From the BiggerPockets Blog

 BiggerPockets Blog »

Jump to Forum View All

Click a category below to view different forum categories.

BiggerPockets

General Info

BiggerPockets Q&A, Site Questions, & Announcements

1522 topics, 14436 posts — Last Post 04/23/14, 11:39AM

BiggerPockets Exclusive PRO Area

118 topics, 844 posts — Last Post 04/23/14, 08:28AM

New Member Introductions

10968 topics, 86438 posts — Last Post 04/23/14, 12:15PM

Real Estate Success Stories

397 topics, 6188 posts — Last Post 04/23/14, 07:49AM

General Real Estate

General Real Estate

Buying & Selling Real Estate

5987 topics, 47183 posts — Last Post 04/23/14, 12:16PM

Renters

649 topics, 5856 posts — Last Post 04/23/14, 10:42AM

Get Foreclosure Help - Help Stop Foreclosure Forum

316 topics, 2557 posts — Last Post 04/21/14, 03:59PM

Home Owner Association (HOA) Issues & Problems Forum

238 topics, 1611 posts — Last Post 04/23/14, 04:02AM

Do it Yourself

658 topics, 6316 posts — Last Post 04/23/14, 09:50AM

Reviews & Feedback

Real Estate Deal Analysis and Advice

3704 topics, 29699 posts — Last Post 04/23/14, 11:00AM

Real Estate Guru, Book & Course Reviews and Discussions

1139 topics, 11596 posts — Last Post 04/23/14, 11:28AM

Ask About A Real Estate Company

743 topics, 7344 posts — Last Post 04/22/14, 11:25PM

Real Estate Investing

Real Estate Strategies

Wholesaling

5630 topics, 43907 posts — Last Post 04/23/14, 11:53AM

Rehabbing and House Flipping

3349 topics, 31094 posts — Last Post 04/23/14, 11:14AM

Real Estate Development & New Home Construction

554 topics, 4694 posts — Last Post 04/22/14, 09:17PM

Innovative Strategies

705 topics, 6044 posts — Last Post 04/22/14, 04:06PM

Tax Liens, Notes, Paper, & Cash Flows Discussion

867 topics, 6692 posts — Last Post 04/22/14, 08:22PM

Rent to Own a.k.a. Lease Purchase, Lease Options

698 topics, 4922 posts — Last Post 04/23/14, 12:17PM

1031 Exchanges

143 topics, 1062 posts — Last Post 04/22/14, 03:21PM

Foreclosure Investing

General Foreclosure & Pre-Foreclosure Forums

1691 topics, 11313 posts — Last Post 04/22/14, 09:26PM

HUD, VA, and Tax Sales

416 topics, 3102 posts — Last Post 04/22/14, 01:39PM

REOs

1217 topics, 10595 posts — Last Post 04/23/14, 09:23AM

Short Sales

1538 topics, 13139 posts — Last Post 04/22/14, 01:38PM

Landlord & Tenant Forums

Landlord & Rental Property Questions

7243 topics, 71096 posts — Last Post 04/23/14, 12:17PM

Mobile Homes & Mobile Home Park Investing

639 topics, 5144 posts — Last Post 04/23/14, 07:57AM

Investor Basics

Starting Out

7725 topics, 60648 posts — Last Post 04/23/14, 11:42AM

Investor Psychology

431 topics, 6107 posts — Last Post 04/20/14, 06:04AM

General Real Estate Investing

4727 topics, 37314 posts — Last Post 04/23/14, 12:12PM

Real Estate Investor Marketing

1737 topics, 14144 posts — Last Post 04/23/14, 12:07PM

Commercial Real Estate

Commercial Real Estate Investing Forum

1412 topics, 9004 posts — Last Post 04/23/14, 08:50AM

Multi-Family and Apartment Investing

1123 topics, 9362 posts — Last Post 04/23/14, 11:59AM

The Business of Real Estate

Real Estate Technology and the Internet

Real Estate Technology, Social Media & Blogging

644 topics, 4910 posts — Last Post 04/23/14, 10:40AM

Business Basics

Goals, Business Plans & Entities

832 topics, 7571 posts — Last Post 04/23/14, 09:48AM

Real Estate Finance & Legal

Financial, Tax, and Legal

Tax, Legal Issues, Contracts, Self-Directed IRA

2803 topics, 20130 posts — Last Post 04/23/14, 11:48AM

Property Insurance

310 topics, 2055 posts — Last Post 04/22/14, 07:38AM

Personal Finance Discussion

330 topics, 2754 posts — Last Post 04/22/14, 12:06PM

