It might take a year or it might take 5 years, but for simplicity lets call it the “3 year flip”.
The 3 year flip is a very simple strategy. Its a hybrid of a flip and a buy and hold. What we are doing here is buying houses on the out skirts of where the hot comps are. Because we’re not buying right in the heart of where the hot comps are we are still able to score deals well under market value. The idea is to buy these houses cheap (25 – 50K) and fix them up to a rental grade standard. Then we lease the property out for 6 – 18 months. At the end of the lease we can then determine if the hot comps have spread. Based on careful research of what similar houses are selling for we can figure out if we want to rehab the property for an MLS flip or simply re-rent the property. Every investor has a certain amount of risk that they are comfortable with… and this particular strategy is for those who are somewhat “risk adverse”.
The reason why this strategy works so well is because of the nature of the transitioning neighborhood. When you purchase a distressed house in a transitioning neighborhood you are making a commitment to the area. You are more than likely taking a boarded up, ugly, overgrown, eye sore and turning it into an occupied, fixed up home. Even if you only fix it up to rental grade standards you still have eliminated a problem for the block. Which makes it that much more likely that other investors will also buy distressed houses in the area. It also makes the area much more appealing for potential home owners to buy houses to live in. During the 3 year flip we have learned to be very aware of the curb appeal of the house while it is a rental. We go the extra mile to make sure the yard is well maintained and the tenants are stellar neighbors to live near.
FS Houses only focuses on a select few neighborhoods for revitalization. This way we are able to target problem houses and buy them and fix them up. We also have a network of our investor friends that are targeting the same areas. Having the financial backing from the investors that are committed to the areas, and the support from the community, makes it easy to see what a safe bet the “3 Year Flip” can be.
The history of revitalizing downtown Indianapolis dates back to the 1960’s and 70’s as this article in the LA Times (circa 1986) outlines. With momentum dating back 4 or 5 decades we (at FS Houses) don’t think this pattern will end any time soon.