Think flipping houses is “dead” after the real estate meltdown? Not at all. It just takes a different strategy to be viable in this real estate environment.
Here is how the art of flipping houses has changed over the recent years.
No More Investor Mortgages
When I first started flipping houses in 2005, there was more money available to investors than they knew what to do with! Mortgages were granted to nearly anyone, and so selling was easy.
Now, investor mortgages are all but a thing of the past. It’s largely a cash game in the under $40,000 housing market. Luckily, there is plenty of cash out there and plenty of investors willing to buy – but they need a better deal than they can find anywhere else.
Money has to be left on the table..
Stricter Mortgage Company Lending Requirements
Another reason you’ll find yourself flipping houses mainly for cash, is that mortgage companies do not like to see anything unusual on the settlement statement. Those unusual items include large cash payments to investors who never owned the property (you).
If you buy properties first and quickly resell, there will be no unusual items on the statement. However, seasoning requirements now become an issue.
Many banks do not want to lend money, to an investor OR an owner occupant, if the property has changed hands in the last few months.
When you have a cash buyer on the other end of your transactions, there is no mortgage company anywhere in sight! The title company will satisfy itself that the title is clear, and that’s it! Done.
How do you get cash buyers, and how do you make them want to buy your properties?
This is easier than you might think. To find the cash buyers in your area, obtain a list of all cash real estate transactions in your county over the last year, along with amount paid and the buyer’s name and address.
You can get this from many online list brokers, and it’s not expensive.
When flipping houses to cash buyers, you must give the buyer a super deal, better than any he can get anywhere else. For tax sale/fixer property, I always try to sell for less than the LOWEST prices offering in that zip code, according to Realtor.com
This step should actually be done before buying the property, so you can make sure there’s a profit in there for you even after giving cash buyers a deal they can’t refuse.
Don’t forget the rules when flipping houses in the down market: buy super cheap, sell cheap, and track down those cash buyers yourself, don’t wait for them to come to you!