Ugly Houses, Fat Profits

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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.

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Episode Transcript

Ed Mathews (00:00):
Distressed properties are the ugly
ducklings.
Think dated kitchens, worncarpets, deferred maintenance or
motivated sellers who need tomove fast.
These properties sell belowmarket value because most buyers
can't see past the surfaceproblems.
Ever sat in your car scrollingthrough Zillow and thought, man,
if I just knew where to start Icould flip one of these?

(00:20):
Yeah, we've been there too.
Most people who want to fliphouses never even start, not
because they're lazy, butbecause they don't have the
blueprint.
Well, that changes today.
If you give us five minutes,we'll give you real world
flipping strategies thatactually work.
No fluff, no theories, nogatekeeping, just real how-to

(00:40):
information for you to apply.
Today I was standing in apristine kitchen with granite
countertops and stainless steelappliances.
The seller wanted $380,000.
My contractor, buddy, nudged meand whispered this place is
move-in ready, no work needed.
I smiled, shook the seller'shand, thanked her for her time

(01:01):
and walked away.
Three weeks later, anotherinvestor bought it, spent six
weeks painting and lost $12,000.
Here's why I knew to run.
Today I'm breaking down theexact property types that build
cash versus the shiny traps thatdrain your bank account.
This single distinctionseparates profitable flippers
from the ones who quit aftertheir first deal.
Look, there are only two typesof properties distressed and

(01:24):
retail.
And here's the hard truth.
Retail properties don't makeflippers money.
Retail properties are thepretty ones clean, updated,
move-in ready.
They're priced at market valuebecause there's nothing wrong
with them.
When you buy retail, you'repaying full price for someone
else's work.
Where's your profit margin?
There isn't one.
Distressed properties are theugly ducklings.

(01:46):
Think dated kitchens, worncarpets, deferred maintenance or
motivated sellers who need tomove fast.
These properties sell belowmarket value because most buyers
can't see past the surfaceproblems.
Here's my filtering system Ionly look at properties where I
can buy for 65 to 70% of theafter repair value minus my
rehab costs.
This is called the 70% rule andit only works with distressed

(02:08):
properties.
In fact, for my beginnerstudents, I recommend also
including your carrying costs.
We call it the safe offer, capor SOC.
Let me give you three distressedproperty types that
consistently deliver profits.
First, cosmetic fixers.
These need paint, flooring andkitchen updates Nothing
structural.
I bought a three-bedroom lastyear for $295,000.

(02:30):
Spent $28,000 on cosmetics,sold it for $395,000.
That's a $32,000 profit in 12weeks.
Second, estate sales.
When families inheritproperties, they often want
quick cash, not maximum value.
I've bought below-marketproperties from estates because

(02:50):
the heirs live out of state andwant to close fast.
Third, pre-foreclosuresHomeowners facing foreclosure
will often sell below market toavoid the credit.
Hit Approach with empathy.
Remember you're solving theirproblem, but they're probably
very emotional about thesituation.
Be a human being.
Now.
Here's what I avoid Newconstruction, recently flipped
properties and anything pricedwithin 5% of comparable sales.

(03:13):
These are retail propertiesdisguised as opportunities.
The biggest mistake newflippers make Falling in love
with pretty properties.
Pretty doesn't pay, ugly pays.
Remember you make money whenyou buy, not when you sell.
If the deal doesn't work atyour purchase price, no amount
of renovation magic will save it.
In fact, it's a trap.
Run Bottom line distressedproperties.

(03:34):
Create profit margins.
Retail properties eliminatethem.
Stick to the 70% rule or, ifyou're a beginner, use our SOC
rule.
Target cosmetic fixers, estatesand pre-foreclosures and run
from anything that's alreadypretty.
This is Demo to Dollars, yourno BS flipping playbook.
One tip at a time.
Drop a comment and tell meabout the ugliest property that

(03:55):
made you the most money, andshare this episode with someone
who's still chasing shiny deals.
They'll thank you later.
Thanks for listening to Demo toDollars.
If today's episode helped youmove one step closer to your
first or next deal.
Do me a favor follow uswherever you get your podcasts
so you never miss a show.
We're grateful to be part ofyour journey.
Now get out there and getcracking.

(04:17):
Bye for now.