FlipSplit, a new house flipping company based in Southern California, has a new business model that is turning skeptical homeowners into believers. Find out why.

With any new venture based on a novel business model, it is nearly impossible to predict the future prospects for the given company accurately. Instead, we find it to be a more productive exercise to focus on the inherent idea of the business and to explore how well it may be received by its targeted customers.

In the case of FlipSplit, a Southern California-based house flipping startup, we believe they have a terrific business proposition that is proving itself, as it converts skeptical homeowners into believers one flip at a time.

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FlipSplit’s Business Model: All-Cash Flip-Split

FlipSplit’s novel business model is summarized in their name – they Flip a homeowner’s house and then Split, 50/50, the net profit of the resale amount. However, FlipSplit goes a step further by also buying the homeowner’s house upfront with a quick, all cash offer. You can think of them as the inventor of the “All-Cash Flip-Split” (ACFS) market.

From the homeowner’s perspective, you receive the assurance of an immediate and competitive all cash offer, with the added benefit of a no-risk, back-end revenue sharing opportunity once the home is resold.

If this “All Cash + Flip” or “All Cash with Bonus” business model takes hold, more homeowners will have the luxury of choosing between two types of all cash offers:

  1. An All Cash Offer from an established iBuyer (national or local)
  2. An All Cash Offer + Flip Revenue Sharing from a smaller, more nimble local House Flipper

Given that the second choice will have no additional risk, a rational homeowner would always choose the latter option, provided that the all cash offers are on par with each other.

 

FlipSplit’s Strategy & Rationale

FlipSplit can take on this “risky” approach because the founders have extensive experience operating low-margin, high-volume businesses in the renovation and house flipping industries. According to FlipSplit’s Instagram account, the founders have renovated over 2,000 properties since 2008, which averages out to 143 projects per year. Though they are small when compared to national iBuyer firms, FlipSplit can buy homes as quickly, with the thinnest margins, as any competitor.

Company management’s experience, purchasing scale, analytical projection models and transparency are all enabling reliable bids that hit mutual goals. The win-win approach for both FlipSplit and the home selling partner is the key to their business success.

According to FlipSplit’s website, their reason for offering their unique resale bonus is that they grew tired of homeowners getting taken advantage of by iBuyers and house flippers. Their underlying mission is to provide an honest and transparent service to homeowners. The beauty of online reviews is that their clients will be the arbiters of how well they meet this admirable goal.

Furthermore, the ability to offer homeowners a stake in an upsell will certainly enable FlipSplit to buy more attractive, and ultimately more valuable properties.

 

How FlipSplit Works

FlipSplit Video: How FlipSplit Works for Homeowners

FlipSplit | How it Works

 

FlipSplit Video: How it Works for Real Estate Agents

FlipSplit | How it Works for Agents

Also see:

 

Ideal FlipSplit Scenarios for Homeowners

Here are the homeowner scenarios that FlipSplit is targeting:

  • Do not want to be bothered with the inconvenience of renovating, staging and holding open houses
  • Are overwhelmed with the prospects of major renovations and upgrades necessary to make the home move-in ready
  • Need to sell existing house and buy a new house concurrently
  • Relocating out of state and need to move quickly
  • Downsizing to a smaller home and need to remove loads of personal belongings
  • Inherited a home that needs lots of “TLC”, but lack sufficient capital, time or desire to make necessary upgrades

 

Homeowner Benefits of Partnering with FlipSplit

  • Immediate Payout
  • No upfront costs or fees
  • FlipSplit only gets paid when they add value and profitability to your home
  • Higher All Cash Offers due to lower FlipSplit margins
  • Flexibility
  • Convenience
  • Upside Potential
  • Convenient Timeframes
  • As-Is Purchases
  • Bonus Potential After Home is Flipped
  • Assistance with Removing Items & Moving or Leaving unwanted items
  • No commissions, fees or closing costs
  • Eliminates the need of dealing with any renovation projects
  • Eliminates the need and hassle of showing your home
  • Prevents against selling too low to an iBuyer
  • FlipSplit may purchase homes previously rejected by other iBuyers
  • Unwanted belongings can remain in the house to make moving easier

