First, research markets with job growth, lower competition, and strong demand for housing. Areas with new businesses or developing infrastructure often show good potential for flips.
Next, building a solid local network is key. Start by asking for referrals to top agents and contractors. If you can attend local investor meetups, that’s a great way to gain market insight and connect with reliable people.
It’s also smart to start small with a couple of flips to test the waters, and make sure you understand the local market dynamics before scaling up.
Good luck with your expansion!
Thanks Deborah! Conventional wisdom states that building a solid local network is key to any operations. I definitely plan to make that my main focus!
just curious - if what you're doing is working, why not continue doing it?
i think less competition is primarily going to mean less margin per deal. here in Pittsburgh for example, you can buy properties in OK neighborhoods for $50-60K that need $80-100K rehabs. and... there's still a good amount of competition on those. or, you can go into the high end neighborhoods where there's more margin... but probably the same level of competition as you're used to. or even more.
not saying you're considering going that far out but just using an example that i can speak to.
my actionable step for you after picking a market would be: make a trip to that market every month and network in person. and just to be candid, i don't see how working with agents would get you anywhere. are you getting your inventory through agents now? If so, that's great. i only see suitably distressed properties hit the MLS very occasionally. and then they get snapped up in 5 minutes.
hope this helps - just trying to give you things to think about
Your insight is absolutely helpful!
In my eyes, "heavy" competition is very subjective. My definition of competition differs from others because no two investors have the same deal flow and/or same buy box. What I'm trying to do now is increase my deal flow here in CA while simultaneously working on expanding my network and operations to out of state flips. I have more than enough private investors willing to pour their money in and I realize that there are diminishing returns when considering time spent looking for deals or deal finders and the amount of deals I close.
I'm a real believer of the Pareto law which states that 20% of effort leads to 80% of results. In theory, if I spread my focus between my market and an out of state market, I may be able to get more volume of flips. Just a personal business philosophy, and I acknowledge that there are limits to my operation capacity/oversight. There will be many people who disagree and say that focusing on my market alone is the "best" or "only" way to grow, but we can agree to disagree on this topic.
To answer your question about my deals, I found that the best deals are the ones that I found myself. I have active leads with wholesalers and other agents, but quite frankly their deals are not good. Again, working on networking to grow my leads into more lucrative deals.
I would say that my current situation is "working" although there is a lot of room to grow.
I think will find that out-of-state will be much more operationally challenged than local. Even if you have a good framework, it's much harder to manage virtually and stay on track. It certainly helps that you've done it, but I would maybe do one that is still in CA, but far so you can't go every day and see how that is and then inch out.
On finding an agent, definitely not the way to go in terms of calling brokerages and asking for their top producing agent. The top producing agent wants nothing to do with a new out-of-state investor, they are local specialists who don't need extra business or time suck. You need boots on the ground to see who lists flips and who lists dumps. That is who you want.
The best contractors will never, ever be on Yelp. They don't care about Yelp or the internet. That is for larger companies or for disgruntled clients or relatives looking to help.
Per diems only work in theory. If you give contractors a prize for finishing early on time, they will finish then to get the prize, but there is plenty that can be left undone without you knowing that will harm you later. Things like these only sound good, they don't work.
Again, the top producer would never go by your flip, ever, in a million years. You want a hustler, not a top performer, if you want check-ins.
I appreciate the candor and would definitely agree that my framework is all in theory until I can get a proof of concept for these out of state deals.
I like your idea of pushing my boundaries in CA. I'm living in the Los Angeles area and have my projects here. I can definitely see how going 100 miles south towards San Diego can give me greater perspective into out of state flips.
I can agree to disagree that the best contractors are not found on yelp. I work closely with one here in CA where I found him working on my investment property's neighbor's house. This contractor has 0 reviews on yelp which I found a bit sketchy, but was able to vet him by his contractor's license, worker's comp, and by visiting some of his ongoing projects. However, while I was still getting contractor bids for different projects, I found 3 different companies that are quick (based off of their contracts and guarantees) and have good quality of work (based off of previous and current investor feedback) but come at the cost of price. These larger construction companies are able to do up to 25 projects at a time and even have in-house project managers. I can see why they price their projects accordingly because their system is designed to help relieve the construction management from the investor. However, it's fair to question the integrity of the management since it's in-house. Also, in regards to a per diem, I'd like to be a bit more optimistic that I can establish the right checks and balances to ensure that the contractor is not skipping corners. I'm sure there are many more experiences where the contractor hasn't fulfilled their scope of work and gotten away with rushing the project to meet the deadline, And, I don't want to be as naive to say that I'm that 1% who can have complete quality/operational control, but I'm confident I can establish a system and hire independent inspectors to review the contractor's work.
