With an ungodly amount of reality TV on networks across the country, real estate flipping and developers were bound to star in their very own drama-filled shows. And why wouldn’t it be interesting? It’s logical, formulaic, and feasible Treasure Hunting. It gives viewers a glimpse into the exciting and turbulent world of real estate developers who find beaten and tired properties and turn them into a healthy profit in months. Flippers make $100Ks – millions in single-family real estate projects and portray a life and career that is both creatively exciting and lucrative.
I have had the pleasure of working with many developers on ventures that run the gamut. From land acquisition to small flips, all the way up to $30M+ new construction projects, every developer has their own criteria, style, and formula. Typically, the following criteria remain consistent:
- Limited cash outlay, less out-of-pocket, and at the least interest payment Possible the better.
- 20%+ profit.
- Exit strategy. Nobody wants to tie their money up without having a backup plan.
- 3-4 solid comparable properties that justify the venture.
In my experience, the average person may find it difficult to enter the world of real estate flipping simply because in a competitive and saturated market such as L.A., great properties have become hard to find and profit margins have gotten skinnier. Seasoned pros have their teams and rehab/costs down to a science. Now I’m not writing this to discourage aspiring developers to delve into the market. Tread with caution, know the market and comps, trust your agent, and always feel confident in the property you purchase. Finding the right property starts with the right agent and trust is key. I myself have urged clients to back out of deals when the math no longer made sense. The profit is in the purchase, everything else is just more dollars to line your pockets.
