Ep 30: Microflipping - What It Is and Where to Start

Today, we are going to be talking about something that I think most people have not heard of, but if you're interested in real estate investing, or a real estate agent looking to get an edge on your market, need to explore.

It's called micro-flipping.

Micro-flipping is a strategy that Robert Grand and I are big believers in, and today, I want to introduce you to what micro-flipping is, why you should try it, where to start, and the easiest mistake even experts can make.

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Full Transcript

Tim Murphy 0:00

Welcome back to the value driven investor podcast where we forge value driven investors on a mission to live life on their terms. No matter where you have come from or where you are going, becoming a value driven investor is in all our best interests. Because becoming financially free allows us to focus on what matters most fulfilling our purpose, our community of value driven investors is committed to showing you the way with the support of this community, you are sure to reach your goals for all of us in the value of an investor community, there is no greater gift than the gift of giving because together, anything is possible.

Tim Murphy 0:49

Today, we are going to be talking about something that I think most people have not heard of. And from what I could discern today, on the internet, most people don't even have a clue what it truly is. And that's called micro flipping, micro flipping, have you heard it? Because you might not have. But you know what? That's okay, because it is something that I think is relatively new. It is a strategy that Bob and I are big believers in. And today, I want you guys to get the introduction on micro flipping, because it's that important. And you know what we just got done talking about short term rentals. We talked about designing for the experience, we had my designer on Annie, to talk about interior design, and how to look at a house and how to bring value to the house from the perspective of an interior designer. This all perfectly melts into micro flipping. Because if you listen to all those different strategies, it's all about creating emotion in the property. And that's what micro flipping is all about. If you truly want to make a profit in micro flipping, it's you got to buy it right. And then you need to be in and out as quick as possible and add as much emotional attachment in that property, which is esthetic updates as possible. And then sell it fast and get out of there. So here we go, micro flipping. The strategy goes hand in hand with House hacking philosophy, because micro flipping can be done as an investor like myself or Robert, or it can be done. If you purchase a home, and you want to house Hackett and Bob, we'll go into that a little bit later. But what is micro flipping? Now, again, I went on the internet today. And if you read different definitions of what micro flipping is compared to what I'm about to tell you, you might not agree with me. But I'm gonna tell you this, I don't agree with them. And I don't think Robert agrees with them. But here's what our definition of micro flipping is, it's when you find a property, purchase that property, do quick, budget friendly, limited risk improvements, then sell it as fast as you can. This needs to be done within 30 days or less, that would be the perfect scenario. And the sale price needs to be aggressive. And when I say aggressive, it's aggressive. Because you're only looking for a 5000 10,000 15,000, maybe a $20,000 return or profit. If you use the micro flipping strategy, it's about speed. That's why it's micro flipping, you're going in and you're buying something you're putting limited amount of dollars into it, you're putting a limited amount of time into it. And you're gonna make a smaller, more limited profit. You're in and out. You're quick. Why do you like to do micro flipping? Why micro flip, because you want to reduce your risk. That is the number one reason why you're going to do micro flipping. Now what is the key to micro flipping? The key to micro flipping is buying the property right. Just before we started shooting this podcast episode, I Googled micro micro flipping like I was telling you guys, it was so funny because I saw all these different explanations about micro flipping, for example, on Quicken Loans on their website, they had an explanation, which would be very similar to what I would define as a wholesaler. Not a micro flipper. All that that tells me is that the person that actually wrote that article has probably never done a micro flip and they might not even be a real estate investor. That's all the more reason why you need to be careful where you get your information and who you get your information from. Because Robert and I, we do this every single day. We don't just come on this podcast and talk about something we don't know about. I've been living investing for 17 years, and Roberts been living real estate for the last 12 plus. So you have to find out, where am I getting this information from? Because there's so much information out there. That's junk. And that Quicken loan article on micro flipping is junk because basically he explained what a wholesaler is. What we're explaining, in our opinion, is what micro flipping is all about. So micro flipping, seems like it's simple, but it's not. And I've seen how complicated it can be because I'm observing it in real time, the Zillow group, open door, their purchasing properties in my market. We just received word. I think it was this week that Zillow is putting the brakes on.

