Real Estate certainly seems to be an investment that people get passionate about.
I guess thats why it is so easy to make huge amounts of money in the Real Estate industry, after all people buy emotionally and then justify afterwards with logic.
Real Estate lends itself perfectly to that maxim.
So lets look at the concept of flipping properties, its pretty easy really, buy something at a price way below what it is really worth and then sell it ASAP for many thousands of dollars more.
People often ask how can you actually do that, after all if it was that easy wouldn’t everybody be doing it?
The answer is not really. My experience is that when most people purchaase property they use the vendor or sellers price as the benchmark or starting point for their first offer. They make an offer which is perhaps 10, 20 or maybe even 30 thousand less than the listed price and the negotiations begin.
The way I go about it is I use what I know I can sell the property for and then work back to the price I want to pay so that I get the margin I want.
This can sometimes mean I am offering 80, 90 or 100 thousand less than what the seller has listed the property for (and we are talking about properties in the 300 thousand mark here.
Often the seller has already factored in the idea that you are going to negotiate and therefor has loaded the asking price by many thousands of dollars.
The next thing I do is I always start out with a cash unconditional offer and 3 months settlement.
When the seller comes back with price changes etc I can then start to change the terms of the contract to suit me, for example I can move the settlement date out further and include a clause that allows me access to the property before settlement so that I can furnish the property and market it.
Before you go out there making cash unconditional offers though be aware that someone might just take you up on that so you better have your finances sorted out. I use a company called LOANZ who provide me with pre- approvals so that I can go out and make these offers. It does not cost you anything to get a pre approval and let me tell you your bargaining power and confidence goes through the roof.
In flipping Real Estate the reality is that it is in the buying that you make your money. The property is worth what ever the market value is and what you can negotiate down to becomes your margin.
The other thing I have noticed is that most of the people who do flip Real Estate regularly also have an arm that can sell the property very quickly.
My other business Professional Investment Services is a business that sometimes has clients who wish to invest in Real Estate so this provides a nice easy outlet.
If you don’t have a nice easy outlet you best do some figures just in case you can not flip the property. Knowing that the property will cost you say $50 per week if you have to keep it will also help you in your negotiations.
Cheers
Big Tez