On finding an agent, you make a completely valid point about the top producing agents. The promise for the prospective agent to represent every flip from the buy side to the sell side is only as valid as the agent's due diligence and work ethic, and trust would need to be built in the process. With that said, how would you recommend I find a hungry, boots on the ground agent? The greatest and probably only leverage I have as an out of state investor is the proof of funds to show I have the liquidity and the risk tolerance to average 2-3 deals per month.
The Yelp thing is specific to California and only for companies. My best contractors over thirty years of flipping were always people I met through networking or other investors or trial and error, never online. If they have the time to make sure their reviews are good, they are going to charge you more than you need to pay because it's a big company. You can't scale like that with them as a partner, they have so many jobs and crews going in and out.
As agent, we hear ten stories a week from out-of-state investors who are going to do ten deals with us. You have to skip that rhetoric, show what you did in LA, and have someone there who is in the neighborhood you want to buy in looking at the yard signs to see who lists flipped and done projects and who is selling the ones that need to be flipped. Online is a very tough way to do it. You want someone who works with investors and gets it. 99 percent of real estate agent don't appreciate investors and therefore don't help them the right way.
I hope that helps.
Happy Thanksgiving~ Always helpful to get some perspective! It looks like I’m going against the grain with out of state flips but still want to understand the full picture.
So in your opinion how should I find my rock star contractor? I can’t attend local real estate gatherings and any investor I network with won’t share their contractor without getting anything in return.
Valid point about the out of state rhetoric and showing my portfolio of flips in CA seems like the right way to go.
No one finds a rockstar contractor out of state on the first try (or tenth). Unless you have boots on the ground there (friend or family, not the agent), it will be very hard to manage. Your best bet is to get the rec from an investor-friendly agent who also flips (but be very careful with this, so many fakers) or an investor. You should make one trip to the area for 3 days and network in person.
Hi everyone.
I'm currently flipping properties in my backyard (SoCal) and have the liquidity to fund multiple projects. However, I enjoy the more operational side of flips and would like to grow my business out of state to increase flipping volume and have less competition in finding deals. I know the grass is not always greener on the other side, but any tips on finding my next market?
Below are some actionable steps I plan to take after identifying a market:
- find a rock star agent by referral and/or calling brokerages and asking to connect with their top producing agents
- find a rock star contractor by referral and/or yelp
- have control over construction by setting per diems to incentivize contractor to finish the project on time, within budget, and with good quality
- leverage my rock star agent's time to check up on the construction process (checks and balances)
- hire independent handymen/inspectors to check up on the construction process for a flat fee (checks and balances)
There's competition everywhere, you won't escape that in any market.
I think this will be much more of a challenge than you think. Even if you have an excellent team built with plenty of trust, it's really difficult to do this without having lots of face time and rapport building.
If you already have that where you live, why put those profits at risk? Double down and scale in your own market and lift your current team up.
Great point! I'm actually considering moving from my personal residence in a somewhat distant future so I was planning to test the waters before making the leap. Perhaps it's more sensible to grow where I am before allocating my resources outside of my own market... Trying to think out loud and this discourse has definitely challenged my paradigm of how I want to grow my business.
The contractor will be your biggest challenge. I have done several flips from out of state, in the same markets as i was trying to build a team. I would suggest having a project manager on each flip, having contractors report back to you knowing that you are out of state is very challenging. I had more than one contractor do a great job on the first and then go downhill from there. You would think they want more business but not really. Working with an experienced project manager that had an established relationship with a contractor worked at then end for me.
Do you think it is worthwhile to hire a project manager from day 1 of the renovation process? Or is it the volume of ongoing flips that will benefit the most with a project manager due to economies of scale?
