Quick Summary
Micro flipping is increasingly turning the tables in the real estate industry for investors who want to flip properties without all the hassle of renovating them. After all, the actual renovation part of a micro flip is one of the most resource-intensive parts of the process, needing significant financing and time to be completed. But what if renovation could be cut out of the flipping process completely? That’s where micro flipping comes in.
Micro flipping real estate is when an investor buys and sells an investment property quickly using technology tools and data, but without repairing them.
You can think of this method of investing as effectively being a type of online real estate wholesaling. Using tech tools that enable them to find property data, they can identify buying opportunities that are under market price, acquire them, and then quickly sell them on to another buyer or interested person. These tools are boosting the popularity of this method of investing which is more suitable for investors looking for more passive income versus active input.
Micro flipping real estate is an investment strategy you should consider, especially if you are hoping to gain exposure to the house flipping industry.
Table of Contents
What Is Micro Flipping?
Micro flipping is a faster process of buying and selling an investment property that is only available through specific data sets. The ‘micro’ part actually describes the speed at which homes are purchased and resold for profits. The whole transaction is set up in a way that allows the micro flipper to can go from purchase to sale within a few days. Some micro flippers even have buyers ready by the time they take on a home, effectively pre-selling their properties as they contract new ones. This reduces the risk of being stuck with a property that won’t sell and ensures it will be a profitable investment.
Micro flips can be bought, handled, and paid in under a week, with only a few hours actually invested into each deal.
This business model is adopted by both individual real estate investors and bigger investment companies – the major difference between the two is in the datasets that are used.
It’s also worth noting that the properties involved in micro flips typically do not require that much renovation work to begin with. Still, micro flippers are more concerned with reselling the home as quickly as they can, and their timeline does not allow for an entire renovation process. As a result, micro flip investors spend most of their time either doing data analysis or locating new buyers while traditional flippers also need to vet contractors and other service providers.
Ultimately, micro flipping isn’t really the sale of a property. Instead, the investor is selling their exclusive right to acquire a property to another interested buyer.
Micro Flipping VS Wholesaling
Micro flipping houses is commonly compared to real estate wholesaling. Wholesaling describes a process through which an investor finds off-the-market deals with the goal of assigning them to other house flippers to renovate and resell. Considering that micro flippers also sell on property leads, these two approaches are parallel but contrary to popular belief there are also one or two key differences.
The micro flipping process is largely high volume but low risk and with lower overall profit margins.
Micro flipping is not for investors looking for a one-off big amount to come, and instead is about continuous property sourcing and selling for smaller, more consistent income. This is one of the reasons why this method is becoming prominent among beginner real estate investors.
Compared to micro flipping, wholesaling is much more labor and time-intensive requiring more active oversight from the investor especially when it comes down to the legal part of the process. Wholesaling requires the investor to look for undervalued real estate, which can be hit or miss, and interested buyers may drop out leaving the investor in the lurch.
Micro flip investors don’t actively rehab an investment property which really lowers the overall risk around their investments. No repairs, contractors, or other service providers are required for the process, and because micro flippers usually line up buyers before taking on contracts there is less chance of them struggling to get the property flipped to someone else. This makes micro flipping less risky as a whole, especially when undervalued properties are used. Property renovation can be the riskiest part of the real estate investing process, with many variables that need to come together for the investor to create a cohesive home that will sell well.
Advantages Of Micro Flipping
There are several advantages to micro flipping that are drawing in an increasing amount of hopeful investors.
The first advantage is that the investor can use technology to find real estate deals.
No hands-on searching is needed, and deals are just at the investor’s fingertips. Unlike traditional wholesalers that have to set up multiple ways to find off-the-market deals, micro flippers simply sort through the data that is available to them. No driving around or knocking on doors needed!
Many investors prefer a more hands-off approach and this is a great way to get exposure to real estate investing with less active effort needed.
This data is particularly powerful, as data can be accessed on properties all across the country.
There are no restrictions on location, and the micro flipper doesn’t have to be located in the same state as the property they are looking to flip.
The data the micro flipper analyses won’t just have information on the property itself but also on the seller. This can lead them to motivated sellers that are more willing to compromise on the price of their home or make other provisions for the buyer. The key is that the data is actionable – meaning it will include direct contact details to make the micro flippers’ life easier.
