In May, The Wall Street Journal reported that real estate agents and developers are hiring ride-share drivers from companies like Uber and Lyft to scout up-and-coming neighborhoods for potential properties to buy. Imagine having dozens of drivers passively working for you and keeping an eye on the very neighborhood you are interested in.
The drivers are already on the road and likely know the area they serve better than most developers. The tell-tale signs of overgrown lawns, notices on the doors or more blatant abandonment are all lead-worthy for the right investor. Investors know how to find a diamond in the rough, and it directly benefits those who can buy and flip it.
Choosing to work with an app, agency or scouting team has its pros and cons. In the end, the decision comes down to you to decide the best approach for your next investment. Education is key to understand more about what to expect from this new potential technology and how to best utilize it.
Corporate Incentives
A house purchase is identified as a “flip” when the property is sold within one to two years of purchase. Flipping homes has become more prevalent with the ever-aging housing market. Recent numbers (subscription required) show that approximately 40% of flips are made by companies and the remaining 60% by individuals. Further, CoreLogic shared property data that shows companies have three times more market share in flipping than they did during the previous housing boom.
There is big money to be made in scaling the number of sales while reducing the time it takes to find a future flip. Rather than taking time to personally scout, reviewing potential properties en masse permits investors to make weighted decisions.
Picture This: Driving Up Sales
With the assistance of ride-share drivers and the like, companies can buy homes in neighborhoods throughout the U.S. that are gentrifying, from Atlanta to Chicago and places in between. Some investors choose to buy properties at or below $200,000 and invest heavily to upgrade and repair the property.
Flippers get the inside scoop in sophisticated ways, like apps that enable drivers to send photos and addresses of potentially abandoned, foreclosed or auction homes. Companies like CORI that specialize in hiring drivers to scout currently have hundreds of drivers with the goal of surpassing a thousand drivers for even more exposure to the local markets. Homesnap is another app that makes it effortless for buyers to plug in an address and get a plethora of information about a potential investment.
Finder’s Fees: What’s In It For The Driver?
Each app or real estate company offers something different. Some offer drivers a nominal $1-2 per property or photo shared. Other firms provide a percentage of the purchase price when the investor buys or sells the flipped property.
For the driver, it is a numbers game. With about one in 200 leads going through, the returns for the driver might not be for a year or so from the time the lead was shared. However, if that turns into $2,000-3,000, then the return — and a bit of patience — could be worth their while. Some drivers send hundreds of leads before investors bite or move forward, so this isn’t for the short-term gain seekers. The long game will pay off in dividends.
You Win, They Win, Everyone Wins
Newly flipped properties often provide substantial returns for the investor for a relatively low cost. The neighborhood also wins since more appealing buyers are drawn in. Rather than vacant or dilapidated homes, the streets are now lined with better homes with tax-paying owners. Of course, the investor took an initial chance on the ride-share driver as well as an unknown neighborhood, and now that chance has paid off.
Pros And Cons Of Outsourcing Leads
Consider using lead-sharing apps as an addition to the work you’re already doing to find your investment properties. It could be helpful to have inside knowledge of an area, but the local coffee shop or food delivery person could be just as useful as an app that provides an address and photos.
If you can, be sure to encourage your sources to find your ideal property. If you prefer to flip or restore Victorian-era homes, a vacant lot or abandoned ranch might not be worth your time, or theirs. Whenever possible, train your team to find properties that align with your goals — just as you would with any associate on your team.
Whenever you take yourself out of the equation, you run the risk of your vision not being executed properly. Although hiring ride-share drivers is one way to expand your reach, it should not be the only way. Continue to utilize referrals and colleagues in the industry. They might have knowledge of upcoming areas, deals and properties that could be useful to you.
Lastly, be sure you get qualified leads. If every property is not what you are looking for, perhaps this route of property exploration is not for you and your business model. You can still canvas new neighborhoods or potential areas without the apps or ride- share drivers. After all, that may be exactly what you have been doing up to this point to great success.