July 17, 2020

5 Expert Tactics to Maximize Profits on Flips

What is a good profit on a rehab flip?  Opinions will vary, especially across different markets.  Some will not do a deal unless there is a 100K+ profit.  Often they have to put in upwards of 1 million dollars and far more rehab than profit.  Here I will show you 5 Tactics that experts use to maximize their profits on flips.

Annualized vs Cash on Cash Return – What if you make 80K profit in a year on a deal that you buy for 120K and put in 120K.  That is a 33.3% annualized and 33.3% Cash Return.  What if you make 40K in 6 months and only did 20K of rehab on 60K all-in.  That is a 66.7% Cash on Cash Return but a 133.3% annualized return.  Which one is better?  Most will go for the 80K profit in a year, that is were most of the competition is.  My model is to target the less competitive, easy flip projects and do volume.  And we are getting closer to averaging 4 months so our annualized return is creeping up closer to 200%.  So now what would you prefer?  Consider your return on time and return on rehab when evaluating and underwriting your deals.  You may find that boring deals are way more profitable and much less risky in your market.

One chance to make a first impression – take them on a journey.  Buying a house is an experience, it’s like going on a roller coaster.  It starts when you are driving in the neighborhood.  This is how they will come and go from their home.  Consider cleaning up neighbors properties to avoid buyers not even getting out of the car.  Staging is key, our properties sell far faster and for more when we stage them.  Virtual tours are not common, but part of our standard marketing and they are phenomenal with social distancing likely sticking around long term.  Make this the best roller coaster ride they have ever been on.  Where buyers can’t wait to go inside upon arrival, then you are invoking emotions through out the walk through.  They are imagining themselves living there, eating and enjoying family, holidays and get togethers.  Spending quality time and getting ready to live their lives.

Kitchen Bathrooms, Curb Appeal – These 3 items are were you can add the most value, the best bang for your buck.  People want open kitchen concepts.  Make it awesome with high end materials and put in nice appliances.  Bathrooms especially master baths are also key.  Don’t skimp, put in nice tile surrounds, shower heads, new toilets and vanities.  And make the curb appeal pop.  The first thing seen is the front picture, if it pops you will be amazing how many showings you can get when the rest of the property and pictures are done right.

Make it pop for Pictures and Walk-Throughs – What you see in pictures vs with the naked eye during a walk through can be completely different.  Imperfections may now show in pictures but immediately turn buyers off during walk throughs.  And some times properties look amazing in walk throughs, but the pictures don’t pop.  Color contrast is key with pictures.  Consider both, buyers and agents almost always see pictures first, they have to appeal enough to get

Leave a Project Folder at the property – List all of the upgrades that have been done.  Include scopes of work, invoices and contractors license info.  It gives a perception that the work is high quality and that items can easily be addressed during inspection.  We often inspect properties ahead of time and list what we have fixed, even offer them to call the same company back out to reinspect for free.