What? You’ve never heard of “80/20 House Flipping”?
Well ok, I just made it up.
But in truth, it’s the most accurate name I can come up with for the type of “house flips” that I do.
If you’re not familiar with what I do, just know that I buy single-family homes with terms (seller financing, etc.) and then sell them with terms to the absolute most motivated buyers in the world. That’s about it.
Who are the most motivated buyers in the world?
People who need a home for their family, but can’t qualify for a traditional mortgage at the moment.
BTW, the majority of the homebuyer market cannot qualify for a loan.
Now most investors stop there, thinking there’s no point in serving these people because they’re all just broke, poor people with bad credit.
However, a percentage of those homebuyers, while they may have bad credit, or some other reason they cannot qualify for a mortgage right now, have a big chunk of cash sitting in their bank account ready to use for a down payment on a house… if only someone would sell one to them!
Enter me and my colleagues.
So why do I call this 80/20 House Flipping?
If you know the 80/20 Principle, you know that it boils down to this naturally occurring phenomenon where 80% of your outputs comes from 20% of your inputs.
In our world here as real estate investors, 80% of our profits come from 20% of our customers (the homebuyers).
And that 20% of buyers is made up almost entirely of these “terms buyers” who need a home, have cash, but can’t qualify for a bank loan.
They are willing to pay over market value for houses.
They are willing to make large down payments.
They are willing to let you control the whole transaction.
They are willing to pay all the attorney’s fees.
They are willing to move in on YOUR schedule.
They don’t require inspections and appraisals and try to get you to make repairs and pay closing costs and fees etc etc.
So why not focus solely on those 20% of buyers who generate 80% of the profit (with less headaches to boot)?
Well that’s exactly what we do.
Yeah, ok, every now and then we’ll get a traditional wholesale deal and flip it out to an investor. But I’ll tell you — investors are CHEAP, and they’re always trying to beat me up on the price! 🙂
In contrast, these terms buyers are GRATEFUL for letting them buy our houses!
The catch is that you have to finance the house for them, which most investors can’t do because they’re tied up with high-cost funds or their own cash.
So how do we do this?
By buying the house with terms in the first place.
Because if I can buy with terms (seller financing, etc.) where I can come in with little or no down payment, low monthly payment, no bank loans, and long-term payoff…
Then I can turn around and sell the house and get a big down payment, a good monthly payment, and a premium price.
This means I get a big chunk of cash the day I do the deal, then I get monthly cash flow, and then if/when the buyer refinances I get cashed out and usually get another big chunk of cash on the back end.
Meanwhile, 95%+ of the investors out there are all trying to play this super-competitive hustle-game of wholesaling and rehabbing.
If only they knew what I knew.
Eh… maybe it’s for the best. 🙂
It’s time to put the 80/20 Principle to work FOR you instead of against you in your real estate investing business.