The adage “what goes up must come down” comes to mind when thinking about a market downturn. However, that doesn’t have to mean fewer profits for your real estate investment business. It might just mean you may need to think about adjusting your strategy. Having a direct line to easy capital can also make all the difference when securing your next project.
Flipping houses is never going to be as easy as it looks on TV. Experienced real estate investors know what it really takes to purchase a property, then renovates and sell it within 12 months or less to yield higher returns. The sweet spot of flipping homes requires both inventory and buyers to be in a healthy place. The current landscape is struggling to keep pace with demand for homes as inventory is still extremely low. Even with rates rising, demand to buy homes is predicted to remain high. But with so many supply chain issues, labor shortages, and low inventory, here are some tips on ways you can pivot your real estate business strategies.
Switch up your strategy by changing your target audience to sell to.
Consider selling to other real estate investors looking to use the property as a rental. Investors looking to buy rental properties aren’t interested in high-end home finishing and fixtures that can come with a high price tag and supply chain shortages. Flipping rental grade properties has been a great strategy for other real estate investors that are able to source materials locally and choose from materials that are in stock.
Source locally
Be open to incorporating design choices based off inventory versus making design choices that could cost extra delays because of shortages. You can read Pivotal’s Blog on Design Trends for 2022 to get some inspiration based on what buyers are looking for in today’s market but also keep an open mind when sourcing materials, fixtures, and incorporating other design elements. Shop locally when you can and find materials that can bring your vision to life based on what is available and avoid any unnecessary delays.
Know your market
As home prices continue to rise, it’s important to know when a property is simply too much and won’t flip for as much as you predict. Home prices are expected to level off and ease up as inventory also eases up a bit. That said, it’s important to understand and know the neighborhoods you are canvasing for your next project. For example, if schools are not good and you’re looking to flip a family home, you may want to take a closer look at what you are willing to pay for that property.
Find reliable relationships
Finding reliable lending relationships is a great way to have more capital available to increase overall revenues by leveraging that capital to do more. Having additional capital can help you close deals much faster and increase the volume of flips you can do in a year. With margins tightening, volume can help make up those revenues. Beyond access to more capital, the expertise that lenders such as Pivotal can offer investors can be a great asset. Having access to their years of experience can help you make the best choices possible and steer you away from unforeseen issues.
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