Loans, Mortgages, Credit Lines

Private & Conventional Lending Discussion

2853 topics, 19842 posts — Last Post 04/23/14, 11:55AM

Creative Real Estate Financing

1217 topics, 8845 posts — Last Post 04/23/14, 09:39AM

Crowdfunding Real Estate

35 topics, 463 posts — Last Post 04/19/14, 06:24PM

Real Estate Professionals

Real Estate Professionals

Real Estate Agents

1217 topics, 8024 posts — Last Post 04/23/14, 08:23AM

Bankers, Lenders, and Mortgage Brokers

442 topics, 1929 posts — Last Post 04/22/14, 11:03AM

Contractors

269 topics, 1690 posts — Last Post 04/22/14, 07:33AM

Local Real Estate

Local Real Estate

Local Real Estate Networking & Recommendations

2012 topics, 11723 posts — Last Post 04/23/14, 12:05PM

Americans & International Real Estate

162 topics, 568 posts — Last Post 04/14/14, 11:19AM

Foreigners Buying in the USA

62 topics, 409 posts — Last Post 04/10/14, 06:27AM

Canadian Real Estate

65 topics, 439 posts — Last Post 04/22/14, 09:27AM

Marketplace

Real Estate Marketplace

Real Estate Marketplace

15077 topics, 54100 posts — Last Post 04/23/14, 11:42AM

Real Estate Events and Happenings

167 topics, 2590 posts — Last Post 04/23/14, 09:12AM

Off-Topic

Off Topic

Off-Topic

2907 topics, 32441 posts — Last Post 04/23/14, 11:24AM

Housing News & Real Estate Market

920 topics, 8390 posts — Last Post 04/23/14, 11:47AM

BiggerPockets Real Estate Investing Summit

97 topics, 1752 posts — Last Post 04/23/14, 04:51AM

BiggerPockets Resources

Forums » Rehabbing and House Flipping » Where are you finding your deals? - 2013 edition

Where are you finding your deals? - 2013 edition

65 posts by 31 users

Signup

Developer · Orange County, California


Deals? What deals? There's none to be had here in OC. @Will Barnard did your big house sell yet?


Karen Margrave, Parlay Investments, 1st American Construction
E-Mail: [email protected]
Telephone: 949-933-3955
Website: http://www.parlayinvestments.com
PARLAY: definition: to increase or otherwise transform into something of much greater value


Real Estate Investor · Gilbert, Arizona


Definitely been an adjustment in Arizona. 2012 was the year the big hedge funds came in and ate inventory. It feels like they have slowed down, most likely one of the major 3 stopped buying. I have taken what the market has given me meaning changing target cities as necessary. We are buy and hold and strict staying at the 2% rule while staying out of war zones. It was nearly impossible in 2012 but some cities have started to soften up. This is using MLS and trustee sales as the main sources of inventory. Flippers I know are no longer active and buy and hold guys are happy living by the 1% on $100k+ homes.



Rehabber · Santa Clarita, California


Karen M. - Others would beg to differ!

Big house? Which one? Currently I have the Sherman Oaks property on the MLS still, the Agoura in the middle of the rehab (this is my "Big one") and a new Agoura big house in escrow to buy.


Small_be_logoWill Barnard, Barnard Enterprises, Inc.
E-Mail: [email protected]
Website: http://www.barnardenterprises.com
http://www.InvestorExperts.com


· Mechanicsburg, Pennsylvania


Deals in 2013

I've never stopped buying and have been consistently been buying double digit properties for something like 21 years in a row.

MLS
FSBO
Courthouse foreclosure sales
Solictation
Abandoned properties
Not for sale properties
Referrals
Word of Mouth
REOs
HUDs
Neighbors of existing properties
Subdividing to create new lots

All properties must have positive cashflow, I look for properties in good neighborhoods with low crime and good schools. That hasn't changed.

