Flippers should scour every nook and cranny of their home looking for ways to save money. Here are some proven tips to minimize expenses. Refurbishment:
- Save and refinish your existing hardwood floors or use vinyl plank floors in place of new hardwood planks.
- Repair your old windows instead of replacing them.
- Reglaze the area around the bathtub and shower.
- Refinish your kitchen cabinets with paint and new hardware.
- Add even more livable square footage by remodeling your attic and basement. A chic, partially finished basement that resembles a trendy coffee shop adds an element of wow and costs a fraction of the cost of a fully finished underground man cave. Flat black rafters, exposed industrial can lighting and ductwork, painted brick walls, and floors covered in commercial-grade rugs look great in photos and are popular with buyers.
- Use gravel instead of asphalt or concrete on your home’s exterior, or repair the concrete instead of replacing it.
- Obtain a real estate license Access new deals and save on fees.
4. Reliable contractors are key
Most flippers agree that good contractor Gold-plated hardware is worth its weight in gold. If the project is likely to be lengthy, the cheapest contractor may not always be the best. Quick flips save you money by getting your property listed quickly and reducing your cost of ownership.
“Broker contractors always ask for lower rates to get work,” Walker said.
“Don’t be fooled by the listed price,” agrees Williams. “I used to manage my own staff to save money, but it was always a headache and cost me valuable time in the long run when I could have found other deals. Now I’m using some reliable G.C. I know I will finish my work on time. ”
5.ARV-based modification
An additional bedroom increases value, but an expensive chandelier does not. Similarly, high-end luxury appliances won’t change your needs. ARVs. Choose home appliances and fixtures that are commensurate with the selling price. Antique and vintage shops can unearth inexpensive treasures found in the right setting.
6. Virtual stage
Moving furniture in and out of your home can leave scratches and can be expensive to stage, especially if your home has been on the market for a while. Virtual staging of your home can be a fraction of the price, especially when using overseas staging on freelance sites such as: Fiber.
7. Stay on top of design trends and keep the buyer in mind
No one wants a home that looks outdated. Similarly, a home that resembles a futuristic nightclub may limit the buyer pool. Always renovate with your target buyer in mind. Understanding the demographics of your neighborhood and the people who are attracted to your home’s price range is important to achieving a quick sale.
8. Renovation budget and sales price are determined by interest rates
Rising interest rates have thrown a spanner into economic activity Affordability of buying a home. Rising home prices, combined with lagging wages, are forcing potential buyers out of the market.
According to the National Association of Realtors, the price of a typical home in June 2023 rose more than 14% year over year to a record $410,200, an increase of more than 40% compared to pre-pandemic October 2019. It became. However, that number is Falling to $387,600 in November.
Despite expectations of interest rate cuts in 2024, Increase in construction costs That means if you want to attract buyers to your sale, you’ll need to downsize your home and buy a home that’s cheaper than when interest rates were lower.
9. Future-proof housing
Future-proofing your home is relatively inexpensive, but it can give you an edge over other homes on the market and drive up the sale price.
Future-proof add-ons include:
- We offer all-electric homes with energy-efficient smart appliances and additional features like Nest thermostats and remote-controlled camera doorbells.
- Provides level 2 EV charger compliant wiring.
- Conserve water by using low-flow fixtures, equipment, and gray water systems.
final thoughts
Low inventory means house flipping is still viable, but every aspect of the process requires close attention to detail. It’s more important than ever to buy right the first time.
Often this means going back to old-fashioned detailed techniques such as: drive for dollarsknocking on doors, and local networking That’s because personal interactions with sellers can outweigh AI-generated content in mass email campaigns. Online marketplaces (Facebook and Craigslist), social media, and real estate auctions remain effective as well.
During renovations, bullet-point all suggested upgrades. Consider ways to save money.
Finally, all-cash buyers will be at the front of the line at the time of sale. To ensure a quick sale, consider negotiating a discount to minimize carrying costs.
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Note by BiggerPockets: These are the opinions expressed by the author and do not necessarily represent the opinions of BiggerPockets.