To be successful in flipping properties out of state, it's crucial to build a strong team. With your experience, having sufficient capital to cushion any mistakes is important. Start small to learn the market, people, and areas where you can achieve success. Choosing a location near LA, accessible by a short flight or drive, will make it easier to check on your projects. This is a great opportunity to leverage your skills, and depending on your risk tolerance, you can continue to build wealth. Finding the good contractors will come with experience and some will be great on one job and fall short on another. Having multiple will be important.
I can’t agree more! Definitely stretching my operational capacity little by little sounds like a conservative and reasonable approach to growing the scope of my business.
I think will find that out-of-state will be much more operationally challenged than local. Even if you have a good framework, it's much harder to manage virtually and stay on track. It certainly helps that you've done it, but I would maybe do one that is still in CA, but far so you can't go every day and see how that is and then inch out.
On finding an agent, definitely not the way to go in terms of calling brokerages and asking for their top producing agent. The top producing agent wants nothing to do with a new out-of-state investor, they are local specialists who don't need extra business or time suck. You need boots on the ground to see who lists flips and who lists dumps. That is who you want.
The best contractors will never, ever be on Yelp. They don't care about Yelp or the internet. That is for larger companies or for disgruntled clients or relatives looking to help.
Per diems only work in theory. If you give contractors a prize for finishing early on time, they will finish then to get the prize, but there is plenty that can be left undone without you knowing that will harm you later. Things like these only sound good, they don't work.
Again, the top producer would never go by your flip, ever, in a million years. You want a hustler, not a top performer, if you want check-ins.
I appreciate the candor and would definitely agree that my framework is all in theory until I can get a proof of concept for these out of state deals.
I like your idea of pushing my boundaries in CA. I'm living in the Los Angeles area and have my projects here. I can definitely see how going 100 miles south towards San Diego can give me greater perspective into out of state flips.
I can agree to disagree that the best contractors are not found on yelp. I work closely with one here in CA where I found him working on my investment property's neighbor's house. This contractor has 0 reviews on yelp which I found a bit sketchy, but was able to vet him by his contractor's license, worker's comp, and by visiting some of his ongoing projects. However, while I was still getting contractor bids for different projects, I found 3 different companies that are quick (based off of their contracts and guarantees) and have good quality of work (based off of previous and current investor feedback) but come at the cost of price. These larger construction companies are able to do up to 25 projects at a time and even have in-house project managers. I can see why they price their projects accordingly because their system is designed to help relieve the construction management from the investor. However, it's fair to question the integrity of the management since it's in-house. Also, in regards to a per diem, I'd like to be a bit more optimistic that I can establish the right checks and balances to ensure that the contractor is not skipping corners. I'm sure there are many more experiences where the contractor hasn't fulfilled their scope of work and gotten away with rushing the project to meet the deadline, And, I don't want to be as naive to say that I'm that 1% who can have complete quality/operational control, but I'm confident I can establish a system and hire independent inspectors to review the contractor's work.
On finding an agent, you make a completely valid point about the top producing agents. The promise for the prospective agent to represent every flip from the buy side to the sell side is only as valid as the agent's due diligence and work ethic, and trust would need to be built in the process. With that said, how would you recommend I find a hungry, boots on the ground agent? The greatest and probably only leverage I have as an out of state investor is the proof of funds to show I have the liquidity and the risk tolerance to average 2-3 deals per month.
The Yelp thing is specific to California and only for companies. My best contractors over thirty years of flipping were always people I met through networking or other investors or trial and error, never online. If they have the time to make sure their reviews are good, they are going to charge you more than you need to pay because it's a big company. You can't scale like that with them as a partner, they have so many jobs and crews going in and out.
As agent, we hear ten stories a week from out-of-state investors who are going to do ten deals with us. You have to skip that rhetoric, show what you did in LA, and have someone there who is in the neighborhood you want to buy in looking at the yard signs to see who lists flipped and done projects and who is selling the ones that need to be flipped. Online is a very tough way to do it. You want someone who works with investors and gets it. 99 percent of real estate agent don't appreciate investors and therefore don't help them the right way.
I hope that helps.
Happy Thanksgiving~ Always helpful to get some perspective! It looks like I’m going against the grain with out of state flips but still want to understand the full picture.
So in your opinion how should I find my rock star contractor? I can’t attend local real estate gatherings and any investor I network with won’t share their contractor without getting anything in return.
