Ugly Houses, Fat Profits

Distressed properties consistently outperform retail properties in the house-flipping business, despite most beginners being attracted to prettier, move-in ready homes. I break down why "ugly pays" and share my exact filtering system that ensures profitable deals.

• Retail properties (clean, updated, move-in ready) are priced at market value with no profit margin
• Distressed properties (ugly ducklings) sell below market value because buyers can't see past surface problems
• Only buy properties at 65-70% of after-repair value minus rehab costs (the 70% rule)
• Beginners should also factor in carrying costs (the SOC - Safe Offer Cap)
• Three profitable property types: cosmetic fixers, estate sales, and pre-foreclosures
• Avoid: new construction, recently flipped properties, and homes priced within 5% of comparable sales
• The biggest mistake: falling in love with pretty properties
• You make money when you buy, not when you sell

Thanks for listening to Demo to Dollars. If today's episode helped you move one step closer to your first or next deal, do me a favor—follow us wherever you get your podcasts so you never miss a show. We're grateful to be part of your journey. Now get out there and get cracking.

Want to learn how to flip your first house?

CLICK HERE to learn more about our upcoming boot camp, Flipper Camp.

Learn to build a house flipping or multifamily business: Clark St Academy

Chapters

• 0:00 Why Most Flippers Fail
• 1:09 Distressed vs. Retail Properties
• 2:15 Three Profitable Property Types
• 3:31 What to Avoid and Bottom Line

Transcript

Ed Mathews: 0:00

Distressed properties are the ugly ducklings. Think dated kitchens, worn carpets, deferred maintenance or motivated sellers who need to move fast. These properties sell below market value because most buyers can't see past the surface problems. Ever sat in your car scrolling through Zillow and thought, man, if I just knew where to start I could flip one of these? Yeah, we've been there too. Most people who want to flip houses never even start, not because they're lazy, but because they don't have the blueprint. Well, that changes today. If you give us five minutes, we'll give you real world flipping strategies that actually work. No fluff, no theories, no gatekeeping, just real how-to information for you to apply. Today I was standing in a pristine kitchen with granite countertops and stainless steel appliances. The seller wanted $380,000. My contractor, buddy, nudged me and whispered this place is move-in ready, no work needed. I smiled, shook the seller's hand, thanked her for her time and walked away. Three weeks later, another investor bought it, spent six weeks painting and lost $12,000. Here's why I knew to run. Today I'm breaking down the exact property types that build cash versus the shiny traps that drain your bank account. This single distinction separates profitable flippers from the ones who quit after their first deal. Look, there are only two types of properties distressed and retail. And here's the hard truth. Retail properties don't make flippers money. Retail properties are the pretty ones clean, updated, move-in ready. They're priced at market value because there's nothing wrong with them. When you buy retail, you're paying full price for someone else's work. Where's your profit margin? There isn't one. Distressed properties are the ugly ducklings. Think dated kitchens, worn carpets, deferred maintenance or motivated sellers who need to move fast. These properties sell below market value because most buyers can't see past the surface problems. Here's my filtering system I only look at properties where I can buy for 65 to 70% of the after repair value minus my rehab costs. This is called the 70% rule and it only works with distressed properties. In fact, for my beginner students, I recommend also including your carrying costs. We call it the safe offer, cap or SOC.

Ed Mathews: 2:16

Let me give you three distressed property types that consistently deliver profits. First, cosmetic fixers. These need paint, flooring and kitchen updates Nothing structural. I bought a three-bedroom last year for $295,000. Spent $28,000 on cosmetics, sold it for $395,000. That's a $32,000 profit in 12 weeks.

Ed Mathews: 2:39

Second, estate sales. When families inherit properties, they often want quick cash, not maximum value. I've bought below-market properties from estates because the heirs live out of state and want to close fast. Third, pre-foreclosures Homeowners facing foreclosure will often sell below market to avoid the credit. Hit Approach with empathy. Remember you're solving their problem, but they're probably very emotional about the situation. Be a human being. Now. Here's what I avoid New construction, recently flipped properties and anything priced within 5% of comparable sales.

Ed Mathews: 3:13

These are retail properties disguised as opportunities. The biggest mistake new flippers make Falling in love with pretty properties. Pretty doesn't pay, ugly pays. Remember you make money when you buy, not when you sell. If the deal doesn't work at your purchase price, no amount of renovation magic will save it. In fact, it's a trap. Run Bottom line distressed properties. Create profit margins. Retail properties eliminate them. Stick to the 70% rule or, if you're a beginner, use our SOC rule. Target cosmetic fixers, estates and pre-foreclosures and run from anything that's already pretty. This is Demo to Dollars, your no BS flipping playbook. One tip at a time. Drop a comment and tell me about the ugliest property that made you the most money, and share this episode with someone who's still chasing shiny deals. They'll thank you later. Thanks for listening to Demo to Dollars. If today's episode helped you move one step closer to your first or next deal. Do me a favor follow us wherever you get your podcasts so you never miss a show. We're grateful to be part of your journey. Now get out there and get cracking. Bye for now.