Being faster, easier, and lower risk at the same time, this is a new method of real estate investing that is especially popular with younger investors. Being more technologically savvy, it makes sense that millennials and even Gen Z are more open to a tech and data-driven approach to real estate investing.
Is Micro Flipping Profitable?
The profitability of micro flipping largely depends on the locations you are investing as this can influence final earnings. Despite having fewer variables than other methods of real estate investing, certain characteristics like the importance of location will still apply. We’ve already established that unlike flips that take a lot of effort and have a big once-off payoff, this method of investing is more passive and has smaller profit margins. That being said, there are still good profits to be made, but it’s important for the investor to seek out undervalued properties.
Conservatively, you can estimate to earn anywhere between $5,000 and $20,000 per micro flipping contract . The biggest draw is that with micro flips, each deal can take place within a few hours. Some micro flippers earn more than $2,000 an hour. It’s also possible to run multiple micro flips at the same time and boost these numbers even higher.
Is Micro Flipping Legal?
Micro flipping is an accepted method of investing in nearly 50 US states, with others requiring just a few additional steps taken by the investor for everything to be according to the law. Properties can be closed using any method of funding the investor chooses, including private money lenders, hard money loans and other ways to finance a house flip.
It’s worth noting that Illinois has the strictest regulation regarding this type of flipping. Even with the full support of the law, it’s still worthwhile for the investor to consult with a real estate attorney or think about how to support their investment efforts.
Successful Micro Flipping
The first step to start micro flipping is getting access to the inventory data and vetting potential deals. Not just any data will do – the micro flipper needs to use a tool that has data that is updated daily and has property listings for all states. From there, the investor needs to contact sellers of properties they are interested in. This is another important characteristic the investing tool will need to have; seller contact details.
Once the seller has been contacted and the micro flipper has purchased the flip, the next step will be for them to shift the property to a pool of buyers.
In many cases, these buyers are located and shortlisted by the micro flipper before a property flip has even been contracted.
Finally, it’s important to keep up the momentum and have multiple deals going.
The most important decision the investor has to make is to decide which software they want to use to find their deals. Without the right tool, the investor will miss out on key deals that they could have made good profits on.
One such tool that is freely available to the public is FlipScout by New Silver Using FlipScout, investors can search any zip code or city, find profitable flips with data like ROI, ARV, and financing costs, and get direct access to the seller.
This tool also allows you to save properties for later, or set up specific search perimeters that will send you an email when a matching home is listed.
Considering how easy and accessible micro flipping is compared to other types of real estate investments, it’s no surprise that this approach is taking off, especially with the younger property investors. While the profit margin may not be as large as it would be for a full house flip with renovation, with the right tools in hand, the investor can make good profits from micro flips without having to work as hard.
This approach holds a lot of benefits for the investor, not only being more efficient and accessible as many other types of investments but also enables the micro flipper to be location independent, with low startup costs and lower risk. With no renovation to take on, the micro flipper effectively cuts the riskiest part of the flipping process out of the equation. At the same time, the speed at which properties are bought and resold mean there is little chance of the investor getting stuck with housing inventory they cannot sell.
Micro flipping deals can be funded using a variety of financing sources, including hard money loans. The success of this strategy comes down to the data analysis software the micro flipper has access to. With a tool like FlipScout that has no attached costs, the investor can easily get started with micro flipping even without prior experience.
FAQ
What is micro flipping?
Micro flipping is a fast and easy way for a real estate investor to buy and resell properties for a profit without renovating them.
How much money can you make by micro flipping?
You can estimate to earn anywhere between $5,000 and $20,000 per micro flipping contract. Some micro flippers earn more than $2,000 an hour.
Is micro flipping legal?
Micro flipping is legal in 49 states and requires special permission in one.
Micro Flipping vs House Flipping
The key difference between micro flipping and house flipping is that there are no renovations with a successful micro flip. Instead, you are sourcing the buying rights to a property, and then selling those rights to an interested buyer, with a mark up.
With traditional house flipping, there will almost always be renovations involved, and you take full ownership of the house while the renovation work is taking place. This strategy can be very lucrative if you increase the after repair value of the home significantly, and it is relatively common to see house flippers make more than $50,000 per flip.