Valid point about the out of state rhetoric and showing my portfolio of flips in CA seems like the right way to go.
I think will find that out-of-state will be much more operationally challenged than local. Even if you have a good framework, it's much harder to manage virtually and stay on track. It certainly helps that you've done it, but I would maybe do one that is still in CA, but far so you can't go every day and see how that is and then inch out.
On finding an agent, definitely not the way to go in terms of calling brokerages and asking for their top producing agent. The top producing agent wants nothing to do with a new out-of-state investor, they are local specialists who don't need extra business or time suck. You need boots on the ground to see who lists flips and who lists dumps. That is who you want.
The best contractors will never, ever be on Yelp. They don't care about Yelp or the internet. That is for larger companies or for disgruntled clients or relatives looking to help.
Per diems only work in theory. If you give contractors a prize for finishing early on time, they will finish then to get the prize, but there is plenty that can be left undone without you knowing that will harm you later. Things like these only sound good, they don't work.
Again, the top producer would never go by your flip, ever, in a million years. You want a hustler, not a top performer, if you want check-ins.
I appreciate the candor and would definitely agree that my framework is all in theory until I can get a proof of concept for these out of state deals.
I like your idea of pushing my boundaries in CA. I'm living in the Los Angeles area and have my projects here. I can definitely see how going 100 miles south towards San Diego can give me greater perspective into out of state flips.
I can agree to disagree that the best contractors are not found on yelp. I work closely with one here in CA where I found him working on my investment property's neighbor's house. This contractor has 0 reviews on yelp which I found a bit sketchy, but was able to vet him by his contractor's license, worker's comp, and by visiting some of his ongoing projects. However, while I was still getting contractor bids for different projects, I found 3 different companies that are quick (based off of their contracts and guarantees) and have good quality of work (based off of previous and current investor feedback) but come at the cost of price. These larger construction companies are able to do up to 25 projects at a time and even have in-house project managers. I can see why they price their projects accordingly because their system is designed to help relieve the construction management from the investor. However, it's fair to question the integrity of the management since it's in-house. Also, in regards to a per diem, I'd like to be a bit more optimistic that I can establish the right checks and balances to ensure that the contractor is not skipping corners. I'm sure there are many more experiences where the contractor hasn't fulfilled their scope of work and gotten away with rushing the project to meet the deadline, And, I don't want to be as naive to say that I'm that 1% who can have complete quality/operational control, but I'm confident I can establish a system and hire independent inspectors to review the contractor's work.
On finding an agent, you make a completely valid point about the top producing agents. The promise for the prospective agent to represent every flip from the buy side to the sell side is only as valid as the agent's due diligence and work ethic, and trust would need to be built in the process. With that said, how would you recommend I find a hungry, boots on the ground agent? The greatest and probably only leverage I have as an out of state investor is the proof of funds to show I have the liquidity and the risk tolerance to average 2-3 deals per month.
Hi everyone.
I'm currently flipping properties in my backyard (SoCal) and have the liquidity to fund multiple projects. However, I enjoy the more operational side of flips and would like to grow my business out of state to increase flipping volume and have less competition in finding deals. I know the grass is not always greener on the other side, but any tips on finding my next market?
Below are some actionable steps I plan to take after identifying a market:
- find a rock star agent by referral and/or calling brokerages and asking to connect with their top producing agents
- find a rock star contractor by referral and/or yelp
- have control over construction by setting per diems to incentivize contractor to finish the project on time, within budget, and with good quality
- leverage my rock star agent's time to check up on the construction process (checks and balances)
- hire independent handymen/inspectors to check up on the construction process for a flat fee (checks and balances)
Hi Dylan.
Like many businesses, the flipping niche has 3 categories that differentiate one flipper from another: quality, faster, cheaper. I'm assuming you haven't achieved mastery in all 3 categories, but realistically you can choose from 2 of the 3 categories. If you get your GC license and intend to run your flips entirely, you may save money (cheaper), but it'll cost you your time (faster) and might have better quality of work. If you want to scale, it likely won't involve you running your own renovations as a GC. You can always do some hands-on work without a GC license so I would agree with the others who say that having a RE license and GC license are not worth it.
Take my advice with a grain of salt since I have neither a RE license nor a GC license.