The faster you can get from property purchase to sale, the more profitable your fix and flip will be. Time is costly for investors thanks to holding costs like loan interest, property taxes, and utilities – for each, the total amount you pay grows as time passes.
Flipping fast also reduces the risk of your investment. The fewer months you are responsible for the property, the less likely it is that you’ll have to deal with theft, storm damage, or personal setbacks during your fix and flip project.
Plus, the farther your sale date is from your purchase date, the more difficult it is to predict the ultimate sale price. Yes, property values generally increase over time – but the value increase is only consistent in the aggregate. In the short term, property values can fall if the local market enters the recession phase of the real estate cycle. The sooner you sell, the more likely you’ll remain safely in the expansion phase and make your predicted profit.
How Can You Shorten Your Project?
One of the most obvious – and most difficult – ways to shorten your investment timeline is to sell your fix and flip before you finish the rehab (or even before you start). It may seem impossible, but one of our most successful investors consistently finds buyers before he finishes his projects (you can read about his flipping technique in our free ebook).
So how can an investor line up buyers for their fix and flip before the home is even finished? Read on to find out.
Sell Before You Start
Technically, you won’t be selling your fix and flip while you’re still working on it. But you can collect a sizable deposit from a potential buyer in exchange for a commitment to sell them the finished property at a specific price.
One way to entice buyers to enter into an agreement like this is to offer a personalized renovation to suit their specific property needs. Personalizing a home for buyers can be risky, which is why you need to collect an extra large deposit if you take this route.
You should also set limits in advance on how far you’re willing to go in this customization process. Decide on all the changes you’ll make for the buyers before you agree to sell to them – and make sure you get it in writing. That way, the buyers can’t force you to expand your budget or schedule for additional work later on.
Ally With Real Estate Agent(s)
Talking to real estate agents doesn’t cost anything. In fact, offer them info on your soon-to-be fully modernized property before it hits the market, and you just might become their new best friend. Potential homebuyers will be more open to considering an unfinished property when it’s recommended by their agent; if their agent vouches for your talents, buyers will trust that you can complete your project in a timely manner, and with all the panache you promise.
Network With the Neighborhood
Who said networking is limited to cocktail hours and holiday parties?
While you are lining up your next investment property purchase, check out the local open houses. Talk to the agents hosting the events (and let them know what you’ll be putting on the market in a few months) to find out what the local market’s like, what properties they’ve seen selling, and what features buyers are looking for. After all, local agents want you to build a highly sellable house; that way, they’ll be able to sell it!
You can also get the information straight from the source by talking to the open house visitors. Ask them what they like about the properties they’ve seen, what they wish they could change, and when they’re planning on moving. Let them know about your project, too – especially if their move-in date coincides with your project completion date.
List Your Property ASAP
As soon as you have usable photos of your property, list it. If you’re doing a full-gut rehab, it may be smart to invest in a 3D rendering for the exterior (and perhaps some key interior rooms, as well) so that you can put up an attractive listing in the early days of your project. Plus, most renderings are even more appealing than true photographs, so the renderings will serve you well even after the renovations are over.
Exhibit A:
Exhibit B:
If you’re worried about artificially extending your listing’s days-on-market, never fear – you can re-list when your rehab is complete (if you haven’t sold it already). An experienced agent will be able to tell the property was re-listed, but the fact that you listed a finished home rather than an in-progress project fully justifies your decision.
Offer Earlybird Showings
This will be easier to accomplish if you already have a network of real estate agents and/or a property listing to attract prospective buyers. In the last week or two of the project, there’s no reason not to hold early showings of the property. Those last days will likely be spent primarily on cosmetic touches, which viewers can easily envision themselves.
As long as visitors understand that they’re not seeing the final product, there’s little risk in an early showing – and a lot of potential benefit. You can collect contact information from everyone who attends and throw a big open house after the rehab is 100% done.
If you can get people excited about the property before it’s even finished, they’ll be more willing to commit when they return to see the tidy, finished home.
As with most strategy changes, these techniques may take time to show significant results. The most effective method for an early property sale is through word of mouth – and you’ll only earn that by building trust with agents and buyers.
The more successful flips and satisfied buyers you have, the more likely people are to show interest in your unfinished fix and flip properties. If you make a name for yourself in your local real estate market, agents and homebuyers may someday approach you to ask what projects you have underway – now that’s a time-saving sale.