Micro flipping is a relatively new term to pop up in real estate investment circles. Micro flippers buy and resell a property online as quickly as possible, using data and tools.
While micro flipping has the word “flipping” in its name, it differs from a traditional flip. With micro flipping, there’s no ripping out a dated bathroom or repainting. Instead, an investor uses data and technology to purchase and flip a home in a matter of days. Here, the “micro” in micro flipping means fast.
Like with traditional flipping, investors are looking for underpriced homes. Unlike with traditional flipping, these homes tend to be newer, immediately habitable, and not in need of renovation. It’s similar to the online wholesaling that iBuyers do.
iBuyers are big, well-funded companies that buy and sell real estate using technology. They purchase properties directly from owners, pay in cash, and do so with speed. They might make an offer in 24 hours to a few days and close just a few days after an accepted offer. Companies in the iBuying business include Offerpad, Knock, Opendoor, and Redfin. iBuyers prefer to work in areas with newer homes, places like Phoenix and the Atlanta suburbs. iBuyers take into account any necessary renovations or updates and some facilitate those repairs before reselling the property.
The key ingredients to micro flipping
You don’t necessarily have to be a big iBuyer to get in on a quick, no-hassle flip. Just like the big guys, micro flippers use technology to find and buy houses that are underpriced but in good condition and have owners who are motivated to sell quickly below market value.
Often, micro flippers aren’t buying the property outright like a traditional flipper. Instead, they are assigning contracts. To do this, successful micro flippers already have sellers in mind before making a purchase and transfer the property prior to closing on it. The less time spent on the flip, the more money is made. Micro flippers might make $2,000 or more on a deal—less than a traditional flip but without much of the work.
As with any real estate transaction, it’s always advisable to check in with a real estate attorney to make sure any real estate contracts you sign are in compliance with the law. A few areas around the U.S. have rules that relate to real estate wholesaling or contract flipping.
How to excel at micro flipping
- Get access to data and/or technology that identifies properties ideal for micro flipping. Think newer homes that won’t need updates or renovations. You’ll need contact information for owners who want to sell quickly. These owners might be on the brink of foreclosure or be in financial trouble—or they may just want to sell quickly and without any hassle. You are looking for owners who will be willing to sell for less than market price in exchange for speed and quick cash.
- Get access to data and/or technology that connects you to interested buyers. Alternatively you might build a network of interested buyers in an area.
- Go from buying to selling as quickly as possible. This means having multiple buyers lined up before even beginning a transaction.
How is micro flipping financed?
Due to the short-term nature of a micro flip, a traditional loan wouldn’t work. Common ways of financing a micro flip include
- Private funding
- Hard money loans
- Transactional funding
Learn more: How to Finance Your Property Investment
Erin Behan is a writer and editor with more than 20 years of experience covering real estate, travel, and restaurants. She lives in Portland, Ore., with her two kids and one gregarious cat.