To FLIP I OR
by Tom Wilson
Are there m
don’t recommend being a
have weathered
real estate investor…un-
turn well, are
less you have a well-de-
many of the
fined strategy, quantitative
above, and hav
goals and are dedicated to go by
tively calmer w
the numbers and not by unsup-
ing these past f
ported advice or emotions.
years?
My engineering training and
Indeed, my
30 years of experience manag-
in more than
Tom Wilson
ing high tech profit centers in
transactions ov
Silicon Valley taught me how to analyze for has revealed that Dallas / Fort W
the best return on investment in any mar- of the best real estate investm
by Tom K. Wilson
have done flips for a ket.
long time. Many more encouraging newcomers
in to
the this
United
States; that is w
dramatic
ow, flipping surely seems
jumped on the 2000 to Today,
2007 boom,
and as of
the principles
analysis
remain
for high
most
cottage
industry
to bid it too
in of my personal po
exciting on “reality” TV.
we know, many caught
falling
knife can do
the the
same.
Anyone
it, however,
one a product
term holdings.
desperation
to get
and then
Actually, it is exciting in real
when the Greater Fool
Model
in
needs
to collapsed
be very disciplined
educated
The higher
strengths
of Dallas / Ft. W
count and
on the
market being
when
life too. However, the flat screen
about the submarkets and products, they
or ride
•Business on and
sell. Dangerous
both financial cap
doesn’t reveal the high risk, hard
the coattails of someone who is.
counts. The South.
supply-demand
work, and stress. Flipping is
Don’ts
primary parameters
for selecting
the is
•The
highest
rent per invested
Flipping Do’s The Flipping
imbalance
better
at higher
primarily a U.S. term (most often
best
investment
markets
are:
major
economic
center in the Un
prices
where
they
are
out
•
Follow
the
herd;
• Get experienced
applied to real estate, although it
to purchase
therefore,
the highest cash
of spec for and
hedge
funds and
find a price
niche ratio
partners and consultants •Rent instead
can be any asset) that defines a
and inward migration
•One
of is the
lowest risk and saf
the barrier to
entry
higher,
• Buy the growth
most expensive
• Buy in high-demand areas •Population
purchase below market with the
•Employment
growth
and
business
climate
in
the
United
States for real est
but
you
take
on
more
risk
house on the block
• Focus; narrow down
intent of selling (with our without
•Housing
affordability
•Lowest
decline
and
capital
requirements.
If housing price
•
Over
Improve
for
the
area and type of flip
adding value) at a higher price.
the to only
US
single digit deprec
you still want
enter
this
neighborhood
• Line up lenders before •Location
It is especially popular when
•Cost • Analyze
of living sales comps
ro
business industry,
at least I
looking for your deal
markets are dynamic and money
market
want you to •Fourth
go into largest
it with and one of the fa
without
expert help
• Set deadlines, rewards, & •Rental
is cheap.
• Underestimate
rehab
and projected
market conditions
ing MSAs (Metropolitan Stati
your eyes open.
penalties for performance •Current
There were over 33,000 flips
costs
Now
that speculative investing for The
fast goal in is the
United States. Projected
• Focus on non-listed
to make
in the U.S. and 2,000 in the San
non-performing
properties with less
profit • Keep
has gone
the way of the last maximum
super- profit
population
to 12 million by 203
per month
Francisco Bay Area in 2013.
associates
buyer competition
model, subs
the &
wise
investor is focused on
cash
•Broad-based
with
minimum
risk. For economy that has
Critics often project that flipping
• Buy
“killer and
deals”
• After a win, do your prep &
flowing
assets
safe in harbors.
the employment
example, making
$50,000 rate growth of
weak resale areas
is somehow unethical and
demo on day 1 after COE
States
during
the past decade
on a $500,000
resale
in three
• Over estimate
fraudulent. Indeed, any potential
• Get fixed bids for
•N
months in an $800,000 me-
resale price
major work
fast profit business can bring out
bu
dian price neighborhood is
• Fall in love with a
• Put more money in the
some bad elements, however,
ma
better than making $100,000
prospective deal; be
front than the back
flippers provide a great benefit
Un
on a $1,000,000 resale in the
prepared to walk
• Minimize risk: permit
to the marketplace by removing
•N
same neighborhood in 12
• Make many changes
structural work, 1099s,
blighted properties from com-
co
months. You want to keep
after starting: they
insure properly
munities, returning them to the
•L
your money moving. Don’t
are costly
• Pay your GC directly; let
owner and rental marketplace,
M
buy what looks like a killer
• Count on market
him pay the workers
and increasing property values
po
deal in a low demand area
appreciation
• Re-evaluate market
and tax revenue to the communi-
qu
only
to
find
it
takes
you
8
• Have a failure and
before listing
ty. I am proud to be a flipper.
ca
months
to
sell
it
after
drop-
not learn from it
• Stage your property
Make no mistake, I am first a
ex
ping
the
price
3
times
with
• Feel invincible because
long term hold investor. Why?
•S
two
buyer
fallouts
(guess
you have a success
Real estate income properties
ing
how I know that).
provide relatively passive income
US
Know your market or get
and have appreciating income
2008. Now that many cities are hot again,
tun
someone who does. Critical analy-
Las Vegas
Dallas Best
and asset values with inflation. Flipping
we have a new wave of speculators
wanting Worst
sis of the sales comparisons on both
is a business with very active participa-
to jump on the bandwagon because flipping the purchase price and resale price is
tion and the highest tax bracket. How-
PAGE 28 • 2012
sounds too easy. It is Realty411Guide.com
not.
mandatory. This is as much of an art as
ever, it can produce short term income if
Currently, cities popular with flippers have a science. Your resale price assessment
done well.
faced short supply and surging demand,
has to be based on what the product
A very small percentage of investors
especially at median to lower price ranges, would appraise for with a Federally
NOT TO FLIP?
W
Realty411Guide.com
PAGE 34 • 2014
reWEALTHmag.com