How to NOT Lose Money in a Buyer’s Market
Flipping houses is a strong business model in a Buyer’s Market. The real estate market is slow moving. If prices decline, it is usually driven by lower prices on dated houses & investor product. Renovated houses are a desirable product that will hold it’s value long enough for you to exit – and capture your profit.
In a Buyer’s Market, there are always owner occupant buyers looking for a place to call home. Consider, if you were the retail, owner occupant buyer, would you rather:
- Buy a tastefully designed, fully renovated house?Â
- Or Buy something dated which you have to renovate over time? (these dated houses have recently (2020-2024) sold for prices equivalent to ARV minus repairs. This trend is reversing now-with dated product beginning to see more discounting in price. These houses are less desirable and in higher supply).
A renovated home is a more desirable product EVEN IN A BUYER’S MARKET.
Here are 3 Keys to Avoiding Risk While Flipping in a Buyer’s Market:
- Buy Fast – View properties & make offers quickly. Sellers & brokers can feel the lower activity in showings/offers, especially compared to 2021 & 2022. They’re willingness to accept the quickly presented, quickly closing offer is MUCH HIGHER than in years past. Closing quickly allows you to get your deal moving quicker, whenever possible. Don’t waste days in DD and simply waiting for closing because the contract says so. Time is the enemy in a Buyer’s Market for any Fix & Flip Investors.
- Redevelop Fast – Plan your renovation while under contract. Execute that renovation as quickly as possible. It is always to goal, but those who can shave a few days, weeks, or even months off of construction time will win. In a Seller’s market, slow moving flippers often make MORE money as the market prices increase. In a Buyer’s Market, the risk is the opposite. Longer construction may mean selling below your expected exit.
- Sell & Settle Fast – In a Buyer’s Market, prioritize SPEED of exit OVER maximizing every penny of profit. Pricing correctly is key here. A few years ago the formula for pricing was asking more than any sold sale-and getting it! In a Buyer’s Market it is often better to price right in line with the market, or, dare I say, even just a hair BELOW market. Better to sell in 30 days or less than have a 6 month marketing cycle with multiple price drops-all while your carrying costs are eating your profit.
To summarize, IT IS ALL ABOUT SPEED in a Buyers Market. GO FAST to avoid risk!!