A Guide to Micro-Flipping in 2021
If you’re interested in real estate investing in 2021, micro-flipping should be a part of your strategy. Micro-flipping is disrupting the world of real estate investing in the same way e-trading changed the dynamics of stock market investing.
New tools, technology, and a rapidly shifting economic environment are fanning the flames of micro-flipping. Let’s take a deep dive into micro-flipping, including what it is, why it’s surging in popularity, and how you can capitalize on this burgeoning trend.
Micro-Flipping vs.Traditional Flipping
What’s the difference between micro-flipping and traditional flipping? In conventional house flipping, investors buy properties below market value, rehab them, and then sell them for a higher ticket price. Remodeling the property increases the property value, thus ensuring a profit.
On the other hand, micro-flipping doesn’t include any renovation. An investor simply scoops up a house under market value and sells it for a profit. The art of micro-flipping lies in finding homes that are undervalued that will sell for a higher price tag. Often, micro-flippers never see the house at all. All the buying and selling is done from a computer or phone (much like stock trading).
Key Differentiators Between Micro-Flipping and Traditional Flipping:
Traditional flipping has a goal of larger profit margins, while micro-flippers are looking for quick flips and lower profit margins of a few thousand dollars.
Number of Properties
Traditional flipping takes time, so investors might only take on a few properties at once. In micro-flipping, quantity is the only way to earn a decent profit, so they aim to claim several properties as quickly as possible.
Traditional flipping takes time. Purchasing, rehabbing, and putting the home back on the market can take some time, so traditional flipping takes a bit of time to complete. Micro-flipping deals can happen in a week or less.
So, why is there a rapid interest in micro-flipping? Has COVID-19 impacted the prevalence of micro-flipping?
How COVID-19 Has Impacted Micro-Flipping
COVID-19 has affected most industries, and the real estate industry isn’t immune to its effects. Here’s how COVID-19 has impacted the traditional and micro-flipping industries.
When the virus hit, sellers were concerned that buyers wouldn’t want to buy new homes anymore. Many opted to take their homes off the market so they wouldn’t have to worry about their house accumulating days on the market. Additionally, keeping the home off the market decreased the risk of COVID-19 exposure.
Ultimately, this massive move to pull properties off the market led to lower inventory availability for traditional and micro-flipping investors.
Low Mortgage Rates
COVID-19’s economic impacts led to the lowest mortgage rates in U.S. history. Consequently, more people can afford to purchase homes. This has led to a larger potential buyer pool for 2021 – great news for fix-and-flip and micro-flipping investors.
The low mortgage rates have increased the demand for houses dramatically. However, since there’s a lower inventory of homes on the market, investors’ potential profitability is high. Fix-and-flip and micro-flippers have much less competition right now.
Rising Home Prices
What happens when there’s too much supply and not enough demand? Prices increase. That’s precisely what’s happened with the housing market. Despite an initial drop in housing prices in the second quarter of 2020, by the end of 2020, housing prices were stable and rising. This data is good news for fix and flip and micro-flippers because rising prices generally lead to stellar ROIs.
How to Find a Micro-Flipping Opportunity in 2021
In many ways, this volatile market is a great time to get into or continue real estate investing. Whether fix-and-flip, micro-flipping, or a hybrid of the two – experts agree it’s a wise time to get started.
But how do you find micro-flipping opportunities in 2021?
Get access to real estate data you need via micro-flipping software
It is possible to use public records like MLS (Multiple Listing Service)to find properties. However, you’ll be at a severe disadvantage because most people who participate in micro-flipping use software. It would be best to get a software solution that gives you access to all available properties in the country. You want software that has:
- Daily Updates
- Full Property Details
- Filtering Capabilities
- Access to Buyers
- Organizational Capabilities
- A Mobile Version
- Regular Updates
- Good Customer Support
Find the Buyers & Sellers
Your software solution might include both. However, what’s going to set an individual micro-flipper apart from big players like Zillow and Redfin is the personal touch. Call up sellers and work to make an impression. Don’t use pressure, and don’t be over-enthusiastic. Simply let sellers know that you have an interested pool of buyers ready to purchase.
Finding the right buyers might be the most challenging part, but you must find a strategy to locate interested buyers. Once you have a pool of buyers, simply connect the dots.
Consider a Hybrid Method
While micro-flipping usually doesn’t involve renovations, a quick facelift can take profit margins from measly to meteoric. Redoing the flooring or adding a deck to the backyard could be a low-fuss renovation that increases your profit margins significantly.
The problem with micro-flipping is that if you’re an individual without a lot of start-up capital, you will have a challenging time competing with the iBuyers like Redfin, Opendoor, and Zillow. However, if you’re willing to hold on to properties a little longer and make minor repairs, you could stand to gain a lot more.
In other words, if you’re open to hold on to a property for a month instead of a week and do minor repairs, you could increase your profit margins by thousands of dollars. It’s a strategy that’s worth looking into – especially if you’re just getting started. Even if you’re more like a wholesaler, deciding to add value to each of your properties with low-risk, low-sweat upgrades could be a worthy investment for your 2021 micro-flipping strategy.
Here at BuildDirect, we offer discounted prices on wholesale flooring materials, so we’re the perfect companion for micro-flippers, real estate wholesalers, and fix-and-flippers. Plus, you get unlimited samples, a 5% credit, and a 30-day money-back guarantee when you become a PRO Rewards member.
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