Micro Flipping: What is Micro Flipping in Real Estate?

Micro Flipping: What is Micro Flipping in Real Estate?

What is Micro Flipping in Real Estate?

Micro flipping is the latest real estate buzzword. This investing strategy is revolutionizing the real estate industry, offering a unique approach to property flipping and ensuring investors have a low-risk entry to investing. 

If you want to dip your toes in micro flipping, but you don’t know where to start, this blog is for you! Here, we’ll look into what micro flipping in real estate truly means, its pros and cons, and how it stands to change the way investors navigate the real estate market!

What is Micro Flipping in Real Estate Investing?

Micro flipping is an innovative strategy in the real estate investment landscape that leverages technological advancements to identify, purchase, and swiftly sell real estate properties. 

At its core, micro flipping involves the quick turn-around of properties, much like traditional flipping. However, the uniqueness of micro flipping lies in its utilization of real estate technology. Wholesaling requires platforms, software, and online tools that facilitate the process of finding undervalued properties, often across a broad geographical area. 

Unlike more traditional forms of real estate investment that may require physical visits, renovations, or prolonged holding periods, micro-flipping often involves minimal physical interaction with the property. 

It primarily relies on online transactions, from the initial market research to the final sale. It's all about speed and efficiency, harnessing technology to rapidly complete transactions.

Micro Flipping Houses vs. Conventional Flipping

Flipping houses typically involves purchasing a property at a lower price, investing in its renovation, and then selling it at a profit. It is a hands-on process that often involves significant interaction with the property. 

Conventional flipping generally requires a keen eye for identifying one or more undervalued properties  or distressed properties, a good understanding of renovation costs, and the ability to manage a refurbishment project. The profit is the difference between the selling price and the total cost of purchase plus renovations. 

Micro flipping, on the other hand, has a different approach. Rather than focusing on property improvement, it emphasizes speed and efficiency of transactions -  a way to ensure profit. It involves identifying undervalued properties (usually with the help of technology and data analysis), purchasing them, and quickly selling them, often without making any physical improvements.

The focus is on the swift turnover of properties for a profit, based largely on market trends and property value analysis.

The time frames for these two strategies also differ. Conventional flipping can be a lengthy process, often taking several months to complete due to the time required for renovations. On the other hand, micro flipping is generally a faster process, with the aim of minimizing holding time and capitalizing on quick transactions. 

The level of capital needed can also vary between the two strategies. Traditional flipping often requires a significant upfront investment for the purchase price and renovation costs. 

Micro flipping, while still needing investment for the property purchase, usually doesn't involve renovation costs, potentially lowering the initial capital needed.

Micro Flipping vs. Wholesaling

While real estate wholesaling and micro flipping are two real estate investment strategies that share a common goal, there are key differences between the two in terms of the process, the involvement of the investor, and the technology utilized.

Wholesaling in real estate is a strategy where an real estate investor, known as the wholesaler, signs a contract with a seller to buy a property and then transfers that contract to an end buyer, all before the original purchase contract with the seller closes. 

The wholesaler never actually owns the property; their role is essentially to connect sellers with buyers and make a profit from the contract assignment fee or the price differential. 

On the other hand, micro flipping involves a real estate investor quickly buying and selling properties with the help of technology, as discussed earlier. 

Unlike wholesaling real estate, the micro flipper does take ownership of the property, albeit for a short time. The investor uses real estate technology platforms to look for undervalued properties, purchase them, and then resell them quickly, often without ever visiting the property. 

Wholesalers earn their income from assignment fees or price differences between what they contract a property for and what they sell the property contract for.

Micro house flippers, however, make their profit from the difference between the purchase and selling price of the properties they briefly own.

Benefits of Microflipping

Micro flipping is an attractive investment strategy for many reasons. Let's explore some of its advantages below.

• No Sweat Equity is Required:One of the many benefits of micro flipping is that it does not involve manual labor or renovations, often referred to as sweat equity. Micro flipping involves buying and selling properties as-is.
• The Process is Relatively Simple:Once you understand the basics, the process of micro flipping can be relatively straightforward. Thanks to the various technological tools available, much of this process can be automated or streamlined.
• No Repairs: Since micro flipping involves selling properties as-is, there is no need for you to conduct repairs or improvements as you would with other real estate strategies. 
• Low Start-Up Costs: While you will still need funds to purchase properties in micro-flipping, you won't have the additional costs of renovations so you only need a good amount of capital.
• It is Primarily Done Online: Most aspects of micro flipping, from finding properties and analyzing data to closing micro flipping deals, can be done online with just a click of a button which made it so popular.
• It is Not Tied to a Location: Since micro flipping is primarily done online, it's not tied to a specific geographical location. You can purchase and sell properties in different cities, states, or even countries which makes micro flipping perfect for digital nomads.
• Fast Turnaround: Micro flipping has a faster return on investment compared to many other real estate strategies like the traditional fix and flip since it requires little to no work after you identified a property. This rapid turnover can lead to more transactions in a shorter timeframe.
• Can Be a Passive Income:While micro flipping does require work, much of it can be automated or outsourced, making it one of the easiest ways to earn semi-passive income. Again, sweat equity is kept to a minimum since you sell the property very quickly.
• Easier to Scale: With its low start-up costs, fast turnover, and reliance on technology, micro flipping can be easier to scale than many traditional real estate strategies. 

Cons of Microflipping

While micro flipping has several advantages, like any investment strategy, it also comes with potential downsides. Here are some of the cons of microflipping you should be aware of.

