How to Find the Perfect Flip for Real Estate Investing

Investing in real estate can be as interesting and fun as it can be lucrative. Finding the perfect diamond in the rough, remodeling it, revealing its true potential, and selling it for a profit can be a fantastic way to invest in your future. 

Though it can be time-consuming (and very unlike what you see on television shows) to find the perfect flip for your real estate investment, the possibilities are quite endless. With the right knowledge, strategy, and team, you can be well on your way to recognizing a good deal when it comes your way. 

Find Your Target Market

It’s important to not only become familiar with your own city and neighborhood but become a local expert. Incredible bargains can be found right where you live, it just takes knowing what to look for. 

What type of housing is currently deficient and why? What is currently “on trend”? For example, do a lot of people in your city now work from home? Perhaps oversized homes from the 1950s, 60s, or 70s can be reconfigured to create home offices or homeschool rooms. 

Once you’ve found your niche, start looking into your neighborhood and adjacent neighborhoods and cities that have similar demographics. 

Find a Patient Realtor 

Realtors are flooding the market now more than ever. But if you want to know how to find a home to flip, you need a knowledgeable, resourceful, and experienced real estate professional. Having a realtor never means you stop doing your “home” work, but they can help take many tasks off your plate. 

Here are some tasks your real estate investing realtor can accomplish for you: 

  • Setting up the MLS search criteria

  • Providing comps for both pre and post-rehab closed sales

  • Getting showing appointments within 24 hours of your request 

  • Providing local zoning issues, when applicable

Another key trait your realtor should have is patience. Buying a distressed property can typically involve more than just the seller. Relatives, attorneys, or advisors can also be negotiating on behalf of the seller and your realtor will need to know how to navigate the situation if anyone is slowing down or stopping the sale process. 

Find Your Team

In addition to your patient and experienced realtor, you’ll want additional professionals in your corner to help you with the property flipping process. Their valuable expertise can free you up to use your skills and time elsewhere. 

  • Architect: Many municipalities require a building permit, even for rehabs. Line up your architect in advance so they can review the property, specifications, and layout before you make an offer. An architect’s insight can save you valuable time and money down the road.

  • Designer: A designer can put together the perfect look to attract target buyers to your flipped property. They can help you source tiles, grout, cabinets, thresholds, flooring, and the many other pieces that go into creating the perfect look. 

  • Stager: In addition to a perfectly designed property, a stager can help put the cherry on top of your perfectly flipped property. They can help match furniture to the theme your designer put in place. 

Local Auctions, Short Sales, and REO Homes

Finding properties outside of the traditional MLS can provide you with a great discount, but there are important things to consider. 

Potential ways to acquire a home at a deep discount: 

  • Local auction: Find properties through your local government, online websites, or real estate agents.

  • Short sales: Find properties that are selling for less than what the seller owes on their mortgage to the bank. These sellers may be wanting to save their credit by avoiding foreclosure. 

  • REO Homes: Find real estate-owned properties that are owned by a bank or mortgage lender and are purchased through an auction property or an REO agent. They are often sold “as-is” at a deep discount. 

If you decide to purchase a property through one of these means, be prepared! These homes can often be abandoned or severely damaged. It’s important to do your due diligence before you bid. You need to understand all of the auction rules and check for claims and liens on the property, as well as any occupants on the property. 

If possible, bring your contractor with you when you inspect the property. You are waiving your right to a home inspection, so hidden (costly) repairs are your biggest fear. Once you determine an acquisition price that allows you a margin for undisclosed repairs, stick to it. Also, don’t assume other bidders have done their due diligence. 

Lastly, the bank/lender holding the property may not accept even the highest bid because it doesn’t meet the outstanding loan balance. In this case, walk away as you have no control over whether the REO person will come to accept the reality of the property’s value.

Flipping Properties Inside Your Self-Directed IRA

When finding the perfect flip for your real estate investment, it’s important to ensure your profit exceeds the risk you are taking. Ideally, having a net return of 25% or more of the total costs is a good starting point. 

What can skyrocket your success, even more, is if you’re investing in real estate with a self-directed IRA, especially when you put your profits back into the IRA. You should know, however, that the IRS prohibits you from doing the actual work, otherwise known as “sweat equity”. If you own a contracting company, have your sub-contractors bill the IRA directly and not bill through your contracting company. 

You will still be a manager over the property and make crucial decisions, but you cannot put in any physical labor. 

Using a self-directed IRA for your real estate investing can help you generate higher returns than the stock market, build wealth and equity, and hedge against inflation while still benefiting from the tax advantages of traditional and Roth retirement accounts. 

How Chicago Trust Administration Services Can Help

At Chicago Trust Administration Services, we specialize in self-directed IRAs. We are custodians who can help you stay in compliance with IRS regulations. Whether you’re interested in investing in real estate, or other alternative assets, we can help you with the time-consuming, complicated paperwork. Trust me, we relish it! To see how we can help, we invite you to schedule a complimentary meeting with us by calling 312-869-9394 or emailing steve@ctasira.com. 

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*The content and opinions in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

**CTAS professionals are not financial advisors and cannot provide advice or recommendations regarding specific investment decisions.

Steven Miszkowicz