Tim Murphy 5:51

Sure they say it's because of the trades or they say they don't have enough labor to turn the projects quickly enough. But in reality, what they're really telling you is, man, we overpaid. Man, we need to hold on to these properties. Man, we're not doing this right. And so yeah, it might be true that they don't have enough labor. But I can also tell you that they are over paying just like open door. And it must be nice to have billions of dollars. It must be nice to have someone else's money instead of your own. Right, because therein lies the problem. The ibuyer are overpaying because they are making emotional decisions, not well thought out logical decisions. It's all about what you buy the property is not what you sell the property at. Because when you buy the property, right, you leave yourself lots of room for strategic improvement, allowing you to maximize equity, fast, like in a micro flip. Robert and I have used micro flipping strategies forever, because it's a fundamental value proposition. We execute for our real estate clients, the people, we help sell homes. Anyone can do this. That's the best part. But like anyone can get their real estate license, not everyone can do it in a way that will maximize results and deliver good returns on your investment. Why? Because not everyone has the experience of being a real estate investors like Robert and myself. For 17 years, I have been buying my own properties, fixing them up selling them for a profit. It's safe to say I have learned a thing or two real estate agents who don't invest like Robert and I will never know the finer details and how to execute a prophet when they're micro flipping. Hell, they might not even know what a micro flip is just like that guy on Quicken Loans. Yeah. So what does this mean for you get started micro flipping on your own personal residence on your own property. Just like with short term rentals, the best place to learn how to micro flip a home is with your own personal residence, your own properties. We back in episode number five, we talked with Roberts wife Shelly. She told us a story about how she got started investing in real estate. Grand Would you consider the house hack that Shelly did as a micro flip?

Bob Grand 8:29

Yeah, 100% I would consider that a micro flip i That's that's the person that eluded me to there's something different in the world of flipping, you know, there's somebody doing something different. It's not the same across the board, you know, and even my starting real estate wasn't a full fledged flipper, I was more of a micro flipper, skim coding things and getting things back out on the street as fast as possible 30 days or less. Now, I actually was sitting here as we're talking about dreaming about those days, when we could get skim coat deals and be crushing it with that inside of 30 days and turning as fast as possible. Now I was telling my brother, I feel like every project last, you know, four to six months, 12 months. And I'm like this is a long road, you know? Yeah, so but yeah, that's exactly how looking back. That's exactly how I got started. That's exactly how Shelly got started. And it's a definitely a great thing to get started. The one thing I clarify though, nobody shoots out to make $5,000 You don't go out there and go and think and make $5,000 in profit. You know, I've got a micro flip deal that I would consider a micro flip that we just completed would be 100k profit. Grand home runs.

Tim Murphy 9:36

I think that I think that Zillow and open door would be just happy with that with a $5,000 profit.

Bob Grand 9:43

I think they would I agree with you 100% They would probably be okay with me. $5,000 That's great. And the reason why they're cool with that $5,000 is other services they can provide right you know other things that they can control so they have a bigger window to make more money in different areas. I go But you know, I could never honestly tells me go out and try to micro flip and make five G's. Your minimum profit on that you should try to shoot for is the 2025 and upwards to 100.

Tim Murphy 10:09

Yeah, no. And I agree with you 100%. And I think though, like, just I wanted to find micro flipping, and I would say that if you wanted to find micro flipping, I think that the ibuyer is the best definition for the micro flip, because they're not doing what you and I do. And they're trying to get it out as quick as humanly possible. But they're starting to realize it's not as easy as they thought so but I do want you to tell us about the micro flip that you just hit a homerun on because it's a great story.

