Micro-Flipping: What It Means In Real Estate

If you’re interested in real estate investing, you may have heard the term “micro-flipping” floating around. Despite the way the name sounds, micro-flipping actually requires little “flipping” at all and can be a much faster way to make money with real estate than the house-flipping you’re likely thinking of.

Interested in learning more about this new real estate trend? Read on for our full guide to micro-flipping and whether or not it may be right for you.

What Is Micro-Flipping?

Micro-flipping is a type of short-term real estate investment that involves buying properties in need of renovations and reselling them quickly for a profit, usually without improvements. It’s similar to wholesaling, which is when an investor buys a property from a seller and attempts to reassign the contract to another buyer at a higher price in order to make a profit.

Unlike wholesaling and house-flipping, micro-flipping is done mainly by utilizing technology and usually requires no work to repair or improve the properties being purchased and sold.

How It Works

The micro-flipping process is very similar to traditional wholesaling, but with a few new tricks. Micro-flippers do most of their work from the comfort of home or an office on a computer, so there is less running around to scout out deals than there is when wholesale selling.

Instead, micro-flippers use software to analyze data and find properties that they can buy below market price and sell quickly to another buyer. No renovating, no manual labor. The process is designed to be very fast – it is not unusual for a micro-flipper to find and resell a property in the same week.

Since they aren’t making any renovations or improvements, micro-flippers aren’t usually making huge profits on the properties they resell. A micro-flipper might purchase a property for $130,000 and sell it to a house-flipper for $140,000, making only $10,000 for the whole deal.

Though the profits aren’t as large as what house-flippers can potentially make after renovating a fix-and-flip property, micro-flipping is popular because it brings in money quickly with minimal work involved.

iBuyers

iBuyers make up a large portion of the micro-flipper population. These companies, like Opendoor and Zillow, buy properties under market value using technology and resell them quickly to buyers for a small profit. Like most micro-flippers, they buy undervalued properties and sell them without repairs for a profit.

As a business model, iBuyers attempt to simplify the home buying process by cutting out the need for a real estate agent or REALTOR^® by selling directly to buyers online. If you are interested in getting into micro-flipping yourself, it may be worthwhile to further research iBuyers, as they will likely be your biggest competition when purchasing homes under market value.

Micro-Flipping Vs. Wholesaling

Micro-flipping and wholesaling are similar in many ways, as we mentioned earlier. The main difference between micro-flipping and wholesaling is that micro-flipping happens faster and almost entirely through the use of technology.

Wholesaling typically involves building relationships with buyers, especially house-flippers that may be interested in the distressed homes that wholesale sellers tend to seek out. A wholesaler typically attempts to reassign a property’s contract fairly quickly, sometimes taking around a month or less to do so.

Micro-flippers, especially iBuyers, focus on studying data to find undervalued homes they can resell in a week or even less. While networking is important to many micro-flippers, iBuyers specifically worry less about this aspect since home buyers are more likely to seek them out.

Unlike wholesalers, who tend to look for distressed homes that they can sell to flippers, micro-flippers tend to look for homes in fairly good condition. The profit made on selling these homes will be smaller, but property can change hands faster this way.

How To Start Micro-Flipping

If you’re interested in learning the ropes of micro-flipping, you’re not alone – it has become a trend in real estate recently. This method is appreciated by many beginning real estate investors because it’s not as costly as house-flipping and brings in money faster than many other investments.

So, where should you start?

Find Buyers

iBuyers like Zillow and Opendoor don’t have to worry much about with this, but if you want to get started micro-flipping by yourself, you will need to network.

In order to get rid of homes quickly, you’ll need a network of interested buyers. You may want to target cash buyers specifically. Though you’ll make less money selling to cash buyers, it takes less time than the typical home buying process and lessens the risk of a deal falling through.

There are many ways you can go about finding cash buyers, but posting ads both in person and online might be a good place to start. You can also make use of real estate listing websites or list your properties on the MLS to reach more potential buyers.

