With about 1,200 fix and flip deals under his belt it was time to shut it down. My friend Keith had rode the foreclosure wave in Phoenix. After the real estate market crash in 2008 he began buying distressed properties at the courthouse steps. He started purchasing a few at a time in the beginning and then as many as 30 a month.
Keith would be the first to admit that these houses weren’t really all that “distressed”.
Sure, the former owner may have neglected the property. Or worse, trashed it to get back at the lender (see the above picture of the knife in the kitchen cabinet). But the truth was these rehabs were of the “lipstick on a pig” variety. Most of the houses he bought were less than 10 years old and didn’t need a lot of repairs.
So what’s a “lipstick on a pig” rehab?
Well that means a very simple cosmetic rehab. We’re talking carpet, interior paint, landscaping clean up and some granite counter tops.
Keith taught me his formula for buying houses at the auction, fixing them up quickly (two weeks or less) and then selling them through a Realtor to a retail homebuyer on the multiple listing service.
Manny and I used his system to flip about 40 of our own deals during this time before all of the opportunities started disappearing at the end of 2012. Now we take on larger scale projects (reconfigurations, additions, advanced cosmetic rehabs) both in Phoenix and Milwaukee, Wisconsin.
These days the demand is just as high for fully remodeled properties. The problem is the “lipstick on a pig” houses are long gone.
In order for you to earn a decent profit you’ve got to know how to find, fund, fix and flip houses that need more than just a coat of paint and a some grass planted in the front yard.
Keith reminded me over lunch recently that regardless of the type of rehab or location, in order to successfully find deals and obtain the cash to buy them you must have two things:
Knowledge of the fix and flip process
His understanding of the market helped him identify deals, at the auction, from wholesalers and from a network of Realtors he developed in Phoenix. And because he learned how to remodel his properties quickly and inexpensively it was easy to attract investment capital.
Keith still likes to say, “if you really have a deal then the money will find you.”
So how do you gain market expertise? You immerse yourself in your local real estate market and surround yourself with people that can help you become an expert.
And what about knowledge of the fix and flip process? Well there are lots of books and videos that will show you how. You can even pay for a coach or mentorship program (there are lots of those out there, including one taught by us) to help you get started.