When deciding the areas to Flip what Areas do you consider the most?

Question

Hello to all BP members,

I can see that flipping investors don't just flip in one area, there are several targeted areas.  What should I look for and what should I consider the most when picking the areas to flip, and what do you think is the most important of all?  i.e. good school, being closer to highway,quality of neighborhood or amount of sold or not sold houses in the area according to MLS? and etc..

I have two places in mind but I am not 100% sure if I'm thinking and deciding it right. One of the area is a city where house prices are cheap but not cheap enough and in Good School Distric. Another one is in the area where house prices are manageable and people have decent jobs and also the retail businesses are doing good but that area doesn't offer good schools.  Schools are not terrible but not excellent comparing to the first one.But there are more houses available and cheaper to buy than the first area.

Thank you in advance

Brian Levredge · Answer

Don't be afraid to let the MLS statistics be your guide.  Ideally, you want to be where a majority of the sales activity is because the market has already decided that is a desirable area to live.  You should be able to get the monthly sales statistics (I would look at the last 12 months) to see which sub markets have higher volume than others.  From there, you can whittle it down even more, or decide if you want to go in a different direction altogether.

Don Hines · Answer

Stick to an area where you would think first time buyers would buy. In my market, that is ARV of $95k to $130k. Generaly these homes need extensive rehabs because of neglect. But, they are the best ones to negotiate with; after the banks get off of their high horse when they are first listed.
Don

Account Closed · Answer

a year ago, i flipped 2 homes in starter neighborhoods far from my house....after those successes, i am now flipping homes in nicer areas closer to where i live...i now look at days on market for sold homes to see how fast homes move.....if people want to live in that neighborhood, your home will sell if it's priced right and rehabbed well...if nobody wants to live in that area, then you'll be waiting a long time, even if you did everything else right....

Brian Levredge · Answer

Again, the MLS also tracks agents by sales as well so it should be fairly easy to find out who the top agents in a given area are from your local MLS board.  Having said that, there are different types and chemistry also comes into play as well to an extent.  Some agents are averse to working with investors because we demand more of them.  Ideally, I would like to work with someone that I get along with well, but I'm not looking to make a new best friend either.  I want results and if that person can't deliver, then I'll go find someone who can.

As an aside, you should make it a precondition that any agent you work with give you access to their MLS.  In return, you can throw that agent all you sales on the back end, provided they can move them in the fashion you agree to.  You will find that some agents will tell you they can't give you access because of xyz reasons.  Those are the agents you want to move on from quickly.   Real estate is not a business for the timid.

Mark Saenz · Answer

Yup...No worries.  Good luck.

Mark Saenz · Answer

Jason,
There are a lot factors that should be considered when answering this question; however, at the end of the day what you need to consider is PROFIT.  That's why you are doing this right?

So first, every area is different and you have to understand what happens in that area.

I invest in multiple areas in my market, but my strategies are different for each part of the market.

If it's a highly sought after area, I may wholesale, fix and flip, or owner finance.

In an area where the homes stay on the market for a long time I buy dirt cheap and wholesale only (mainly to investors).

I also tailor my offers by what will happen in that particular area...again in the not so good areas, I may not exceed .40 cents on the dollar as opposed to an area where I know I can sell quick I may go up to .70 cents on the dollar.

At the end of the day you have to begin with the end in mind...how much am I going to make on this deal?  And then structure everything to help you achieve it.  A quick 5K (in 1 month), might beat a slow 10K (4 months).

In your particular case you may also want to consider buying in the good area buying and then just wholesaling to one of these families that wants to move into this good area.  You're in and out quickly and with less investment than "fixing it up".  again you may make a quick profit -vs- a slow profit.

As for the cheaper homes...do some research and determine what the quickest way to sell is in that market and then implement that strategy.

Another thing to consider in these "cheap homes" area is theft and vandalism.  In my "cheap homes" area I have to consider that....so if you are doing a fix and flip...will your NEWLY installed materials be there when your buyer goes to check out the property.

Just some thoughts for you to consider.

Amigos,
Mark

J Scott · Answer

I personally stick to one area (currently), and the overriding factor is proximity to my personal residence, to my full-time project manager and to my contractors.

While I certainly wouldn't be investing in this area if it weren't profitable, I'm happy to forgo some potential profits for the convenience of dealing with investments in close proximity to where I live.  Not only does it make it easier to find houses (I know the area), and to rehab houses (I can stop by easily and whenever I want), but most importantly it makes it MUCH, MUCH easier to sell houses.

We like to ensure that every showing is well-prepared for -- blinds open, lights on, floor swept, blank contracts on kitchen counter, etc.  I've never seen an agent do this, so it's up to us.  And if we need to drive more than 10-15 minutes to get to our houses, we wouldn't be able to do this.

I know it sounds like a petty reason to buy local, but it's actually one of the big keys to our success (in my opinion).

Jason Davis · Answer

I am a newbie, I am starting in a lower end area.  I can get into a house for $30 - $40k, do my rehab and still sell for under $100k.

I hope that after a few of these I can into better hoods.  I need the money from the 1st and probably 2nd and 3rd to cove up.  Or if the lower end sells I might just stick there for a bit.

Good luck
Jd

Rob Gillespie · Answer

Jason,
I think it is great you are looking for areas to flip in. With that said,there are few definitions of flip in my opinion. Are you looking to purchase a home, put work into it, and put it back on the market at a higher price?
The second way of flipping is what I prefer. this is the method of taking a property and locking it under contract, and selling the contract at a profit. You are not actually closing the property with any of your own cash or credit.
In the second scenario, there are two ways to analyze the market in which you choose to do business. The first is dealing in low income rental neighborhoods. For example, you do a purchase agreement on the property for $10,000, and you sell the contract for $2000 to an investor that wants to hold the property as a rental. This will put the in the buyer into the home for 12,000+ any repairs. For this scenario to work, the home fixed should be worth double what the in buyer as In to it.
The second scenario, you would be dealing in better neighborhoods and locking properties with the lease option agreement, and selling your option to it in user.

Sorry about getting so long-winded,best of luck to you.

Jason Kim · Answer

Thank you for taking your time Brian. After reading your reply, I am understanding better and I should persue to find that agent now.

When deciding the areas to Flip what Areas do you consider the most?

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