Tips on Flips (7 Things You Must Know)

1. Look for high appreciation markets. Your market data research will make this very evident. The highest “Top 10” or “Top 25” appreciating markets in the country will on average change every four to five months.

2. Pick the early build-out phases of a development. For example, try to buy in phase 1, phase 2, or phase 3 versus the later phases.

The earlier phases, for obvious reasons are usually priced slightly lower to generate activity. Also, there can be times when the later phases are capped off at the perceived value of the homes and, as a result, create an artificially high benchmark, irrespective of what the market dictates. As a tip off, adjacent communities and developments are usually a good way to check the comparative value, as to whether or not that particular developer has priced their home at, under or above the market. 3. Target specific homes or lots that have a long build-out at a development, since this likely ensures a better chance of the home “marinating” in appreciation-so much so that you can lick it off the side of the plates. Also, by focusing on a long build-out, this is a hedge against a slowdown that may occur in the market.

This could be very important, if for example you put a home under contract three months ago, and the market has slowed and to your consternation, the sales office has unexpectedly told you that the home will be ready to close in six weeks! In this scenario, you only have three and a half months of marinating, which is hardly enough! 4. Target low deposit requirement communities. Low deposit generally implies a deposit between $3,000 and $8,000, although you may see some deposits lower then that. In terms of a low deposit, always known as an earnest money deposit, I have yet to find a builder that requires no deposit, despite claims by those late night infomercials that misinform novice investors. The objective is to put down as little money as possible since this substantially reduces risk to the investor. Ultimately, it’s easier to walk away from a deal when only a small deposit can be lost, than actually closing a flip deal that is questionable at best and will be the resultant cause of a painful “green” bleed. 5.

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