Bob Grand 10:36

Yeah. So that that project, so my brother locked this deal up on a house for 350,000. And we're finally like, Oh, my God, it's one of the micro flips that we can do. We don't necessarily just say, Oh, God, micro flip, you know, that's kind of the term placed on that category broadly, you know, we call it, you know, a skim coat that we can go in and just clean everything up on the surface level. So that one was just one that we just picked up. And we just got off a project, you know, that we'd spent a long time on probably like three months on, and we made you know, what we're actually closing now. So we'll make probably, like, you know, $80,000, on this project, you know, that we spent three to four months on? Well, this one we go in, and it was just over 30 days. So we missed that window, cuz we had a couple of delays, but it was just over 30 days to get this whole project done. We bought it for 350, we put it on the market at 570. And we felt like That was actually a really good price. So part of it, you know, comes down to that purchase, you know, when you get a really great purchase on a home that you can just skim coat, you've got that window, but we knew we could spend a little bit more on the interior fixtures, we could clean it up a little bit better, we could tile the showers on this one, you know, we could do that type of extra work, because we had the window built into it. We ended up spending $80,000 On the house, you know, we want to spend 60, but you know, like everything materials and everything are going up right now. So we and that's one of the things we've been dealing with. And so it's like we end up spending 80, which wasn't, you know, a huge deal, because we still had a huge profit window. So it's pending right now. We'll close next month. And we'll make over 100k profit on it. I think you know, when I just backed myself out quickly looks like it's to be about 130. But I'm not adding interest. I'm not adding real estate fee. So I say just over 100k will walk away with

Tim Murphy 12:19

well, so I was just thinking how the heck is that a micro flip though, if you spent $80,000? Like how do you define the big flip

Bob Grand 12:27

just the best, it doesn't matter. Like you could do 1000 square foot house, right. And you might spend 30,000 on it because you're only touching the surfaces. So like a micro flip like when you're going through, we didn't tear down a single wall in the house, we didn't cut into a single piece of drywall into the house unless it were to patch it right. Maybe patch a ceiling like all that micro stuff that you would do. We weren't doing anything structural, we didn't rewire the house, we didn't do any like significant electrical work to the house, we didn't do anything to the plumbing, besides actually switching out the shower valves and sour skins to put in, you know the new shower that was going in. So we didn't have to get into the to the bones of it. We didn't have to get into the roots of it. We didn't have to get crazy with it. We didn't do insulation, all those crazy things that go into, you know, those big renovations that we loved. It

Tim Murphy 13:14

wasn't structural, there's no structural improvements, there's no major overhauls. This is just basically a static improvements.

Bob Grand 13:21

Exactly. It's just taking something that's old, like I think this house is built in the 70s. And those are my favorite micro flips, because they got good electrical, typically good plumbing, those ones in the 70s. You go through and you just resurface them all the way throughout. And it gives them that modern look. And boom, there is one thing that I would do and still considered a micro flip that that wall between the kitchen and the living room. Yeah, there's one wall, that's the one wall that I would if I could take it down to get like a bar that was in there. And I would still like we've done that multiple times and houses that we would still consider micro flips. That's the one exception to the rule. But when I'm talking structural, that's the least amount of structural it is and a lot of times that was like non structural anyways, so you could just get rid of it, you know, because back then people like to compartmentalize things. So that's truly like, I think you know what a micro flip is. And what I love about it so much, is that's how I looking back, you know, that's how I got started way back in 2002. And I went into a house, I didn't go buy a brand new house, it was already looked perfect. I went and bought a house, it was 1975 and I cleaned it up and redid all the surfaces, and then I sold it and I made a great profit. And that's kind of like that sweat equity, you know, kind of Homeownership Program that you hear of like a lot of people do over the years, so they can just keep growing their house to the next level. And that's where I think a lot of people start getting

Tim Murphy 14:36

well that's where Sally started, you know, in episode number five, right? Yeah, that's

Bob Grand 14:39

exactly where she started. And she was doing it like an extreme level man. She was like going back and she was buying these houses now. Like, gosh, I don't know, you know, and she'd buy it cleaned it up. She's like, I know, I'm going to create this amazing environment, make it look amazing. I'm going to stage it all out and she would do that and not spend a truckload of money on I'm probably less than this at care, but she'd spent $50,000 on these things, and she turned them inside of six months, turned them so fast to the point where the mortgage broker she was using was like, Look, you got to start keeping things for like six months at minimum, you know, like otherwise, because I don't think I can like keep doing these loans for you. And I was like, she goes, I don't know what to do I go, all you have to do is go to a different mortgage lender. She's like, really, I go, yeah, just go to a different one, if you want to do it. And then I was like, I shouldn't have said that, because that sped up the process even more, but that was just her figuring that process out, you know, and using her skills and her team that she had built. And, you know, her design knowledge, you know, yeah, and I'll

