What Does Microflipping Mean In Real Estate?

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

If you’re interested in microflipping, it’s important to understand how it works before deciding whether it’s right for you.

What Is Microflipping?

Microflipping is a type of short-term real estate investment that involves buying undervalued properties and reselling them quickly for a profit. It’s similar to real estate 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 to make a profit.

Unlike wholesaling and house flipping, microflipping mainly happens by utilizing technology. It usually requires no work to repair or improve the properties being bought and sold.

How Microflipping Works

The microflipping process is like traditional wholesaling, but with a few new tricks. Microflippers do most of their work from a computer, so you won’t have to do as much running around to scout out deals as you will with wholesaling.

Instead, microflippers use software to analyze data and find properties they can buy below market price and sell quickly. With no renovating and no manual labor required, the process is designed to be very fast. Finding and reselling a property in the same week isn’t unusual for microflippers.

Since microflippers often don’t make renovations or improvements, they usually reap only small profits on the properties they resell. For example, a microflipper might buy a property for $130,000 and sell it to a house flipper for $140,000, making only $10,000 for the whole deal.

Microflipper profits aren’t as large as what house flippers can make after renovating a fix-and-flip property. But, microflipping is a popular way to bring in money quickly while putting in minimal work.

What Are iBuyers?

iBuyers make up a large portion of the microflipper population. Like most microflippers, iBuyer companies buy undervalued properties and sell them for a profit.

As a business model, iBuyers attempt to simplify the home buying process. They cut out the need for a real estate agent or REALTOR^® by selling directly to buyers online. If you’re interested in microflipping, it may be worthwhile to do additional research on iBuyers. They’ll likely be your biggest competition when purchasing homes under market value.

Microflipping Vs. Wholesaling

Microflipping and wholesaling are similar in many ways, as mentioned earlier. The main difference is that microflipping happens faster and almost entirely via technology.

Wholesaling typically involves building relationships with buyers, especially house flippers interested in the distressed homes that wholesalers tend to seek out. A wholesaler typically attempts to reassign a property’s contract in a month or less.

Microflippers, especially iBuyers, study data to find undervalued homes they can resell in a week or less. Networking is important to many microflippers, but iBuyers worry less about networking since home buyers are more likely to seek them out.

While wholesalers tend to look for distressed homes, microflippers tend to look for homes in fairly good condition. The profit margin on selling these homes will be smaller, but property can change hands faster this way.

How To Start Microflipping

If you’re interested in learning how to microflip, you’re not alone. It’s become a recent trend in real estate. This method appeals to many new real estate investors since it’s less costly than house flipping and brings in money faster than many other investments. Now, let’s walk through the steps you’ll need to take to get started.

Find Buyers

Although iBuyers don’t have to worry much about finding buyers, you’ll need to network if you want to start microflipping by yourself. To get rid of homes quickly, you’ll need a group of interested buyers. You may want to target cash buyers specifically. Though you’ll make less money, cash sales are usually quicker than the traditional home buying process and have less risk of falling through.

You can find cash buyers in many ways, but posting ads in person and online might be a good place to start. You can also use 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. You’ll want to find a software product to help you identify homes you can easily resell. Programs such as PropStream and Flipper Force let you access property records and filter results based on what you’re looking for. Some platforms offer free trials, so you can try different ones out before buying one.

Though it might seem optional, user-friendly software is essential for managing your microflips. Digging through public records yourself and trying to keep track of everything in a spreadsheet will slow you down. Microflipping is very speed-focused. Having a program do half the work for you can save lots of time.

Figure Out Your Financing

Financing is important to think about before you embark on microflipping. You’ll likely be buying properties in fairly good condition, so they may have a heftier price tag than distressed homes. You could buy and sell in cash, but this might not be an option for beginner investors who don’t have that kind of money on hand.

Another potential option is to get a traditional loan or hard-money loan. Hard-money lenders give the borrower money right away, as long as the borrower quickly repays the loan – often in 1 to 2 years. While these loans can have high interest rates and can be risky, their convenience and speed make them popular for microflipping.

Connect With Experts

Connecting with an expert before you start microflipping will help you get your bearings. You may want to try a local lender that works with flippers, and you might also pair up with a real estate agent or REALTOR^® to help with contracts and transactions. Leaning on someone with wholesaling or microflipping experience can also help point you in the right direction.

Is Microflipping A Good Investment?

Microflipping is a faster, less labor-intensive effort than many other forms of real estate investing. But, is it a good investment? Next, we’ll review the pros and cons.

Pros

Some advantages of microflipping are as follows:

• You can do almost everything from your computer. Unlike traditional house flipping, you won’t have to do any renovations or remodeling. This means you don’t have to worry about sweat equity or putting in a lot of manual labor.
• It’s fast. Microflipping is a tech-savvy, streamlined version of wholesaling. It can bring returns within days or weeks of finding a home to resell. While your profits on each sale might not be huge, you can make a lot of them quickly.
• It’s almost passive income. Microflipping involves work and careful planning. But, it’s less intensive than real estate investments that require renovating or hunting for homes to flip in a sea of records or by driving around.

Cons

Consider these potential downsides of microflipping:

• The competition is fierce. Your main competitors are iBuyers, which have a major advantage over you because they’re already organized and in possession of a huge network of potential buyers and other resources.
• Profits will be small. Successful microflipping requires buying and selling many properties. You might only make a few thousand dollars on each home you flip, so the number of deals you can land is important.

How It Stacks Up

Microflipping is a short-term real estate investment strategy compared to other options. This can be nice if you’d rather make a little money quickly than wait a long time for larger returns.

Microflippers tend to buy homes in good condition instead of fixer-uppers, so microflipping is generally much less labor-intensive and less risky than traditional house flipping. If you can flip enough homes, you also have the chance to make a little more money than you would by renting out a property.

However, competing with iBuyers can be difficult. And, making dozens or hundreds of real estate transactions a year isn’t for everyone. You have plenty of other real estate investment options, which include flipping, renting and REITs, and let you invest in real estate in a similar manner to how you’d invest in the stock market.

The Bottom Line: Microflipping Can Be A Good Option For Tech-Savvy Investors

Microflipping is a fast and convenient real estate investment, but it isn’t for everyone. Aspiring real estate investors might consider several alternatives, such as buying rental properties and fixing and flipping distressed homes.

If you’re interested in financing an investment property and are ready to get started on your mortgage application, you can apply online now with Rocket Mortgage^®.