Micro-flipping is a great way to create wealth investing in real estate.

Micro Flipping Defined

It might seem complicated to micro-flip real estate, as it is a relatively new concept compared to traditional fix-and-flip that most house flippers are familiar with. It’s not difficult or complicated. Although it sounds sophisticated and fancy, the term is very simple to understand and much easier to use.

What is it? It’s real-estate wholesaling with technology and data. This is not the fix-and-flip scenario often associated with house flipping.

This is a short-term investment strategy in real estate where an investor searches for affordable and viable properties online to sell quickly. This is a short-term strategy that does not require any renovations or rehabilitation.

What is Micro Flipping?

Micro flipping, as we’ve already said, is similar to wholesaling or other real estate contract flipping techniques with some notable differences. This method is typically similar to wholesaling, but it has a different approach to each step.

Search Properties

Finding the right property, just like in any other real estate transaction is the first step toward becoming a successful micro-flipper. Micro flippers should not settle for any property, unlike other methods. Because the margin of return on investment for a micro flip is much smaller than a full-on fix and flip deal, the house must be less than its market value.

Technology is key here. The difference between success and failure is determined by the tools you have.

Is Micro-flipping for you?

Micro-flipping can be a great way to get new investors into the industry, especially tech-savvy. But just because everyone has access to the internet and a computer, it doesn’t necessarily mean that micro-flipping is easy for them. This line of business requires a certain kind of attitude and aptitude. It is also difficult to find promising properties in the data.

There are many other ways to get into real estate, including house flipping, wholesaling, and renting out residential properties (both short-term and long-term). It is up to you to choose the one that best suits your financial goals.

You’ll probably be surprised at how much there is to know if you are just starting out with flipping and buying houses. Flipping houses is not as simple as you might think.

If you’re willing to take the time to learn the proper way to flip houses, it is possible to succeed. There are many ways to reduce your learning curve and to put in place safeguards to minimize your risk.

This article will show you how to flip your house, and what mistakes to avoid.

How House Flipping Works

House flipping is the act of buying distressed properties and fixing them up to resell for profit. These properties are often found through foreclosures, bank short sales, or property auctions.

You must be able to spend your money well and invest in low-value properties if you are going to make a living flipping houses. These properties are often very difficult to work on.

You will then need to make renovations that will increase its resale price and draw a buyer’s attention. After the renovations have been completed, it’s time to market the property.

Microflipping

It is possible to sell and buy properties without any renovations. Microflipping is a method of selling properties quickly that doesn’t require any renovations.

This is possible by analyzing data to identify potential opportunities to purchase property below its market value and then flip it quickly to another buyer. These homes are usually houses that don’t require major repairs.

Microflipping requires that you work quickly. Microflippers are able to process large volumes of real estate transactions and they are highly successful.

7 Steps to Start House Flipping

Before you can start flipping houses, it is important to know what the steps are. This will increase your chances of success and lower your risk. These are the seven steps to get started with house flipping.

1. Know your Neighborhood

You should spend some time researching the market and deciding where to invest. A real estate agent can help you with this.

It’s a smart idea to hire a general contractor to evaluate the property once you have found the home that you are interested in buying. This will allow you to estimate the cost of any work needed and determine if the house is within your budget.

2. To plan your budget, use the 70% rule

Real estate investors often refer to the 70% rule. The 70% rule stipulates that an investor should pay 70% of the after repair value (ARV) of a property, minus any repairs. After a home has been renovated, the ARV is its value.

Let’s take, for example, the AVR on a house is $200,000 and it requires $25,000 in repairs. The AVR of 70% is $140,000. Add the repairs and you get $115,000. You should not pay more than $115,000 to purchase this home.

3. Assess your Skill Set

You will be more successful as a house flipper if you have certain skills. Knowledge of real estate, construction, and design are all good skills. You don’t need to have these skills, but it’s fine to be able to identify professionals who do.

You should have a team of experts to help you before you start flipping houses. These could include lenders, real estate agents, and insurance agents.

4. Finance your Project

Next, you need to decide how you will finance your project. You will need to be preapproved for a loan if you don’t have enough cash to pay for the project. You will need to have a high credit score. The bank may also require a 20% downpayment or collateral.

5. Make a decision and buy your house

The most difficult aspect of flipping a home is finding the right property. This is because you don’t need to just consider how much the house currently costs. You also need to consider its potential resale price.

Foreclosed and Distressed are good options. To fully understand the scope of work required, you will need to consult a contractor and a real estate agent.

After you have found the perfect property, you can make an agreement and close the deal. You can expect competition from potential buyers if the house is really good. You should know the maximum price you are willing to pay for this house while still being profitable.

6. Increase sweat equity

You can save money if you are new to house flipping or have a limited budget by building sweat equity. This is the amount of unpaid labor that you will put into the project.

Entrepreneurs often find that sweat equity is essential to building a business. It gives them the energy and resources to continue building their business.

7. Flip the House

After the repairs are complete, it is time to sell the house. It is crucial to act quickly. The longer a home remains on the market, you will make less profit. Your goal should be to quickly make improvements and sell the home as soon as possible.

To help you sell your house, you will need to partner with a professional real estate agent. Raleigh real estate expert Gary Kevin Coats can help you decide the best resale value.

Cost of flipping a house

Costs for flipping a house vary depending on how much it costs to acquire the property, the repairs needed, and the time taken to sell the property. Let’s take a look at what you can expect when flipping a house.

Your Financial Investment

It’s all about the math when buying and flipping a home. It is important to realize that you will earn a profit in the end.

You should also consider the costs of renovating the house and the initial purchase price. These expenses should also be included in your budget:

• Deposit payment
• Property taxes
• Insurance payments
• Closing costs
• Utility costs
• Marketing costs
• Real estate agent fees

Your Time Investment

Flipping a house requires more than a financial investment. It also requires a significant time investment. It will take a different amount of time depending on how large and complex the project is.

