How to Finance & Build 10K/month Cash Flow from Rentals!


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How to Finance & Build 10K/month Cash Flow from Rentals!


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Where to Find Flips and How to Flip Fast

Our last flip went perfect, a 70% LTV and we made a nice annualized return (tip #5). It was in a suburb just outside of a great rental area and before you get to the nicer suburbs. We categorize this as a high end blue collar area (tip #1) which are perfect for flips and/or rentals. REO sales are in the 30s with retail sale ranging from 80-130K which shows a huge discount for REOs (tip #2). The best part is there was only 1 for sale property in the neighborhood compared to 4 sold comps (tip #3) and there was definite pride of ownership with few rentals (tip #4).

5 Tips for Where to Flip:

1. Target high end blue collar areas – These areas are perfect for flips and without the competition of the nicer suburbs. Often called transitional areas and they are often just outside the rental areas and just outside the nicer suburbs.

2. Large difference in REO vs retail sales prices – REO sales have to be a fraction of retail sales. In our case, REO sales are in the 30s and retail sales 80-130K which is great.

3. Sold comps vs For Sale comps – Too many for sale comps is not good. There must be close to as many or more sold comps as for sale comps or you are looking at a rental area not an area to flip.

4. Pride of ownership – Make sure there are not too many rentals and there is pride of ownership. If this is not the case then the area is likely better for rentals instead of flips as long as it is not a warzone.

5. Focus has to be on annualized return – It is very important to focus on volume and annualized return. A 5% return in 1 month is a 60% annualized return where a 15% return in 6 months is only a 30% return. If you can flip it quick then do it and move onto the next deal. You will improve your annualized return by quick flips and volume.

Now, we have 2 more properties under contract in the same neighborhood but one we project to be in 10K less and it is bigger and has 1 more bath then the other property. It could be the first flip plus 20K profit. Again there is only 1 for sale property and now 5 sold comps (tip #3) and the pride of ownership still exists with few rentals (tip #4). The 2nd deal has a huge lot and 5 car garage and we will be in 15K less with the same value. Both home run deals, but we want to sell quick in order to focus on annualized return then do more flips for volume (tip #5). So here is what we plan to do.

3 Tips for Quick Sales:

1. Weekly price reductions – We want activity all the time. So to keep our property in front of buyers agents we do a small $250 weekly price reduction. This works brilliantly as we had 4 times the traffic and go our offer after only 2 reductions.

2. Give free stuff – Offer a free flat screen TV for a sale by X date, 1-2 weeks out and see what happens. It will cost up to $1000 but that is fine with us if we get that quick sale at or near our asking price. You may sell in half the time which could double your annualized return for only $1000.

3. “List High Rehab Drop” – List the property at the highest for sale comp during rehab then when rehab is done you drop it to your initial asking price and market a huge price reduction. It can produce a really fast sale which is incredible for annualized return.

For this deal a realistic salesprice is 90K. We are only going to be in around 50K so 90K would be a tremendous profit especially if we can sell it fast. So our initial list price is 90K but during rehab we wish to list it for the highest for sale comp.

If I go back another month to 7 months, there are sold comps for 114K and 127.5K. WOW, that is awesome. In addition, you could throw a baseball and hit the roof of both houses. One is across the street and 2 down, the other directly behind the house across the street. Even more good news though, our property compares favorably. We have an extra bath compared to the 114K comp and we are bigger and with an extra bath then the 127.5K one.

So we don’t have to use a for sale comp, rather we can use a sold comp, 2 to be precise. Now our high list price during rehab actually may get some activity as the price points in the neighborhood can support it. But we are not expecting activity. We plan to complete rehab in 1 month and drop the price to around 100K. Then we will market this huge 27.5K price reduction, will go fast, bring all offers, free flat screen tv if sold within 10 days from now, fully remodeled, etc etc etc. We think this will work. If no we are 10K above our initial listing price and can start with the weekly $250 price reductions as normal. So no disadvantages and we may be looking at a huge profit really fast. I can’t wait to calculate the annualized return on this one.

I hope these tips are helpful. So what quick sale strategies do you guys use? And how to you target areas prime for flips?

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