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3 Factors for Successful Real Estate Flipping

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Although I’m not a huge fan of flipping, it can definitely be a viable investment property strategy.  In fact, I’ve successfully done 3 flips since 2005 even though my primary strategy is to “buy-fix-hold.”  So even for long term multifamily investors like me, flipping has its place.

That said, a property flip is never a slam dunk; it requires diligence, hard work, and a little bit of luck to successfully execute a flip.  Your overall flipping success will largely be dependent on 3 things: finding good deals, having access to adequate capital, and having a network of prospective buyers.

The first factor – finding good deals – I would hope is self explanatory.  There’s an old saying in real estate that you don’t make money when you sell property, but rather when you buy.  In other words, if you’re not buying a property at a bargain price, then you have very little chance of making money when you sell, especially with a short term strategy like flipping.  Luckily, the market is still in the toilet so it’s not all that difficult to find cosmetically-challenged REO properties for as low as 40-50 cents on the dollar.  But even with that, you must be patient and negotiate hard to ensure the best deal possible.

The second factor is that you must have access to capital, such as cash in the bank or a line of credit.  This is important with a flipping strategy, because many REO properties do not quality for investment property mortgages.  Additionally, you can often get a price reduction if you are willing to pay cash and close quickly, because this removes much of the risk from the seller’s perspective.  Finally, you will need access to capital in order to make the necessary repairs and cover all the carrying costs.

Finally, of course you cannot flip a property without a buyer, so you’ll need to accumulate a network of potential buyers.  You can create this database by joining property owners associations in your local area, asking your rental property agent or title company for referrals, listing your properties online with a contact form, or even doing some print advertising.

To sum it up, in order to successfully flip a property, you must pay less than its retail value, have cash-on-hand, and have a network of potential buyers.  Good luck and happy flipping!

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