It has been tough this year finding enough deals to flip or use as rentals. I flipped 26 houses last year and planned to flip 36 this year. I have been selling many flips, but I have not been buying as many as I want to. Last week, I got two new house flips under contract to buy. On one flip, a real estate agent I knew called me up and asked me if I was interested in a property before it hit the market. On another flip, the house was listed on the MLS, but the agent gave me a lot of hints and help to get my offer accepted over other higher offers. In both of these the cases, the agents believed they were doing the best thing for their sellers because they knew I would close the deal and be easy to work with. I have many wholesalers who love to work with me and give me first dibs on properties as well. Something I have always done throughout my career as an agent/broker and investor is treat people the right way and do business the right way. If you want to get more deals, you need to make sure you know what you are doing and are treating the people who will give you deals the right way.
Why have I been unable to buy as many house flips as I would like?
I had a goal to flip 36 houses this year. I have been doing great getting houses fixed up and sold, but I have not been buying as many flips as I would like to. I wanted to buy three flips per month, and so far through five months, I have only bought 7 flips! There are a few reasons why I have not been buying as many flips as I would like to.
- There are fewer deals on the MLS. Our market in Colorado continues to be red hot, and inventory is extremely low. On the deals I see, other investors are willing to pay more than I am.
- There have been fewer deals coming from the wholesalers I usually get leads from. On the deals I have seen from wholesalers, other investors are willing to pay more than I am.
- I started a new real estate brokerage this year. I have been very distracted and not spending as much time as I normally do looking for deals.
- I have not been sending out as many direct market mailings as I planned too. This is my fault and one of the ways the real estate office has distracted me.
- There are almost no foreclosures or short sales in the area. I used to buy a few properties from the foreclosure sale or REOs after they were listed. There are have been virtually zero foreclosures or short sales in our area.
While I have not bought as many flips as I hoped to this year, I am still happy that I was able to buy 7 in our extremely competitive market.
How was I able to get house flips under contract in a competitive market?
Over the last few years, I have bought many houses from wholesalers, the MLS, and even other investors. When I say I am going to buy a house, I do not mess around. I almost never renegotiate a price; I almost never include an inspection clause; and I make things really easy for the seller. I think I am able to work this way in part because we used to buy almost all of our flips from the local foreclosure sale. When you buy from the foreclosure sale, you get no inspection, no title insurance, and sometimes cannot even see the interior of the property.
By doing business this way and almost always sticking to the terms of my offer, other agents, investors, and wholesalers have come to love working with me. They know when I make an offer, the deal will go through. For this reason, I have had other agents bring me deals before they hit the market. Some sellers do not want their house on the market because they may not want showings, they may not want people to see the condition of the home, or there may be tenants making the sale difficult. The agent will tell me about the property, the price, and show me the house before it goes live on the MLS. If the price works for me, I will not mess around negotiating—I will write the offer for that price. If the price does not work, I will try to negotiate but never burn a bridge.
On one occasion, a real estate agent brought me a deal before it was listed, and we were able to get a contract accepted for a price that worked for everyone. A week later, the sellers decided they did not want to sell the house because of a family dispute. I could have tried to enforce the contract or be a tough guy and tell them they had to sell the house to me. If I would have done that, I can guarantee that agent would never bring me a deal, and the sellers would never want to work with me again. I let them out of the deal with no hard feelings. Now if they get their issues worked out, they will most likely come to me first to try to sell the house again.
On one of the recent deals I first talked about, I had an agent go to bat for me with the seller. The house was listed on the MLS for a good price. I looked at the property and made an offer right away. The agent called me and told me I would need to raise my offer a little to have a chance. She said she knew my deal would close without problems and she was trying to convince the seller of this as well. The other offers were much higher than mine, and he was thinking about taking a financed offer or offer with an inspection. He needed to sell fast, and she thought it was in his best interest to take our offer. We ended up texting back and forth on a Saturday morning to get the deal done. There were other offers $10,000 higher than mine, but my reputation and the way we do business got me the deal.
How can doing business the right way help you get deals from other sources as well?
Doing business the right way has also helped me get deals from other investors and wholesalers as well. I try to make the deal as easy as possible. If they have a price in mind on a property that works for me, I will not try to negotiate. I will give them the price they want. I have had wholesalers make $30,000 or more on deals I bought from them. Some people might get mad that a wholesaler would make that much money without doing any work, but they found the deal. The deal still works for me, and it should not matter how much they are making. I have also had wholesalers say they love working with me because I know what I am doing. They work with many new investors who don’t have a clue how wholesaling works and the deals often fall apart or they spend a ton of time holding the investor’s hand to get the deal done.
I work the same way with other house flippers in my area. I try to get along with everyone and not burn any bridges. I have bought houses that I flipped form other investors who flip in my area. On a couple of occasions, the other investors got really good deals, and they still made money by selling it to me without fixing up the house. A lot of times, the same investors are trying to buy the same houses I am trying to buy from the MLS, wholesalers, or off-market sellers. I don’t say bad things about investors to anyone because I know it could come back to bite me. I had an investor I am friends with tell me thank you for telling the sellers we were good guys when I saw them at a wholesale deal a couple of weeks ago. This investor had sold me a house before and mentioned he would send any excess deals he gets my way in the future. I could have told the sellers that the investors were jerks and not to trust them to try to get the deal. But that one deal would not make up for the multiple deals I might lose in the future from the investors.
I have had other sellers refer their friends and family to me after I buy a house from them. I try to treat everyone the right way and not bicker over cents when there are big dollars at stake.
For more information on how to flip houses check out: Fix and Flip Your Way to Financial Freedom Finding, Financing, Repairing and Selling Investment Properties.
How can you burn bridges and hurt your chances at getting more deals?
I have been in the real estate business as an agent, broker, and investor since 2001. I have seen the way many people do business. They will bicker over minor inspection issues, use tricks to save a few hundred dollars, and even try to intimidate people. I remember most of the people who use these tactics. I may not remember exactly what they did, but I remember they did something shady. If I am selling a house or representing a seller, the people who play tricks are a lot less likely to get a deal than someone who I know does business the right way. I know other agents, investors, and wholesalers think the same way. It does not make sense to jeopardize future deals that will make you tens of thousands of dollars so that you can save a few hundred or few thousand on one deal.