Tim Murphy 15:35

talk about a property that I have, it's actually on the market right now. And I would consider it a micro flip for sure. Because I'm only about 33,000 into it, which is one of the smallest amounts of money. I've been into a property in a very long time. And I bought it because another agent had brought the deal to me and said, hey, you know, these this family's in a particular situation, and they really want to get out and they have another house identified. And they just they they don't want to work with Zillow. They don't want to work with open door. They just, I told them about you. Would you be willing to or Could you look into this and see if you can help out? And I was like, for sure. And so I did. And and I was and I said, Hey, here's what I can do. Here's the pricing of that. And they said, You know what, thank you so much. Yes, we'll make it happen. Okay, great. And it was just like Robert said, it was built in, I think, the early 90s. And it just needed a refresh. And that's what the micro flip is all about. It's like a refresh. And so we went in there and boom, I was gone. I was in and out there in less than three weeks. cleaned it up everything now, yeah, where did I screw up on the strategy because I made a mistake. And you know what, that's part of doing these things. Because when you go from like these big infill development projects that I'm doing that take a year longer, and you have hundreds of 1000s of dollars into these projects, and they are just like, super encompassing of like, just you know, you're building new construction, you're all into this design. And you have this team of interior designers and contractors and all this crap. What happens is you come back here, and you do a micro flip. And you're like, overthinking everything, like I'm overthinking everything. And I'm like going, Man, I still want to make 70 grand, well, but you can't always make 70 grand or more on a deal. Like you have to sometimes look at it and say maybe doing it quicker, is going to add just as much profit as maybe the 70 Grand that you're hoping for, which we all deal with with sellers, right? I know a victim of my own philosophy, which is when I'm going in and I'm working with a seller to help them sell their house, I'm like, Hey, don't try to don't think your house is worth or you have this amount of equity in your house, your house is worth what the market will sell, what will the market will pay for it, that's market value by definition, the house is worth what the market will pay for it. So just because you think you have 100,000 or $70,000 in equity in that house, Mr. Murphy doesn't necessarily mean that that's what you have. Because if the market won't pay the price, then you don't have it. So don't count your chickens before they're hatched. And that's what I've done is I've caught my chickens before they hatched, the market has also shifted its soften a little bit. And if I would have just really said okay, you're doing the micro hacking strategy here, dude, you're doing the micro flipping strategy. And I would have just been like, boom, I'm gonna make $20,000 $25,000 I'm gonna get in and out and I'm gonna price it accordingly. I would have probably sold it sold it a lot quicker within like weeks. And I would have probably potentially gotten multiple offers and maybe gotten more than I thought. But no, I was like every other seller that we deal with. If you're a real estate agent out there, I thought I had more equity than I did. I thought the market would bear the price that I expected it to bear. I got emotional. I went after a big number. And now I'm sitting here 30 days on market going, Dude, I know what you just did. You just made a mistake. You didn't do the micro flip. And you did what every seller does that you deal with on a regular basis. You gave yourself money that you didn't really have. And so game your own worst enemy grand. No, I mean, you're laughing because you know exactly how that goes.

Bob Grand 19:19

Walking through my brain. Listen to that. God God, that's so true. Yeah, I should have called

Tim Murphy 19:23

Bob and he should have been like, you know what, Rob, you got it. Robert, you got to answer you got to list my house for me because I'm just about to make that typical selling mistake or everybody

Bob Grand 19:31

does that though. You know, it's like some psychological thing where you perceive value that's not there. I've done it. You know, my brother's done it we've all done it on projects. And it's all been recently too, right? Yeah. Oh, God, if you live there, tack on an extra zero. You know, like you're just as bad as ever and then it's like you're a real estate agents worst enemy. You know, like when you're like that, and, you know, it's just expectations in reality, and I think that's a good point, you know, What you know, a house is worth what, you know, the market is willing to pay for it and what people decide. And they know because they're watching everything people that want to buy a house are watching everything, and they know value. But they also can see that extra value to you know, and thanks. So FUTA priced at just right, you know, or just slightly under, which is a great strategy, you would have probably gotten over because I go, Oh, man, get them through that door, and boom. But uh, I've done it recently, too. We've done it twice, actually, in the last, you know, year. So and actually, even our one of our brokers, she over priced a listing the same way kind of got caught up in the emotion of the property, and it went a little higher, agreed to a higher price. And, you know, now it's just back it down to the market.