Get The Right Tools

Having the tools to find properties you can easily flip is just as important as locating buyers. In order to identify homes that you can easily resell, you’ll want to find some software that can help you. There are many programs out there, such as PropStream and Flipper Force, to name a few.

Most of these programs will give you access to property records and allow you to filter results based on what you might be looking for. What program you choose to use is ultimately up to you, but it’s worth noting that most of these platforms offer free trials before you purchase, so you have a chance to try them all out, if you wish.

Though it might seem optional, having user-friendly software to help manage your micro-flips is absolutely essential. Digging through public records yourself and trying to keep track of things in a spreadsheet will slow you down. Micro-flipping is very speed focused, so having the help of a program that can do half of the work for you will save a lot of time.

Figure Out Your Financing

Financing is an important thing to think about before getting into micro-flipping, especially considering you will be buying properties that are in fairly good condition and may have a heftier price tag than distressed homes often targeted by house flippers.

One option is to buy and sell in cash, as we mentioned earlier – though this is not really an option for many beginning investors who don’t have that kind of money just lying around. Another potential option is to get a loan or hard money loan.

A hard money loan is a loan from a private lender that allows the borrower to get the money right away, provided the borrower pays the loan back in a very short period of time – often just a year or two. While these types of loans come with high interest rates and can be risky, they are popularly used for micro-flipping and house-flipping in general because of their convenient fast financing.

Connect With Experts

It’s a good idea to connect with an expert before you get started micro-flipping to help you get your bearings. You may want to connect with a local lender that works with flippers as well as a real estate agent or REALTOR® to help with contracts and transactions.

It could be useful get in touch with someone that has wholesaling or micro-flipping experience, as well, to help point you in the right direction.

Is Micro-Flipping A Good Investment?

Micro-flipping is a faster, less labor-intensive effort than many other forms of real estate investment, including wholesaling and traditional house-flipping. But is it a good investment? Let’s take a look at the pros and cons.

Pros

• You can do almost everything from your computer. Unlike traditional house-flipping, you won’t have to do any renovations or remodeling, so you don’t have to worry about sweat equity or doing a lot of manual labor.
• It’s fast. Micro-flipping is a tech-savvy, streamlined version of wholesaling that can see you making profits just days or weeks after finding a home to resell. While your profits won’t be huge, you can make a lot of them quickly.
• It’s almost passive income. While there is some work and thinking involved in micro-flipping, it’s a less intensive process than other forms of real estate investment that might involve personally renovating a house or hunting for homes that can be flipped either in a sea of records or by driving around yourself.

Cons

• The competition is fierce. You’ll be competing mainly with iBuyers who have a large advantage over you by being already organized and in possession of a huge network of potential buyers and other resources.
• Profits will be small. In order to be successful micro-flipping, you’ll have to buy and sell a lot of properties. You might only make a few thousand on each home you flip, making the quantity of deals you can pull off very important.

How It Stacks Up

Micro-flipping is a very short-term real estate investment compared to other investment options out there, which can be nice if you’re looking to make a little money quickly rather than wait a long period of time.

It’s a lot less labor-intensive than flipping a house and generally less risky as well, since micro-flippers tend to buy homes in good condition rather than fixer-uppers. You also have the chance to make a little more money than you would renting out a property, if you can flip enough houses.

Competing with iBuyers can be difficult, however, and making dozens or hundreds of real estate transactions a year isn’t for everyone. There are plenty of other investment options available in the real estate world, like flipping, renting and even REITs, which allow you to invest in real estate in a manner similar to the stock market.

The Bottom Line: A Good Option For Tech Savvy Investors

Micro-flipping is a fast and convenient real estate investment, but it isn’t for everyone. There are many alternatives out there for aspiring real estate investors, such as buying rental properties and fixing and flipping distressed houses.

If you’re interested in financing an investment property and you’re ready to get a mortgage, you can apply online now with Rocket Mortgage®.