The real estate industry is one that comes with lots of new trends. The most recent is known as micro flipping, which provides a viable source of quick income for the investor. We're going to go over exactly what micro flipping is, how it varies from regular house flipping, and why this strategy could be beneficial for your investment portfolio.
What Exactly Is Micro Flipping?
While you may be under the misconception that this has something to do with rehabbing a home due to the ‘flipping' in its name, that's not correct. Rather, micro flipping is the new term for real estate wholesaling. This involves purchasing a property and reselling it to an interested buyer.
With this strategy, you use a plethora of tools and technology to identify properties that are being sold for much less than their actual value. These properties are commonly termed undervalued properties. You proceed to purchase the property. In most cases, you'll turn around and resell the property as-is. In some instances, you may make small cosmetic upgrades to enhance the look of the property for a higher resale value.
It Happens Very Quickly
In either instance, you don't do any major renovations to the property. Rather, the term ‘micro' comes from the fact of the sale and resale happening so quickly. In fact, many of these micro flips happen within one short week of finding the undervalued property. Micro flippers must work quickly to ensure success with this type of investment.
Micro flipping is all about achieving high-volumes of sales, each bringing in a low-profit margin. Most micro flippers will make a few thousand dollars with each investment. It's much rarer to make tens of thousands of dollars from this type of real estate transaction.
The Benefits Of Micro Flipping
When you look at the various options of investment strategies in the real estate market, you'll find that micro flipping is one of the easiest strategies for passive income. Apart from identifying undervalued properties and potential buyers, there's not a whole lot of physical labor that goes into this strategy. Much of the work that is involved with micro flipping can be done from the comfort of your own home.
Another great benefit of micro flipping is that it provides a quick stream of revenue for any investor. As you learned above, micro flips happen in as a little as a week. There's no need to invest months in rehabbing a property to make money. Rather, you can use readily available technology to identify undervalued properties to purchase without having to invest time and money driving around.
The Cons Of Micro Flipping
As with all types of investment strategies, they do have their downsides. With respect to a micro flipping investment, the major con is that there is a lot of competition. Many real estate investors have learned about this strategy and have started implementing it to gain quick, passive income. With sites like Zillow, Opendoor, and Redfin, everyone with an internet connection has easy access to the data sets you need to identify undervalued properties.
The second con of micro flipping investments is that they provide a low-profit margin. One can't expect to make anywhere near what they would with a traditional fix and flip. Again, you can expect to make a few thousand dollars per investment. This means that you'll need to do a high-volume of investments to make a sizable income.
Tips On Getting Started With Micro Flipping
If micro flipping sounds like an interesting real estate investment strategy you'd like to get started in, we're going to provide some easy tips that you can implement to get going. Remember that micro flipping is all about high-volume transactions. You want to set yourself up for being able to handle many transactions throughtout the year to create a sizable income.
Network Like Crazy
While your first instinct may be to find undervalued properties to purchase, that shouldn't be your first priority. Rather, you should start networking to find potential buyers for various areas. Having a predetermined list of buyers that you can contact to purchase a particular property is the key to being able to unload it for a quick profit.
It's best to have investors that are interested in various type of properties. For instance, you may find some local investors who only purchase single-family homes and others who only purchase apartment buildings. This opens up your ability to find undervalued properties and sell them quickly.
Networking should involve both online and offline tactics. The internet provides many opportunities to get connected with potential real estate buyers through online forums such as BiggerPockets. Offline tactics should include attending a local real estate investing meeting or seminar to meet people in your local area. It's best to tap all forms of networking to ensure a long list of potential buyers for your micro flipping properties.
Your Technology Makes Or Breaks Your Career
Once you get your list of potential buyers, it's time to start finding those undervalued properties. To do this, you'll need to have up-to-date access to all the latest market data in your area. Most investors are familiar with public records databases like MLS.
The problem with these public records databases is they provide way too much general information. You only want to be shown properties that are considered undervalued or distressed. So, it makes sense to invest in the right technology that provides you data on just the properties you're looking to purchase.
There are an abundance of software programs out there that you can invest in. The most popular are those that show homeowner information for people who are on the verge of foreclosure. These are considered motivated sellers who may be willing to sell their property for much less than its market value.
Determine Your Financial Strategy
This is an essential component of the micro flipping strategy that needs to be set up for a successful career. Most micro flippers use hard money loans or transactional funding to purchase an investment. Each type of financing strategy has its own benefits and disadvantages. It's best to understand what they are and choose the best one that fits your needs.
Apart from having a go-to lender, you're going to want to set up your real estate team. This includes key people like your real estate agent, title agency, insurance company, and so forth. Having these people picked out ahead of time goes a long way in ensuring a purchase goes smoothly and quickly. Don't just pick any realtor that you find. Rather, take some time to evaluate each potential team member's history and experience before deciding to include them in your winning real estate team.
Is Micro Flipping The Right Strategy For You?
Now, you should have a pretty clear idea of what micro flipping is and how it can benefit your income. Much of being successful with this type of investment endeavor is creating a winning strategy from the very start. If you follow the tips that we outlined above, you can set yourself up for success.
It's important to be realistic with your goals and understand what's involved. While micro flipping provides a low-profit margin per transaction, it's highly repeatable. If you're willing to invest the time in fostering a buyers list, setting up a winning team, and investing in the right technology, you can turn micro flipping into a lucrative investment strategy.