3 Ways Fix and Flippers Can Still Thrive in Today’s Seller’s Market

Real estate investing can be a lucrative business, especially when the market favors investors. But while some investors shy away from the market as headwinds like rate hikes and inflation bubble, others continue to still thrive despite operating in a seller’s market.

In fact, home flipping rates increased even during peak COVID conditions. From 2020 to 2021, fix and flips were up 47% in 99 metro areas.

Clearly there is still money to be made for those leveraging a fix and flip business model. However, the trick to thriving versus just scraping by may be tweaking your strategy to hedge against change and market volatility.

If you want to continue to thrive as a fix and flip real estate investor, here are a few considerations to help power you through this seller’s market.

1. Diversification Isn’t Just for Hedge Funds

Most people have heard financial experts boast about the importance of diversification. Whether it’s in stocks, bonds, or real estate, diversification can help you manage risk and volatility.

The same holds true for your real estate investing strategy on a more granular level. Fix and flip strategies can be much more sustainable in a seller’s market through diversification across different project types.

One option to consider is taking on tiny home projects. The tiny homes market is experiencing incredible growth. In fact, 56% of Americans would consider living in a tiny home. Flipping these properties is a great opportunity to make killer profits.

Similarly, investors focusing on out-of-state flips in smaller markets are also seeing some sizable returns on their investment. While long-distance flips have their fair share of challenges, they can also be lucrative business opportunities.

2. Understand Impacts to Your Supply Chain

Everyone wants to blame real estate woes on the supply chain. While it’s true that supply chains have impacted construction, the truth is that most investors were not prepared for COVID or inflation rising to the point it has.

The only way to survive in today’s real estate market is to intensely scrutinize your supply chain and tighten control over your lead times before you pursue new projects.

It’s important to have the right foundation in place which will help set you up for future success. This means ensuring you hire the right managers and workers to work your flips right the first time. Any oversights impact your bottom line which could spell utter disaster.

Getting to know local municipality workers, such as inspectors and surveyors, as well as having a thorough working knowledge of local ordinances is always a smart move. Having multiple teams to complete your projects and flex to others when necessary is even smarter.

Diversification isn’t just for Hedge Funds!  – John Reid

 

3. Tighten Up Your Budget

It’s no surprise that as costs have gone up, they have taken a bite out of investors’ pockets. While the number of flipped homes has been trending upward, overall gross profit margins on flip homes have gone down.

As a result, being able to work within a tighter budget can help pad your pocket with additional profits. Consider taking a lean systems approach to managing your costs, looking for areas to eliminate waste and increase efficiency.

Additionally, not all homes need to be fully rehabbed to be marketable. Oftentimes it may be more beneficial to focus on improvements with a higher ROI.

For example, adding a home office can add $10,000 to your property’s resale value. Building an accessory dwelling unit (ADU) can also increase your property value anywhere from $47-66,000.

Fixing and Flipping Houses with REID Lending Partners

REID Lending Partners is a premier private mortgage firm that specializes in providing alternative financing for business owners and real estate investors.  REID  funds business-purpose loans for borrowers who struggle in getting conventional bank financing.

Whether you are house flipper looking to flexible capital in today’s seller market or an investor interested in growing your passive income through real estate notes.

We welcome you to contact us and work with a trusted partner!