Table of Contents
- What Are Netting Escrows & How Does It Work?: The Best Guide - January 2, 2024
- The Secret About Prescriptive Easement: Top Guide 1 Must Know - December 4, 2023
- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
About Micro Flipping in Real Estate
There are many ways to earn money as a real estate investor. Renting and fixing and flipping are a few of the most common ways to invest in real estate to generate income.
However, for individuals who are looking to start their venture in real estate, micro-flipping could be a good option to consider.
In this post, we will learn what is micro flipping in detail.
What Is Micro Flipping?
Micro flipping is different from the traditional fix-and-flip strategy. It’s a wholesale strategy where technology and data are used to find real estate properties that are undervalued.
Once an investor has identified one or more undervalued properties, they will buy, flip and sell them immediately. The word “micro” describes how quickly these properties are flipped and sold.
This is more of a high-volume and low-profit strategy. You can only expect to make a few thousand dollars per transaction, but you can close a lot of transactions because they closed quickly.
While you may choose to make some cosmetic improvements to properties to make them more attractive to potential buyers, it is not mandatory.
The reason why this strategy gained popularity during the pandemic is because of its quick closing nature.
It’s a way to flip real estate, with the click of a button. This is just one of the many benefits associated with micro-flipping that have made it so popular even after the pandemic.
How Does Micro Flipping Work?
This strategy is a little different from traditional real estate purchase and sale.
1 - Locate Properties
The process is initiated with the property search, but not just any property. Micro flippers require properties that are undervalued as the profit margin is lower compared to any other strategy.
Investors can choose from a variety of tools, but make sure the one you choose has at least the basic features listed below:
- Instant updates on properties for sale.
- The search option filters underpriced properties or sellers who need to sell fast.
- Correct contact details of sellers to contact them easily.
- Provide access through phone to filter out properties anytime and from anywhere.
- Get user-friendly inventory, allowing you to quickly view properties and make quick investment decisions.
2 - Negotiating the asking price with sellers
Finding a home is just the beginning. The next step is where the investors have to negotiate the sales price with the sellers.
As the investors are looking to make a profit, they should try to get the lowest sales price possible.
Generally, micro flippers work with motivated sellers. For instance, a seller who is looking to sell the property to avoid foreclosure can benefit the investor to get the deal in his or her favor.
3 - Lining up Buyers
In this type of strategy, investors generally have the buyer lined up before they buy the property.
This is the only way to ensure a fast transaction. Without buyers aligned, investors have to incur carrying costs, which reduces profits, and with the low-profit margin involved in microflipping, it is not sensible to hold the property.
Investors must sell the property for a profit, which means using a quick sales strategy to convince buyers to buy the property.
What Are The Pros And Cons Of Micro Flipping?
Pros:
Micro flipping can be considered a great form of passive investing as a majority of its process is done online. Your job will include finding underpriced properties, motivated sellers, and interested buyers. There is a small amount of work involved. In most cases, you can sell the property without any repairs to the home.
Another advantage of micro-flipping is speed and simplicity. You can move the property very quickly, especially when compared to a traditional neighborhood store. Micro conversions can be done using data analysis techniques. There is no need to cold call, knock on doors or drive around looking for property.
Cons:
One of the major drawbacks of this type of strategy is fierce competition. As many investors have adapted to this strategy, the market is getting saturated. Apart from usual real estate investors, you will have completion from big players called iBuyers. Zillow, Redfin, Opendoor, etc.
You should also know that the profit margins of most micro-flip businesses are low as it is a less profitable high-volume strategy. You need to manage your expectations because you won’t make as much money in any market as you would with other real estate investment strategies. If you’re microflipping, be prepared to close a lot of deals if you want a high-paying profile.
Conclusion
Micro flipping is a good option for individuals looking to kick starts their real estate investment profile. Make sure that you do your due diligence about the property and the area you are planning to conduct your business.
It is also important to use proper online tools that help you to find potential properties that you can micro-flip.
