Top 5 Strategies Learned from Successful Fix-and-Flip Investors

Top 5 Strategies Learned from Successful Fix-and-Flip Investors

Last year it was estimated that the average gross profit on a fix-and-flip REI project was over $60,000…an all-time high!  And as we take a closer look at some of our most successful investor clients we realize that the common denominators of success have little to do with economic circumstances, and much to do with proper REI business relationships and execution.

The following ideas are simple and powerful strategies learned from our most successful fix-and-flip investor clients…

1.  Their confidence comes from reliable fundamentals rather than market trends. A few years ago Warren Buffet was asked about his secret formula for successful investing. He replied, “Well, over the years I have found the markets to go up and down. So, I decided to buy low and sell high.”  We see this mindset consistently among our wealthiest investors…you see, in their mind real estate investing is not a mystery.  They follow simple and reliable principles…and these principles not only guide their decision making, these principles also allow them to take consistent action.

2.  They build a good team. A fix-n-flip project has several moving parts, and the ability to rely on quality professionals and partners is critical. Your team should include realtors, real estate attorneys, accountants, contractors, appraisers, inspectors, and lenders.

3. “Flipability:” They focus on offering a property that is in high demand.  What do the buyers in a particular area want?  Their personal preferences have little to do with their decision making.  Instead, they fixate on how they can serve their local community. Here at Lima One Capital we share this approach by following a military leadership principle that we call “No Comfort-Based Decisions.”  A “no comfort-based decision” policy ultimately means, “it’s not about you.”  It’s about your constituencies.  Let’s find a seller who is motivated right now.  And let’s acquire, rehab, and deliver a home such that everyone involved wins.

4.  They don’t focus on speculation…they focus on structuring the deal properly.  At Lima One Capital we attract conscientious investors because they value our smart lending criteria.  While its popular to view lenders as a necessary evil, we find that successful investors appreciate the function of money.  They realize that a good lender will know the numbers and the anatomy of a good deal.  After you establish a value for the property, your next step is to determine ARV (After Repair Value).  The ARV will reveal whether or not the project is likely to be profitable.  During the inspection of the property you should consult with your GC to put together a rehab budget and construction plan that includes itemized repairs and a cost breakdown.  The recommended ARV for a fix-and-flip project is less than 70%.  Thus, you only want to take on a rehab project when the ARV is 70% or less than the newly renovated estimated selling price.

5.  Inspect what you expect.  Successful fix-and-flip investors manage the construction process.  Home renovations can range from 1 to several months depending on a multitude of factors.  You and your general contractor should create a timeline for a complete project and remain accountable to the plan.  Holding a property longer than necessary can quickly erode profits. Our experienced investors plan for unexpected delays and additional costs. The ability to anticipate and prepare for challenges is always a common denominator among our most successful and consistent investors.  “Most players skate to the puck…I always skate to where the puck is going."  Wayne Gretzky

In summary, the most successful investors are the most consistent investors...and the most consistent investors build systems based on effective REI fundamentals.  When we see tremendous success stories and huge profits being achieved it is easy to get caught up looking for the magic bullet or mysterious secrets. Our experience working with successful investors across the nation reveals a different truth...that extraordinary results come from doing ordinary things extraordinarily well.