WHAT MAKES SOMEONE GOOD AT FLIPPING HOUSES?
Dec
23
2018
Peter Answers
The word “flipping” makes it sound so easy.
It might be easy sometimes (rarely) if one can buy a ready to go home or property for well below market value. Normally a bargain deal requires some investment of time and money — fixing it up for re-sale. Then too, if there is a standard broker’s commission plus closing or transaction costs going in and coming out of a deal, in the USA , one must sell for 15% more than they paid just to break even. This is not easy.
In Europe it is far worse, because transaction costs are more like 15% going in and 15% coming out. So there ( in the EU and Asia as well,) to make money “flipping” one needs to sell at 30% more than what was paid. That is, just to break even!
Here are some of my work-arounds . Legal methods I have used to avoid transaction costs.
One of my biggest “secrets” is not to buy and take title, but to just rent with an option to buy. If title doesn’t pass, there are no closing costs. If I make a direct sale (FISBO for sale by owner), there is no broker. Transaction costs can be kept to a minimum this way. On a $500,000 buy and a “flip” at $700,000, the transaction costs in Europe would negate most profits. In the USA, by making deals directly, your profit could be increased on this example deal by nearly $100,000.
Thus to summarize the main points,
A successful flip requires:
1- Getting a property at a huge discount from market value. This usually happens only with distress property that the owner must get rid of in a hurry. Why? Divorce, Deaths, Legal problems, something wrong with the property.
2- Acquiring a property directly, preferably with an option, not passing title until it is sold.
3-Being good at marketing- that is creating an irresistible deal —
A) Maybe no money down financing to the buyer;
B) Exposing the property to all potential buyers. How to do this (B) depends on the circumstances. More than once I have advertised an open house with an auction (conducted by me! Not by any outside outfit that charges up to a 30% commission). My auction is typically on the evening of the same day as the open house. I used newspapers, internet, positing on trees and lamp-posts and calls to all my friends in the business. I spell out the how-to-do-it details in my books Think Like A Tycoon, Distress Property and also in other answers.
Category: Peter Answers
By P.T.
December 23, 2018
Source : http://www.petertaradash.com/what-makes ... ng-houses/