Flipping properties is an excellent way to get started in real estate investing—especially during a seller’s market. Property flipping offers new and experienced real estate investors the opportunity to make substantial profits, be creative, and transform communities. And, thanks to networks like HGTV, it’s only grown in popularity. Flipping properties in a buyer’s market though? That’s a little trickier—but entirely possible!
All things considered, if you buy and fix a house you can’t sell quickly—you’ve effectively burned through a large chunk of change and made no profit in the process. Flipping properties in a buyer’s market does weigh your odds, but it definitely doesn’t have to.
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What Is A Buyer’s Market?
A buyer’s market in a housing market in which the supply exceeds the demand. Or in other words, there’s a plethora of properties available, but there’s a shortage of qualified home buyers.
Tips For Flipping Properties In A Buyer’s Market
The truth is that even in a market slump, it’s still very possible to flip homes and make good money doing it. As long as you do your due diligence, have insights into local buyer behavior, and a firm understanding of the flipping process, you can be successful no matter what state the current real estate market is in.
Here are four great tips to keep in mind if you’re looking at flipping properties in a buyer’s market.
1: Buy Less Expensive Properties
If this was a more obvious strategy, it’d slap you in the face, right? Regardless, it’s still worth mentioning since investors sometimes have trouble learning to tighten their budgets to reflect market fluctuations.
When flipping properties in a buyer’s market, look for homes that are selling under market value and are more affordable than the houses you’d normally purchase. The idea is that you’re spending less cash than you typically would when buying the property, so you don’t have to also skimp on your renovation costs. Additionally, it allows you to potentially list the home at a lower price point while still making a nice profit.
The conclusion? Lowering your listing price during a buyer’s market encourages people to make more offers that keep you from selling the home at a loss.
2: Find Foreclosed Properties
A buyer’s market during a recession often leads to an increase in the number of available foreclosed properties. This means there’s a ton of new inventory that’s now owned by banks. The good news for you is that banks aren’t in the business of owning homes, just mortgaging them. So, a great way to locate cheap properties to flip is to focus on bank-owned houses; also known as real estate owned or REO homes.
Generally speaking, these types of properties will be in relatively good condition because they’re being maintained by a financial institution or recent owner. They’ll also typically sell at a much cheaper price because banks are eager to get rid of it.
The conclusion? Purchasing foreclosed properties is a fantastic was to spend less on your investment, while improving your odds of making a substantial profit.
3: Consider Landlording: Buying, Fixing, and Renting
As a seller in a buyer’s market, one of the best moves you can make is to purchase a property and then hold on to it until the market shifts in your favor. Not only that, having rental properties in your real estate portfolio is a great long-term investment strategy. What’s more is that you don’t have to worry about having to sell the home quickly.
Following any repairs and renovations of your flip, consider renting the property to tenants. First, fix the home and then pay-off your bank note or bridge loan using a new rental loan. Next, charge enough in rent to cover the property’s expenses and build equity until the market is more favorable or you’re ready to sell.
The conclusion? Landlording rental properties can be a great way to pad your real estate investments while seeing long-term financial gains.
4: Practice Patience
To no fault of their own, property flippers tend to be the type of investors who expect to see an immediate return on their investments. They think that once the renovations have been completed it’s time to sell and enjoy the fruits of their labor. Now normally, that would be fine except when you’re flipping properties in a buyer’s market. In this instance, the best thing investors can do is be patient.
It may take a little longer to sell the home. You might want to take your time on the renovations, or maybe you’re looking to cut costs by doing some of the work yourself. Whatever the reason is, you could potentially be lengthening your normal renovation timeline.
The conclusion? If you can afford to be patient and wait for the market to shift to more of a seller’s market, you increase your chances of a sizable profit in the end—just not necessarily as quickly as you’re used to.
Learn How To Successfully Flip Properties In Any Market
Even when the market is unpredictable, one thing is certain: flipping properties is a solid way to break into real estate investing. Don’t let a recession or a buyer’s market dissuade you from taking the leap. By learning how to mitigate the financial risks involved with house flipping, investors pave the way for their investments to be worth their weight in gold.
So, what are you waiting for? Let’s build something together.
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