A Fix and Flipper’s Path in a COVID-19 Market
October 6, 2020
Founder and CEO, Tru Realty
As real estate professionals, we’re taught to expect the unexpected. The ability to adapt is almost a requirement, especially for those who flip properties. When a problem arises, you research solutions, identify the best option, implement, and monitor progress. However, absolutely no one was prepared for the storm that is COVID-19, and as a result, experienced and newbie flippers alike are feeling the pressure of their next move.
One of the biggest challenges fix and flippers are facing is low inventory overall. As I write this article, both inventory and new monthly listings have been on the decline since March, naturally leading to higher purchase prices. When the price tag goes up across the board, fix and flippers instinctively get nervous. If the acquisition cost is high, is the flip even worth it?
In this market, the answer depends on your situation and commitment to the flip. Below are some scenarios and solutions to help guide you in your decision.
If you can afford the current market…
If you can muster the price tag, it’s likely to pay off. One key factor I haven’t mentioned yet: even though purchase price is up, sales have also been on the up and up! High prices are not scaring motivated buyers away. So, if you have the funding, move quickly because other buyers are doing the same. Know your market, know your plan of action, and execute swiftly. Certainly, don’t cut corners on your process, but now more than ever, the sooner you can get your property back on the market in this high-demand ecosystem, the better off your margins will be.
If you can’t afford the current market…
It’s ok if you can’t play the game, that’s what the bench is there for! Many fix and flippers simply don’t have the cash-flow or confidence to support the current purchase prices. We’re living in unprecedented times in an unpredictable industry, and you need to do what’s best for you and your business. Regardless of your reason, if you need to wait until the market bounces back a bit more, there are plenty of things you can do while you “wait for some playing time.”
- Improve Your Skills: Use your “bench time” to better your current skills or identify something new you’d like to add to your metaphorical Always wanted to tackle your own plumbing projects? Unsure of how to use Facebook for your business? Now is a great time to master skills you’ve always wanted to learn.
- Grow Your Network: Networking in a COVID-19 market might sound odd, but 2020 has gone completely virtual! You can call, text, and video chat with new people to add to your contact You’ll also have the time for thorough reference checks for any new contractors.
- Review Your Processes: Are you finding, fixing, and flipping properties in the most efficient way possible? Are you spending too much on certain projects where there’s opportunity to minimize cost? Use this time to take a deep dive and be honest with yourself on how you run your
Even for skilled professionals with decades of experience in the industry, navigating the current COVID-19 climate can be extremely challenging. Being a rookie in this market is likely very overwhelming; but no one starts a successful career in the real estate industry believing it will be easy. You will get through this and be better for it! If you can afford to play the game right now, the payoff should be well-worth the investment if you’re able to flip quickly. If you can’t, focus on the things you can do to make your business even stronger when the market bounces back.