30% Margins flipping houses?

[Arturo Borges]

Is there any city in FL where you can actually follow the 70 rule? There are currently no properties in today's market that can meet that. There are no margins for people that can only get high-rate financing plus other funding like gap financing, but is it possible to constantly find these properties?

[Stephen Herbert]

As a hard money lender, I have conversations with investors nationwide every day, and a lot of the investors I speak with are telling me similar stories. They're talking about margin compression, lack of inventory, too many players and the inability to easily find homes with margins that work for them. The key here is margins that work for them. In today's market, you need to work for the margins. 

Gone are the days of 3 houses on a block being easy flips bought at below market value. Gone are the days of rampant foreclosures and vacant houses. Today, you have to be able to look at situations creatively to find a way in. I spoke with an investor in DFW the other day who was talking about her current strategy of reinstating loans out of foreclosure, and another in Austin who laid out his business plan of buying properties with large lots, building an ADU in the back, completing a condo conversion for the lot and then selling each unit individually (in effect, a short cut to subdividing the lot). I have buyers in NY that specifically target below-market rent properties, buy the tenants out with a cash for keys offer, and reno the units to bring the rents to market value, adding hundreds of thousands of dollars to the value of the property. I have buyers in CO that are tapping into local zoning codes to find properties that are being underutilized, i.e. basement into a rentable unit, or an in-law in the back, to maximize returns.

The deals are there, but sometimes they're hidden, and sometimes we need to work for the margins.