Tim Murphy 20:42

Let's say to, though, that the market had had some influence in that because the market was so smoking hot, it's still pretty good. I mean, it's better than a you know, it's warm, it's not smoking hot, it's warm. Well, I mean, there's plenty of houses, they're still selling with, you know, one or two offers, instead of like six or 12 or 15 offers. Yeah, and I kind of I got caught up in that. And that's emotional decision making. And, and you have to be self aware, you're always going to make emotional decisions, or you're going to have emotion in your decisions. But the less that you let the emotion come in, the better because it will pay dividends because usually, like Robert just said, you know, usually you want to elicit just a little bit under what the markets telling you the value is. And then boom, they'll come in with multiple offers, and they'll price out the house. And that's 90% of the time. That's what I do on this one, though. Yeah, I was like, this is a micro flip. Let me let me let me see how I can make this work. And I got caught all caught up in it. But, Robert, I really want to you know you? Yeah. But what I would really want to do is like if you're a real estate agent out there, on this introduction to micro flipping on top of micro flipping as a strategy as an investor or as a house hack. Robert and I in our businesses as real estate, Roberts, a real estate broker, I'm a real estate agent. Micro flipping is one of the fundamental strategies that can help you differentiate your real estate sales business from every buddy else. Now, you might be like, what, what are you talking about? Okay, guys, listen closely. If you're out there in your real estate agent right now, and you're battling, it's the ibuyer. You're battling against Open Door battling in Zillow. You're battling against wholesalers, you're battling against for sale by owner because everybody thinks all they have to do is put a sign in their yard and they can sell because you know what, there's a million buyers out there. If you're battling it's all these threats to your commission. You have to ask yourself, How do I differentiate myself? How do I how am I different than the next agent? Because you know what, most of us real estate agents, we aren't very different. You know what I can tell you this, we're not created equal. Because it's definitely an 8020 rule. There's 80% of the real estate agents, they don't even know how to do real estate. They don't even know how to read a contract. They don't even know how to represent a client 80% of the agents out there. Robert, would you agree 100% 100%. So that means 20% of the agents actually know how to just do real estate services. But now all of a sudden, you put a whole nother layer of differentiation on there like Robert and I have in our businesses. And you're able to say I am different from the other agents because I am rehabbing and improving properties with my own money. And I can show you the profits that I make. So when I walk in your door, and I say Hey, this is what my team and I can do for you. This is what my stager can do for you, my designer can do for you, my contractors can do for you. Oh, and by the way, it's super hard to find contractors right now. Have you tried? Yeah, nobody calls me back. Okay, well, don't worry about that. Because we already have that in the bag, because we have a full team. And oh, by the way, how many agents have really brought in a designer that are going to talk to you about how we can use our micro flipping strategy to maximize your return on investment? Oh, not one. Yeah, exactly. Because now you're not part of the 20%. That's part of the 80% you are actually part of the 1%. Because there's 1% of agents in my market, and I guarantee in Roberts market that has anything close to the differentiation and the true value that we bring to our sellers and our buyers in this market. So this episode I'm passionate about, because if you're a real estate agent out there, you need to figure out how to execute micro flipping, whether it's on your personal residence as a house hack, or whether it's on an investment property that you're going to go out and buy. Because the second that you're able to execute and become a value driven investor that can now represent buyers and sellers, particularly sellers and then you can execute them Micro flipping strategy for your sellers, this is fundamental and how you truly maximize a seller's return on investment when they go and sell a property on the open market. Grando give them your sense of this strategy as a real estate professional.

