Scoring a bigger profit margin on your deal starts with the way that you calculate profit.
The first things to pop into your head might be:
- The purchase price of the property
- The property’s ARV, and
- The rehab costs to get you from A to B
If your answer would have been “Yes,” don’t worry. These three numbers are definitely the best place to start, but calculating profit on an REI deal should never stop there.
This post is here to help you take your profit calculations to the next level and, with a small perspective tweak, get bigger profits on your next rehab.
I even throw in an exclusive tip from my coaching programs towards the end of the post, but you’ll definitely want to read through to that point.
“The Big Three” When Calculating Profit
Truth be told, those three things would have been the first things to pop into my head, too. Let’s call them “The Big Three.”
BUT, at least for 90% of investors out there — their profit calculations would stop there.
That’s a problem.
Think 4th Dimensionally
In fact, as strange as it might sound, focusing on only the numbers is part of that problem.
Remember in the Back to the Future movies when Doc Brown keeps telling Marty McFly, “You’re not thinking fourth dimensionally!”?
The fourth dimension is Time, and factoring Time into your profit calculations is the perspective tweak you need to take your both your profit calculations and your profits to the next level.
Time really is money when you’re doing a fix and flip. This is where lending costs and all other time-sensitive expenses come into play.
By my calculations, an unsold property costs the investor at least $50 per day for EVERY DAY that it goes unsold.
Flip that logic around, and that means that you MAKE an extra $50/day for every day that you sell your property faster than expected.
Rehab Faster, Sell Faster
Flipping houses faster roughly breaks down into:
1) Rehabbing Faster– The best advice I can give you to rehab faster is what I wrote in a previous post — Faster Rehab: 3 Exclusive House Flipping Tips.
Enjoy.
2) Selling Faster- I actually haven’t touched this one in a while on my blog, so I’m going to spice up this post by throwing in an exclusive tip from the vaults of my coaching programs. Read below.
Exclusive Tip to Sell Faster
One tip to sell your property faster is to never underestimate the motivations of the buyer’s agent.
Ever wonder on those house flipping shows and blogs how the selling part seems to happen lightning fast? It’s like it’s magic or something!
Chances are that it’s not magic. I can’t prove it (because I wasn’t there), but I’d wager my skin that some major wheeling and dealing goes on behind the scenes with the buyer’s agent to wrap those deals up so nice and pretty.
The secret here is that you can and should do the same thing when you want to sell fast.
My advice is to talk to your buyers’ agents and increase their commission on the sale. You’ll be amazed at the wonders this can work.
Once you get this and other tactics down to your own personal science, you’ll be able to work these strategies into your profit calculations from the beginning. You can even base the agent’s commission increase on the number of days early that the property sells. Easy ROI right there.
Remember: First profits are always best profits.
“So, Why the Runaround!”
I could have easily titled this post “1 Great Tip to Sell Your Properties Faster!” and written the post in half the words, but I didn’t.
If I had, you would have skipped to the tip, digested it, and then thought no more on the subject. And in my opinion, you would have missed the more fundamental learning lesson here about thinking 4th dimensionally.
Most of us are already hyper-aware (on the conscious level) of the virtues of flipping houses faster, but I can tell from talking with many of you personally that tons of investors still haven’t let this one sink in all the way.
This is post is a good example of the philosophy behind my coaching programs.
Yes, the programs are full of actionable tips you can use right away, but more than that they are designed to tweak your REI perspective into that of a successful investor, one principle at a time.
Find out how all of this works by registering for our next webinar.
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