 

Most Common Ways FlipSplit Provides Value to Homeowners

  1. Convenience
    1. House does not need any major upgrades or repairs
    2. Homeowners receive a quick and competitive all cash offer
    3. Provides a faster experience than with national iBuyers like Zillow and Redfin
    4. Homeowners receive the added advantage of a bonus
  2. Upgrading a Home that is Currently Not Move-In Ready
    1. Home requires a lot of work to make it habitable
    2. Home sellers do not have to live through any renovation projects
    3. Home sellers can leave behind unwanted belongings and clutter

 

Advantages of FlipSplit Versus Large iBuyers

  • Responsiveness
    • Can make offers more quickly
    • Does not require formal inspections or detailed property reports
  • Flexibility
    • Can move out as quickly as 72 hours or as late as 90 days
    • Can adjust offer between a higher all cash price/lower bonus potential and a lower all cash price/higher bonus potential
  • Transparency
    • All costs and projections are shared with homeowners
    • Profit sharing is adjusted if costs are lower than projected
  • Bonus Potential
    • If FlipSplit exceeds their expected sales price, they will split the additional profits with the home seller

 

How Does FlipSplit Compare to Pre-Sale Renovation Firms like Curbio?

Another low-risk option to home sellers that need to upgrade their homes to reach an optimal sales price is Pre-Sale Renovations. Firms like Curbio use data, technology and best-building practices to upgrade homes quickly for an optimal sale, without requiring any upfront payments by the seller. Renovation costs are covered at the time of closing.

FlipSplit’s approach to pre-sale renovations is significantly different than that of Curbio, in that the home seller does not have to live through the renovation process, staging or open houses. Once the home seller accepts an offer from FlipSplit and moves out, they will only have to wait for their potential bonus check. Therefore, the risk is reduced with a FlipSplit transaction, as sale proceeds are paid upfront.

Additionally, there is no risk of holding on to real estate in a prolonged home sale, in the event of a real estate market reversal, unlike in a partnership with Curbio.

If FlipSplit’s profit-sharing approach gains momentum with other trustworthy house flippers around the country, we suspect that firms like Curbio may have to entertain this model, as well.

To learn more about pre-sale renovations and Curbio, see:

 

Examples of FlipSplit’s Work

 

Benefits of Selling to an iBuyer/Cash Buyer/Investor/House Flipper

To understand the full benefits of working with firms like FlipSplit, it is important to understand the benefits of working with any iBuyer.

  • Quick Close
    • Speeds up the selling process
    • Average Loan took 46 days to close in June 2020 (Ellie Mae)
    • 5% of all homes fall out of escrow
    • Contingency Buys
    • Relocation
  • No Showings
    • Safe and Convenient
  • No Commissions
    • Savings of 2% to 6%
  • No Costly & Lengthy Renovations
    • Home seller is immediately off the hook for repairs & upgrades
    • iBuyer takes on the cost of repairs
  • Reduced Risk
    • All Cash Offer guards against a potential market downturn
    • Home seller has cash in hand to purchase another home quickly
    • With All Cash offers, iBuyer assumes all risk (market volatility, repair costs)

 

Downside of Selling to an iBuyer/Cash Buyer/Investor/House Flipper

To understand the full benefits of working with firms like FlipSplit, it is also important to understand the downsides of working with any iBuyer.

  • Lower Price Offer
  • Aggressive Bargaining Tactics
  • No Upside Once Home is Sold

 

Nest Steps

If you are located in California and interested in a quote from FlipSplit, reach out to them on their website. Though they tend to work in Southern California, a comment on their Instagram account implied that they can also service Northern California.

For homeowners located in other parts of the country that are entertaining all cash offers from local or regional iBuyers, we encourage you to ask if any of these house flippers will offer you a post-sale bonus, like FlipSplit.

Share this article with them and point them to FlipSplit’s website. All you need is more than one bid to motivate one vendor to rise to the occasion to win your business.

And like that, the “All-Cash Flip-Split” business model can begin to proliferate nationwide, one flip at a time!

 

Resource Links

 

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