Bob Grand 25:18

Yeah, I mean, we we do that in our business, it's one of the things that why our agent on our brokerage, she loves going out and be able to say, we can help you do these things to your house, because that is 100% differentiator, I'd say you might be part of the point 00 1% that can actually accomplish that. And you know, when I would go into house, tell people like, hey, if, if I could get you $5,000 More for your house, and you only had to spend $500? Would you do it? $500 To make 5000, net 4500? Who would say no to that? And then even, even if they couldn't do it, sometimes I'd be like, Well, I'm just gonna do it anyway, how about that, you know, I'll pay for it and take it out of escrow. There's so many different options, you can do, you know, as a real estate agent. But when you have that resource kit, it's like having, instead of having like one tool in your toolbox, you just got a ratchet set with, you know, 500 different heads to it, that you can figure out what you're gonna do. And as an agent, it's such a great place to start, start learning and start getting, you know, your investment career going by just helping homeowners do those little tiny things. And it's amazing.

Tim Murphy 26:24

Now, here's the difference, though people, like don't read it in a book. Don't search it on the internet, don't google it on YouTube. And why do I say that? Because yeah, you can come up with all these suggestions, but you really don't know, cause and effect. Because you've never lived through it. You really don't know what the market can bear. You don't know what the material costs are, you don't know what the labor costs are, you don't know a lot of different things, because you've never done it. So again, what would the 80% Do the 80% do would just fake it, fake it till you make it, fake it till you make it. I'll pretend that I have that differentiation. And that's great. And you can do that. But you know what, that's gonna kill your your relationship, it's going to kill your reputation. And you won't last long. Now if you actually go out and execute like Robert it myself, and you actually learn what micro flipping is, and you've actually you're in the mix, and you're living it like we are, you're bringing so much value that this is what the agent of the future is all about. This is what I buyer open door. And I don't Redfin, I don't care who you are, you cannot compete with me. Because you do not have the full stack, like I do. With contractors, designers, I understand everything, I everything on the material cost side, I understand the labor cost side, I understand what the how the market responds to this color, that color, this product or that product, I understand everything because I'm living it every single day. And I'm doing it, you can't beat that you guys, you can't beat the proof. And that's why Robert and I are crushing it right now. And that's why the 80% are going to fade away, the 20% are gonna stick around because they're survivors, and the 1%. We're gonna crush it, because you can't compete with us. And so that's how important this episode is. That's how important learning micro flipping is. And that's what the value driven investor is all about Grando, you want to take us out on this man, because at the end of the day micro flipping real estate for your clients as a real estate agent, that is the true agent of the future.

Bob Grand 28:47

On a percent. I agree, I couldn't agree any more. If you're in the real estate business, and you're a real estate agent, you should be doing that process right there. And you should learn how to do it, do it well, and then keep progressing from there to become an investor. As well as people working with sweat equity on their own home, you should be doing it too.

Tim Murphy 29:06

Alright, buddy, that was an awesome episode. I'm excited. We're gonna go a little bit deeper into micro flipping, probably in the next part one here and just kind of go into, like different strategies. What are the different things that I should be paying attention to? What's the most important thing that I should do when I'm just doing a light overhaul when I'm doing an aesthetic update? Again, you wouldn't know this. You can read about it. That's great. But you wouldn't know this unless you're doing it. Because Robert and I have made the mistakes. We've lived through it. So we know. Okay, Robert, you know, what's the first thing you would do if you only had $5,000? What's the first thing you would do? Yeah. And then what if you only had $2,000? What's the first thing you would do? And I guarantee in 30 seconds he has not even in two seconds he has an answer. And as I increase his budget, he will literally expand his list incrementally. It will have a purpose behind every single decision. And he could probably sit here and talk to you about each individual purpose and why for about 20 minutes, because why? Because he has a story behind every single choice because he's done it. And that's what a talk. That's what that's what the value driven investors about you guys. It's about execution. It's about doing it. And so, wait for our next episode on micro flipping when we talk about the list what to pay attention to, when you're trying to do a micro flip. Thanks for listening to the value driven investor podcast where we lead by giving for more information about our community and what's new visit value driven investor.com

Dave Lawson 30:45

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