Real Estate Investors Guide to Micro Flipping

Real estate investors seek a new opportunities to find under-market value properties and capitalize on quick returns. While house flipping has long been a tried-and-true real estate investment strategy, it carries significant risk and requires substantial time and experience. 

On the other hand, micro flipping isn’t traditional house-flipping. It combines aspects of wholesaling and house flipping into transactions that can move from buyer to seller in days. Read on to understand how micro flipping works and the pros and cons of this investment strategy. 

Micro flipping is the process of locating and buying under-market value properties and immediately selling them again. The micro in the name refers to when you hold a property, often only for days. Sometimes, you make minor cosmetic improvements to a property before selling. However, normally, micro flipping involves buying an under-market value property and immediately selling it for more.

The comparison with wholesaling is simple: in wholesaling, you locate an under-market value property, sign a purchase contract and assign that contract to another buyer. The mechanics are similar to micro flipping, with one key difference: you don’t purchase the property in a wholesaling transaction.

On the other hand, traditional house flipping involves purchasing an under-market value property and performing renovations and upgrades before re-selling. HGTV has made this style of real estate investing popular, but house-flipping renovations aren’t always a complete overhaul. You could replace an old roof or just paint the interior and exterior before reselling. 

Micro flipping differs from traditional house flipping in that you make few or no renovations. You can do most of the work of locating and listing properties from your computer. 

Micro-flipping real estate investors buy properties needing renovation and either re-sell them as-is or perform basic renovations before quickly reselling. You’ll go through the process of making an offer on the property and closing before relisting. While some micro flippers use personal funds, others get a mortgage or work with private investors. 

You can perform many transactions each month. In this case, you’re not aiming to make tens or hundreds of thousands of dollars per transaction. Micro flippers may only make a couple thousand dollars per micro flip, but they have time to close many monthly transactions. 

There are significant advantages to micro flipping for investors, including:

Less labor intensive than house flippingRecoup your invested funds quicklyCan make a money with less risk than traditional house flippingCan perform many micro flipping transactions a month. 

Like any investment strategy, micro flipping isn’t without risk of capital loss. The possible disadvantages of micro flipping include:

Difficulty re-selling the propertyLoss of property value if you pay too muchRequires in-depth market knowledgeStiff competition in saturated markets

If you’re ready to find profitable micro-flipping opportunities, here are some ways to locate properties. 

Start by researching local real estate markets to identify target neighborhoods. You can work with a local real estate agent to understand market trends, look at comps and better understand the current real estate market to find micro-flipping opportunities. Learn how to identify investment scams. 

You can identify distressed properties or motivated sellers through online listings and by working with a local real estate agent to search the MLS. You can also consider driving through neighborhoods and approaching owners whose properties have deferred maintenance or searching public records. 

Building a relationship with wholesalers and real estate agents not only helps you find properties for micro flipping but can offer greater insight into market trends and help you get ahead of unlisted local opportunities. 

The best tool to find properties is often real estate investment software, online platforms and search tools. There are a number of real estate investment software options, many with free trials, so you can test them out and see which works best in your area to identify micro-flipping opportunities.

Not every under-market value property will work for micro flipping. There are a number of key considerations with micro flipping, from financing to property evaluation. Here’s what you need to consider. 

Factors to consider when assessing a property’s potential for profit include assessing repair costs and required renovations, analyzing the surrounding neighborhood and market trends and making informed decisions based on thorough analysis.

You’ll want to explore local financing options for micro flipping. In addition to considering whether you’ll pay with cash, through a mortgage or private investment, it’s essential to have a solid budget. You’ll need to account for closing, marketing and renovation or repair costs before re-selling.

You’ll also want to work on negotiating property prices. For example, you can look for properties in foreclosure or with deferred maintenance and offer a fast closing or all-cash offer, which is attractive to these homeowners. Consider how you can help the property owners get rid of the property and free up their finances, and include that in your proposal.

To acquire properties efficiently and effectively, work with local real estate agents, real estate attorneys and other real estate investors to streamline the closing process and facilitate an easy sale. If you rely on funding, ensure the funding is secure or ready for fast approval or avoid delays in closing. 

After closing the sale, it’s time to implement effective project management techniques. If you plan to make renovations, hiring reliable contractors to oversee renovations can ensure fast, professional work.  

To market the property, consider staging, lighting, photos and listing to facilitate a quick sale. Remember that the goal is usually a quick sale, and maximizing profits can come through effective pricing and negotiation and an increased micro-flipping volume. 

It is not unlikely that you will run into situations where you’ll have to deal with unexpected repairs and renovation issues. Consider and research legal and regulatory requirements before microflipping to prevent delays related to regulations or local restrictions.

Then, make a plan for managing time and resources effectively, including addressing micro-flipping hurdles.

Consider steps for scaling up your micro-flipping operations, including bringing on additional real estate investors, wholesalers or employees. You can also build a network of potential buyers or rental investors to increase opportunities for buying and selling while offering personalized solutions.

Consider reinvesting profits in rental properties, hiring other real estate professionals or seeking out other real estate investment opportunities to diversify and grow your business. In building the business, maintaining professionalism and forging strong customer relationships are essential to building trust and a good working relationship. 

Micro flipping doesn’t have to start as a full-time career. You could start a side hustle and increase flipping volume over time. If you’re considering real estate investing, micro flipping can offer a short-term, sustainable opportunity to earn extra income or build a full-time real estate investing business. However, like any investment, micro flipping requires in-depth knowledge and research to be successful. Learn more about other real estate investment opportunities, including real estate investment trusts (REITs) and house flipping, here.