• High Competition:Given the relative simplicity and the low entry barriers of micro flipping, it attracts many investors, leading to high competition. This can make finding profitable deals more challenging and may also drive up the prices of undervalued properties.
• Smaller Profit:Unlike traditional house flipping, the profit margin in micro flipping can be smaller compared to other real estate investment strategies. You may need to complete more transactions to achieve a high profit level. It is not suggested to quit your day job for this reason.
• You Should Be Tech-Savvy: Given that micro flipping relies heavily on technology and online tools for every step of the process, being tech-savvy is crucial. 
• Possible Market Volatility: Real estate markets can be volatile, and their dynamics can change quickly. While this is a risk in all real estate investments and not only when you flip properties, it can be particularly impactful in micro flipping given its reliance on quick transactions.
• Possible Technological Glitches: While using technology makes many aspects of micro flipping more efficient, it also comes with the risk of glitches or downtime. It's essential to have backup plans and to use reliable, well-supported tools so you can work with motivated sellers seamlessly.

How To Start Micro-Flipping

Micro flipping, although a newer strategy in real estate investment, has a clear and systematic process since it is based on traditional flipping. To help you get started, let’s discuss each of the steps of micro-flipping in detail.

Step 1. Do Your Research

Doing your research is the foundation of micro flipping. Your first step should be to understand the concept of micro flipping thoroughly. 

Once you have a firm grasp of the basic principles, delve into researching various real estate markets. The goal is to find undervalued properties in locations that show potential for growth or are already experiencing upward trends. You also need to research whether the states you are targeting prohibit you to start micro flipping unless you have a real estate license.

Step 2. Connect with Micro Flipping Experts

Seeking advice from those successful micro flippers can significantly streamline your journey. These professionals can provide insights drawn from their experiences, tips on the most effective strategies, and warnings about potential pitfalls. 

They can also provide recommendations for helpful tools, platforms, and resources. You can connect with experts through networking events, online forums, social media platforms, or even mentorship programs.

Step 3. Build Your Team

Despite being a highly digital strategy, micro-flipping still requires a solid team. You'll need real estate agents who are well-versed in the local market, a real estate attorney to handle legal aspects, accountants for financial management, and virtual assistants for administrative tasks. 

If you plan to sell to investors who may rent or flip the property, having reliable contractors, property managers, and home inspectors in your network can also add value.

Step 4. Plan Your Financing

Identifying how you will pay when buying the property is essential in micro flipping operations. Some investors use their own savings, while others rely on hard money loans from hard money lenders, private lenders, or even crowdfunding platforms. 

Regardless of the source, make sure the one you choose is flexible and fast. You need to be able to close deals quickly - a key aspect of micro flipping. Of course, in finding a lender, you need to manage your expectations because you won't find one outright, especially if you are new to a deal without fixing and flipping.

Step 5. Find Cash Buyers

One of the goals in micro flipping is to sell your properties quickly, so you should have cash buyer lined up. This is one of the most important element of micro flipping.

These buyers usually don't need to secure mortgage approval, which can significantly speed up the closing process. 

You can find cash buyers through networking events, real estate investment groups, online platforms, and even public records of past cash transactions. Without these buyers, you would definitely have a low-profit margin involved in microflipping.

Step 6. Find the Right Real Estate Software and Tools

Technology and data are used as the lifeblood of successful micro flipping. Various software and tools can help you find properties, analyze data, streamline transactions, and manage paperwork. 

Some popular options include Multiple Listing Service (MLS) databases, property data platforms, customer relationship management (CRM) software, contract management tools, and more. The right tools can significantly enhance your efficiency and scalability.

Step 7. Find Sellers

Individual micro flippers also find motivated sellers who are willing to sell their properties below market value since this is the key to profitable micro flipping. 

You can use software tools to locate undervalued properties or sellers who may be motivated due to circumstances like divorce, foreclosure, or inheritance. Direct mail, online advertising, checking out property listings, and even door knocking can also be effective strategies.

Step 8. Close Deals

Once you've found a potential property and negotiated terms with the seller, it's time to close the deal. 

Depending on your state's regulations, you may need a title company or attorney to handle the closing process. You'll need to manage paperwork, ensure funds are transferred for the carrying costs, and complete the legal process to transfer ownership. 

After you own the property, the final step is to quickly resell it, ideally to a cash buyer, to complete the micro flipping process.

Frequently Asked Questions

Is Micro-Flipping Legal?

Yes, micro flipping is legal since it involves a standard practice in real estate. Investors don't go against any law by entering in this type of transaction. However, it's essential to conduct all transactions ethically and transparently, and adhere to all relevant laws and regulations. Always consult with a legal professional if you're unsure what to do.

How Much Money Can You Earn From Microflipping?

Typically, you can earn thousand dollars per transaction or per flip in micro flipping real estate. This amount varies based on several factors, including the property's purchase price, its selling price, the number of transactions you complete, and your operational costs. 

How Long Does it Take to Micro-Flip?

The micro-flipping process is quite fast, with many individual investors buying and selling within a week. Note that this timeframe can also vary greatly depending on factors like the efficiency of your systems, the availability of buyers, and the specifics of each deal. 

Some investment decisions and transactions might also take longer, especially when you're just starting out or if there are unexpected complications.

Key Takeaways: What is Micro Flipping in Real Estate? (Real Estate Investor's Guide to Micro Flipping)

With its potential for fast turnovers, relatively low start-up costs, and a streamlined process, micro flipping is an enticing option for those who are tech-savvy and eager to venture into the real estate market. 

However, like all investments, it's not without its challenges, including high competition and market volatility. If you unsure if this strategy is for you, just opt for traditional house flipping for the meantime. 

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