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If you want to flip houses, how do you know if the houses you are attemping to flip will be profitable? One indicator is to have similar comparable sales in the area. But what would be another indicator to know if you were buying in a strong market? How could you find out how long it will take for your property to sell?
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The ratio of the current # of listings verses the trailing 12 month
sales is one of the biggest keys to flip houses successfully!
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For example, in one of my buying areas there was 6 homes
sold in the past 12 months and 2 active listings. This would
indicate that there has been 1 home sold every 2 months. Since
there are only 2 active listings and 3 times the amount of sales,
it is fair to say this market has a pretty good listing/sales
ratio. If the numbers were reversed it would be a poor listing/
sales ratio. This is because 2 property sales in 12 months
would suggest houses were taking 6 months to sell.
There are many others factors to take into consideration. For
example, was the majority of the homes sold in the first quarter
of the year, last quarter, or is it balanced? If there were no
properties sold in the last quarter, this could be an indication
that the market is softening. On the flip side, if there were no
properties sold in the first quarter, this may be an indication
that the market is gaining strength. It is also important to check
the comparable sales to see what characteristics they have and
compare them to the houses you are wanting to acquire.
In addition, if you are looking to buy in an area that has a
lobsided listing verse sales ratio (more active listings than total
sales in the past 12 months), then you must buy the property
deeply discounted and analyze all of the previous sales in
the past 12 months. If the property lacks some of the positive
charactaristics of the homes SOLD (3 bedroom, etc.) and has negative
characteristics of the UNSOLD listings (2 bedrooms, etc.), then
this could be a red flag and you should consider staying away from
this property all together!
The bottom line is this: If you are obtaining comparable
information from an agent to determine before and after repair
value (ARV), then be sure to ask for previous 12 month sales,
current listings in the area and all property history on the
comparables. It is also recommended to obtain property history
on the property you are looking to acquire. After reviewing this
information you will be able to determine if the properties were
previously listed or sold. This will allow you to have a better
understanding of the market. You will be able to forecast how long
it will take for your house to sell.
I hope you find this information to be useful for your current and
future real estate investment needs. You can read more about this topic
and other useful topics in my Foreclosures and Flips manual.
www.foreclosuresandflips.com
www.USPropertyBuyers.com - *Alternative to expensive investor websites*
Successful Investing,
Jeff Knize, CRA, ICAP member
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