Whether you are looking for a good residential “Flip” opportunity or simply looking for a good “Fixer Upper” deal, Realty in the D has a system that may help you do just that…Find a good deal! In this article, I’m going to share with you Realty in the D’s 7 Steps to Finding a Residential “Flip” Opportunity in Detroit:
- Step 1 – Determine which neighborhoods you want to be in. We concentrate our focus on nieghborhoods within Detroit that have proven to be areas of growth. A few examples are Boston Edison, Indian Village and Sherwood Forest. Some other “up and comers” are Russell Woods, Rosedale Park and the Bagley District. When focusing on Flip opportunities in the “up and comers” markets, it’s a good idea to further refine your search to specific blocks within the neighborhood.
- Step 2 – From the MLS, pull all houses for sale, sold and pending for that specific neigborhood and export them into an Excel spreadsheet.
- Step 3 – Once the homes are exported, have the spreadsheet calculate the average price and price per foot of houses sold over the past 6 months. This allows you to determine what you can anticipate selling your Flip opportunity for.
- Step 4 – Determine the price per square foot you are willing to pay for a Flip property in this area. The way we go about this is by taking the average price per square foot of homes sold in our target market and multiplying that number by .90 to determine our target sales price per foot for our Flip net of closing costs. Once we know that number, we divide it by 1.20 to arrive at a target buy price per square foot for the Flip to achieve a 20% profit margin. Note…everyone has a different target profit margin. If your target profit margin on the Flip is 15%, you would divide your target sales price by 1.15.
- Step 5 – Now that you’ve determined your target price per square foot that you are willing to pay for your Flip opportunity, screen the spreadsheet for houses for sale that are priced at or below that level. Then further refine this list for your specific criteria. For example you may only want to look at Flip opportunities that have a basement rather than a crawl space or is built on a slab.
- Step 6 – Go visit each Flip house opportunity to determine how much work will need to be done to “add value” to the property. Once you know that number, reduce the target acquisition price for the specific Flip house opportunity and reduce the target price by the amount of cost to renovate the property. This gives you your target offer price for the specific Flip opportunity.
- Step 7 – Start making offers to the seller. Note…very rarely will the seller accept your initial offer so you may need to be patient and watch the property until the seller has reduced the price of the Flip opportunity to a level that he/she may consider your original offer.
The most important thing to do when looking for a residential Flip opportunity is to be disciplined and patient. Wait for the right deal. Remember the most important thing about Flipping houses…You make your money on the buy side, not by hoping a market appreciates in value. Good luck!
On that note, if you want to help finding the right residential Flip opportunity, let us know below. We’d enjoy the opportunity to help!