You can expect to spend between six and twelve weeks buying and flipping a house if everything goes according to plan. This could be delayed if you have to approve a third party or the remodeling process is delayed.

Are you a good candidate for flipping houses?

Are you a good fit for flipping houses? The following chart will help you understand the pros and cons of flipping houses.

House flipping is a viable option if you have the right plan and are careful about the financials. This strategy is not going to make you rich overnight. You will likely make mistakes along the way and lose money.

This process can be made easier with the help of the right team. A qualified agent can provide insight into the local market and help buyers understand what type of homes they are looking for.

A good general contractor will be able to help you assess the condition of a house. This will prevent you from investing in a money pit. You should also consider your financing requirements ahead of time.

Real estate investments are the key to some of the most successful people in the world. How is real estate investing able to create wealth?

These are the top driving forces for real estate success.

Forcing Equity

Equity refers to ownership. Your personal equity in real estate investing is the difference between the property’s market value and the amount you owe the bank on the mortgage. If your property is worth $150,000 but you owe $120,000 to the bank, then you have $30,000 equity.

Forced equity refers to the wealth you create when you purchase a property for a lower price and make it more valuable. A “distressed property” is typically sold for 25%-30% more than a similar property that isn’t in distress. It takes 10-15% to repair it (carpet, paint and some replacement appliances), and bring it back to its market value.

Let’s suppose you paid 25% less than the market value. Then, you spent 10% to fix it. This will increase your equity (ownership) 15%

You can also force equity by adding features that increase the property’s value. Imagine that you purchase a house with two bedrooms in a neighborhood with three bedrooms. Your property would be comparable to the market value of other properties if you added the third bedroom. If you buy the house at an appropriate discount because it only has two bedrooms, and the cost of adding another bedroom is less that the difference in your price and the market value, then you have earned equity.

Depreciation

In most cases, depreciation is a negative thing. It is the loss of value.

However, real estate investing does not mean a drop in property value. Real estate investors have a tax benefit that the IRS offers. You can deduct a portion of the investment property’s value each year for the IRS-determined lifetime.

The IRS states that residential properties have a useful life expectancy of 27.5 years. For example, let’s say your property is worth $150,000. You can subtract $5,454 from rental income. Let’s say your annual net rental income is $15,000. Say your net annual rental income is $15,000. Your taxable rental income falls to $9,546.

This depreciation tax cut is so powerful because most real estate doesn’t lose value every year. Property values tend to increase over time. This means that you can get a tax credit for an asset that is likely to increase in value.

Depreciation, which is a tax credit, is added to property upkeep costs and other costs you can subtract from your rental income. A cash-positive rental can become a loss on paper due to depreciation. This loss can lower your overall tax bill and reduce your other taxable income.

Leverage

One of the most popular wealth-creating real estate investment strategies is leverage. This is borrowing capital to buy or increase the return on investment. Leverage allows real estate investors to make more money with an income-producing asset than their cash outlay. Let’s take, for example, 20% down on a $100,000 property and finance 80%. Leverage allows you to control and benefit from the income generated by a $100,000 property even though you only invested $20,000.

Real estate agents love to refer to leverage as the ability to “make money with other people’s money”. The bank funds are used to buy the property, and the money of the tenant to repay the bank. Your profit is the difference between what the tenant pays and what you pay the bank. You could have $500,000 worth real estate assets instead of buying one house for $100,000 with cash.

Inflation

We all take inflation as a given. We are forced to pay more for everyday goods because the price of them is increasing. We don’t pay much attention to it. It is a cost that does not discriminate but affects everyone. So why complain?

Many large companies offer an annual “cost of living raise” to help employees understand how inflation affects their ability to provide for their families. Inflation is only one aspect of the economy. The average annual inflation rate in the United States is 3%. However, there have been years of high inflation (12.5% for 1980), and low inflation (0.1% for 2008).

Inflation can be a reliable and consistent source of wealth for real estate investors. Because inflation is a constant driver of home price appreciation, Fixed-rate mortgages have a monthly payment that remains the same for thirty years. If at all, taxes and insurance rise very slowly. This means that although the investment property’s value is rising each year due to inflation, its cost is still relatively low. Inflation is the difference. Equity means you have a more valuable asset each year.

Appreciation

Inflation leads to a gradual rise in the value of your investment properties, but rapid market appreciation is a major factor that creates wealth. From 1968 to 2009, the average price of existing houses increased by 5.4% per year.

Real estate is all about location. You can expect your investment to increase year after year if you have done your research and bought a property that has a high value. This is how many people have made large sums of money in real property.

Real estate investing follows the same principles as stock market investing. Buy low, sell high. Some areas of the country like California have seen their home values rise much faster than inflation.

Annual Rent Increases

Housing is the cost to life. Inflation leads to an increase of food and other consumer goods. Housing costs keep up with inflation. Due to inflation, it is common to see rents rise by 2.5 to 5% every year. It is common for landlords to increase rents every time a lease term is renewed.

If your mortgage interest rate remains fixed, however, your rental property costs won’t rise with inflation. Your rental income will increase while your costs will remain the same as a landlord. Your investment property will bring you more profits year after year.

Be aware of the risks

These are the main strategies real estate investors use in order to make money. There is always risk with any investment. It is important to be smart about your investments, to manage well and not become too dependent.

Real estate investing requires more time and effort than stock trading. You also get higher returns if you take on more risk. Real estate is a long-term investment, unlike other options. Because it is a fixed asset, which can’t be liquidated quickly, and because transaction costs are high, this makes real estate a long-term investment. It is important to understand the risks and take steps to mitigate them.