Flipping houses can be an insanely lucrative business. However, you also need to get all your ducks in a row and have an ACTION PLAN in place to make sure you’re making big bucks — instead of losing them.
Part of your Action Plan is knowing where you draw the line between saying “yes” to deal instead of “no”. Ask yourself what your minimum profit per house flip needs to be. $70,000? $50,000? $35,000? Only you can really answer the question. Make sure your expected returns are realistic given your market, but there’s also no reason not to shoot for the stars.
If you need to make $50,000 or more per deal to justify the time, energy and other resources a 4 to 6 month project could take, then don’t back away from that. Be ready to say “no” if the numbers don’t match up. You still might be able to monetize a lead by wholesaling it to another real estate investor for $10,000 or so, but there’s a lot to be said for knowing what type of investor you are from the beginning and sticking to it.
Your plan and your business goals are yours alone — don’t let anyone tell you what you should or should not be willing to take. Part of being a real estate entrepreneur is being able to call the shots. If others are willing to settle for less, then that’s their business. Most people who flip houses know that the expected profit is also a safety buffer for the unexpected, meaning that your $50,000 profit margin is not necessarily greed at all — it’s responsibility in action.
Here are a few extra tips for getting those high-end house flip profits:
- Have a three-pronged marketing attack: direct mail, online/SEO and networking. Only by having multiple lead sources will you be able to choose the juiciest of deals.
- Know your neighborhoods well so you understand how to position your rehab for the best profits.
- Get your contractors to outbid each other for your repeat business – reducing costs is a super way to increase your bottom line. Offer them free plugs in your rehab videos in exchange for a better project bid.
- Negotiate, negotiate, negotiate. Instead of speaking with a seller only about price, get them to see the value in not waiting 6 months for a buyer to choose their home over all the others available for sale. How much value is there in not making another 3 to 6 mortgage payments? Maybe a lot – make sure they understand this extra benefit that you bring.
- Ask for discounts on closing from your escrow company. If you bring them enough business throughout the year, they should be able to give you preferred pricing.
- Take advantage of seller financing to reduce your private lending costs. Have a homeowner with equity? Maybe they can take a partial payment now in return for leveraging the equity in their home and waiting a few months for a larger payoff.