Chapter 25
Ten Signs of a Great House Flipping Opportunity
IN THIS CHAPTER
Spotting real estate hot spots
Working with homeowners who are eager to sell
Discovering properties that look much worse than they are
Successful house flipping demands that you execute a series of successful steps, but the most important step is the first one — locating a property at a price low enough for you to fix it up and sell it at a profit. If you trip on that first step, your profit is doomed to take a hit. In this chapter, I point out ten signs of a great house flipping opportunity to help you get over that first hurdle. For more tips on finding excellent flipping candidates, check out Part 2.
The Location Is an Obvious Hot Spot
In any neighborhood where housing demand exceeds supply, you have a much wider margin of error. When housing values are rising at an annual rate of 10 percent to 15 percent, you make money simply by buying and holding a property. You make even more money if you can acquire a property at a discount — a distressed property.
Observe the housing market in your area and identify the trendy areas — where people would live if they could afford to. Head to Chapter 6 for more information about targeting different neighborhoods.
Nobody’s Home
In your target area, you know the sale prices of homes in various price brackets. After you identify the high-rent district, drive or walk around the neighborhood and look for the following signs of a vacant property:
- Overstuffed mailbox
- Newspapers piled on the front porch
- Weedy or overgrown lawn
- No window dressings
- No furniture inside the house
Jot down the address and head to Chapter 10 for a refresher on how to research distressed properties.
The “For Sale By Owner” Ad Is Shrinking
Sell-it-yourself homeowners often begin advertising with $50 or $100 ads. The longer the property is on the market, the less money the homeowner has available for advertising, so the ads keep getting smaller and smaller. A tiny ad is a great sign that the homeowner is getting desperate and beginning to realize that the property may not be worth the original asking price. If a homeowner places a 4-inch ad, he isn’t ready to bargain yet.
Keep tabs on the classified For Sale By Owner (FSBO) ads on a weekly basis and take note of any ads that seem to be shrinking or are lingering for several weeks. Shrinking ads are the most attractive. Head to Chapter 7 for more information about FSBO properties.
The Seller Is Highly Motivated to Be Freed from the Burden of Ownership
Part of your success as a flipper hinges on your willingness to be an ambulance chaser — to capitalize on the misfortune of others. You find your best deals when homeowners are facing foreclosure, when they’re getting divorced, or when a family member dies and the property ends up in probate or goes to relatives who already have a place to live. Here are some helpful tips on finding and handling these types of deals:
The House Is Ugly Outside
To a flipper, the ugliest home on the block is the bombshell on the boardwalk. The homeowner wants to sell the property, but the exterior looks so bad that it’s driving away paying customers. When you’re an investor, ugly homes should have the opposite effect on you — they should grab your attention and pull you inside.
The House Is Ugly Inside
The landscaping and outer shell of the house may be attractive enough to draw visitors, but if the interior is ugly, it can push prospective buyers right out the door.
Some houses just don’t show well for any of several reasons. Sometimes the owners appear to be color-blind, picking color schemes that make normal people gag. In other cases, the homeowners put no effort into staging the house. Whatever the reason, if the structure is sound and the floor plan works, the filth, clutter, and foul smells may be to your advantage. You can acquire the property at a discount, do some heavy-duty cleaning, properly stage the home, and make a good profit with a very small investment. (Chapter 15 shows you how to give a house a quick pick-me-up, and Chapter 21 features a home-staging checklist.)
The Decor Is Outdated
A house may be clean and properly maintained, but if the decor has fallen out of style with time, it can repel buyers as quickly as a herd of roaches. Of course, if you’re dealing in historical homes, vintage decor may be a big plus, but if the decor is old without the accompanying elegance, you can quickly redecorate and place the property right back on the market. Such houses are a perfect opportunity for a quick flip, as I describe in Chapter 15.
The House Has Character
Some homes have panache. Something about them just has a universal appeal. Maybe the floor plan makes the human soul feel expansive. Perhaps the landscaping creates a sense that you’ve returned to the Garden of Eden. Or perhaps the decor pulls everything together and creates a healthy balance. Whatever it is, you know it when you see it. Don’t dismiss the value of character when looking at houses. Character sells.
The House Has Undeveloped Living Space
Look for properties with unused or underutilized attic space or an enclosed porch, and modify that space to make it livable. An extra bedroom or bath typically raises the value of the home the most, but home offices are popular. If the house has an attic that’s too small to use for living space and it needs a new roof anyway, calculate the costs and benefits of adding a dormer. Chapter 19 has details on reconfiguring spaces.
The Property Backs Up to Nothing
Few homeowners like to have neighbors in their backyards. They prefer having their yards back up to a wooded area, a park, or even a cemetery. If you find a property that has all the essential qualities of a good flip and the property backs up to nothing, you’ve struck gold. Just make sure, before you make your offer, that all the numbers work and that the zoning board doesn’t have plans in the works to rezone the area behind the property for commercial or industrial use.