Flipping houses can be an incredibly profitable venture that nets you an amazing return on investment — as long as you know how to find houses to flip. You can research numerous avenues to find those diamonds in the rough. Undervalued properties, short sales, auctions, and wholesalers are all great choices.
Ready to find those great deals that flippers dream of? Let’s take a look at your many options for finding excellent properties to spruce up and resell.
What to Consider Before Looking for Houses to Flip
Real estate investors don’t just need to know how to find houses to flip. They must also understand how to assess which cheap houses would make a good asset. As such, you need to think about these factors to identify good candidates for house flipping.
Location
To make money flipping houses, you need to find the right area, one that isn’t overvalued but that is also in a desirable location within an optimistic market. Generally, you should target distressed properties near a hotter neighborhood, as this will help you bank on buyers who are seeking to benefit from properties near a revitalized community.
Budget
You’ll need to get a feel for the local real estate market and ascertain whether the fair value of the property will be within your budget.
Additionally, you will need to factor in rehab costs and have a good idea of how much the overall house flip will cost you so as not to pick time-consuming properties that won’t have a good after-repair value (ARV).
Inspections
When you find distressed properties, you should always order an inspection. Get familiar with the issues that could scuttle a real estate deal, such as extensive water damage or termite infestations, so you know when to walk away from a potential investment property that will be a liability.
Where to Find Houses to Flip
House flippers have a variety of ways to profitably find houses, ranging from the familiar to the more obscure. A good real estate investor will develop a strong network of others in the house flipping business who can clue them into how to find houses to flip in their particular area. They’ll also use a variety of different resources to find cheap houses that meet their needs.
These are some of the most popular ways to find distressed real estate, each with its merits.
Wholesalers
Real estate wholesalers find distressed sellers, obtain a purchase contract, and then resell this contract to real estate investors. These deals happen quickly, as they are seeking to turn a fast profit just as you are.
Generally, wholesalers are restricted in what kinds of advertising they can do, so you’ll need to talk to other real estate professionals to obtain these connections. When you do, however, you can often find great options below market value, even with the wholesaler fee.
It’s important to note that a wholesaler will not inspect or assess their damaged housing stock, though they may be able to clue you into the risks involved in buying the contract from them.
MLS
The multiple listing service can be a great way to find undervalued properties that have been on the market for a long time.
Be sure to check the expired listings. Many homeowners will go well below the asking price if they haven’t been able to sell during the listing period, especially if they are motivated to sell because they need the funds for a new home.
Auctions
Bank-owned properties, also known as real estate-owned (REO) homes, can often be in relatively good shape. While these may be listed on the MLS and available at places like Redfin, you may also find them on Fannie Mae’s HomePath or Freddie Mac’s HomeSteps.
Tax records from the local area can help you find recently foreclosed homes or those in danger of being delinquent on property taxes, allowing you to contact the bank when the foreclosure process begins.
Developing good contacts with local banks can help you capitalize on bank-owned homes before other investors, letting you get the best deal.
Foreclosure auctions occur when a bank releases a foreclosed home onto the marketplace for bids. These property auctions often allow you to find properties well below market value, making them a great option for a house flip.
Be advised, however, that it can sometimes be difficult — though not impossible — to get financing for an auctioned property. You may need to work with a hard money lender, so be aware of the risks of this financing option before flipping houses with a hard money loan.
Last in this category are short sales, which can be very helpful for a house flipper with good connections in the real estate business. A short sale is when a distressed seller offloads their property for less than the remaining mortgage with the bank’s approval. A house flipper gets a cheap house, the homeowner gets out from under their mortgage, and the bank loses money but doesn’t have to go through the foreclosure and auction process.
Agents and Real Estate Investment Groups
Real estate agents are your greatest ally when flipping houses. They’ll have insider knowledge of the local neighborhood and can alert you to new listings. They can also assist you in finding comparable properties to analyze so as to learn whether an opportunity is worth its purchase price.
Other real estate investors can be a great resource when you want to flip property, as they’ll have deep knowledge of the real estate market and can direct you to other local professionals who can help you find the right property for your needs.
There are many specialized online groups for real estate professionals, as well as meetups where investors discuss the best real estate agents in the area or provide advice for flipping homes. Once you find a good deal, they can alert you to other properties that fit your criteria, making them a powerful resource for generating leads.
Online Marketplaces
There are a variety of real estate marketplaces available, such as Zillow and Trulia, as well as more generalized marketplaces like Craigslist and Facebook Marketplace, that often provide ample opportunities for those interested in real estate investing.
This is often where wholesalers advertise their contracts. Those at risk of foreclosure or who simply want to offload a property without the hassle of an MLS listing may also advertise their options here.
Sometimes, these are cash deals, meaning that you don’t need to worry about closing costs or a down payment. However, this may also mean that you’re taking on a risky property that might put you at risk of huge repair costs, making it not worth the trouble. Vet a property carefully and insist on performing an inspection before you sign anything.
Local Area
You can seek out potential house flips simply by taking a drive around the area. Find “for sale by owner” signs. The owners often look for fast offers and don’t want to bother with the MLS. If you can provide them with an offer near enough to the fair market value, you can walk away with a cheap house in no time.
You can see firsthand how the house looks, which can give you an idea of how much repair it might need — and, therefore, what your gross profit may be. Checking out the area in this way will also give you a good idea of whether the neighborhood seems promising and how you may be able to market the home once you’re done with the flip.
It’s important to note that working directly with a homeowner is very different from talking to a bank or buying at a real estate auction. Even though the owner is motivated to sell, they will also have concerns about the future of their property and the neighborhood. You’ll need to reassure them that you’ll take good care of the house.
Finally, you can contact people delinquent on their mortgages and offer them a deal. The best way to find such individuals is through targeted advertising, working with bank connections, or relying on a real estate agent familiar with the local market.
What to Consider After Finding Houses to Flip
Once you’ve found a suitable real estate investment for sale, it’s time to figure out how to turn this into a profitable opportunity through financing, negotiation, and selling.
Financing
With this form of real estate investing, you’ll almost certainly need investment property loans to ensure a good cash flow. These depend greatly on how you purchased the property, for how much, and how long you intend to hold onto it.
Many house flippers will rely on hard money loans, but this may not always be a good option because they have such short terms, as well as balloon payments at the end. Fortunately, there are quite a few alternatives, including to refinance your hard money loan into DSCR loans.
You can contact Visio Lending for more advice about your options and find the right loan for your real estate investing needs.
Budgeting and Repairs
When you flip houses, you want to spend as little as possible on repairs while still turning it into an attractive real estate investment for your buyer — a huge reason why you need to insist on an inspection before buying a property.
Focus on the most significant, value-boosting repairs rather than things like changing cabinetry or installing new countertops. Think about things like curb appeal first and foremost. A good exterior can encourage potential buyers more than having the latest appliances.
While these aren’t always cheap, they will reassure buyers that they’re making a good investment. If you’re unsure exactly what to do, you can always ask a real estate agent for advice or research the repairs with the highest ROI.
Listing and Selling
Selling the property is pivotal to house flipping. You can rely on your network of other real estate investors. For example, see if anyone in your community is looking for rental properties to buy. You can also list on the MLS and work with a real estate agent to find suitable buyers.
Make sure to write an attractive yet factual listing highlighting things like new siding, ductwork, or hardwood floors to reassure buyers that they will be getting a solid property.