Doing less land subdivision and less non-residential due to the economy.



Real Estate Investor · Salt Lake City, Utah


Originally posted by K. Marie Poe:

I'm at a crossroad about changing my buying criteria. My husband always accuses me of being too cautious and needing overly wide margins. My thinking is that I don't get burned by deals I don't do. But I don't make any money on the deal I don't do either. His point is someone with skills, experience and capital (me) should be able to adjust to the current market. Still chewing on that.

I too am quite conservative in my purchasing and it has served me well; however, I know from talking with sellers of deals I have lost what others are paying. I have made the decision to slowly move my criteria down. I do about 6 rehabs a year, and my hope is to pick up 2 additional deals a year with thinner margins. One never knows; the larger margin deals could all dry up.


Small_gary-logo__2_Gary Parker, GaryBuysHouses
E-Mail: [email protected]
Telephone: 801-635-4756
Website: http://www.GaryBuysHouses.com


Real Estate Investor · Salt Lake City, Utah


Originally posted by K. Marie Poe:

Dell Schlabach: What's your selling price on a house with a $13-17K profit? Nothing wrong with those numbers if you don't have to tie-up $100K for 3-6 months. But that's me. That being said, I may be in for an attitude adjustment about margins if I want to stay busy this year.

If I reduce my criteria, I am looking at $15 with $110 tied up for 4 months. I also feel like my risk is lees in this market. I am OK with less as long as the risk is lower too. O course I have not pulled the trigger on one of these yet either.


Small_gary-logo__2_Gary Parker, GaryBuysHouses
E-Mail: [email protected]
Telephone: 801-635-4756
Website: http://www.GaryBuysHouses.com


Private Money Lender · Los Angeles, California


Here’s another option. We’re getting more and more calls from some experienced rehabbers who want to pay close to full market price for relatively expensive, yet run down homes in really nice areas. One criterion is they have to sit on lots large enough to build out and expand the footprint. They are typically older properties and can’t command the rent that would result in a positive cash-flow, so they’d be of little current interest to a hedge fund.

One deal recently presented to us involved buying a $375k FMV run-down property for $350k and spending $100k to $150k to add several bedrooms and a bath, as well as a kitchen upgrade and polishing the rest of the place up. The resulting property in this neighborhood would be worth around $800k or so. Obviously the rehab costs would have to be scrubbed, but at first blush it looked like there was plenty of meat on the bones. We passed, but only because we have plenty of other deals that we’re more comfortable with. The rehabber bought the place and I’m interested to see what happens.

It’s a bigger risk but a bigger profit and presumably less competition for the purchase. There still seem to be enough “normal” flips around to keep us busy and we haven’t done any of these (yet?) -- just reading some handwriting on the wall.

What do you guys think of this strategy? Anyone do any of these? Thanks.

Jeff



Rehabber


@Jeff S Did the neighborhood have existing home sales of comparable properties in the $800k range? Or was the new ARV derived from avg sq ft.

I ask because I have thought about that exact strategy but decided against it because of my fear of neighborhood price ceilings. I don't want to be a 3,000 sq ft mcmansion in a nice neighborhood with avg sq ft of 1,800.

I do know of one BP'er who has had success breaking previously established neighborhood price ceilings. Check out Tom Tarrant. He lays out his deals on his blog and he's done that exact strategy in his market. One key takeaway that I got from his blog is that that particular strategy best works in gentrifying areas. Also, once he has broke the ceiling in a neighborhood he continually targets it since he created his own comps per se.

Glenn



Developer · Orlando, Florida


Sounds like everyone is in the same boat these days. Lower margins, less deals. I can still buy and hold here at decent returns however those opportunities are quickly evaporating as well. I'm starting an overdue direct mail campaign of 1000 letters on Monday so hoping that over the next few months that will net a deal or two.

The plus side to all of this is that prices have risen to the point where new construction is feasible again in the upper middle class areas and above.

Has anyone seen any solid stats that show what the % of owner occupants vs investors is on the current buying frenzy? Agents around town all have very conflicting comments.



Real Estate Investor · Central Valley, California


@Jeff S

Originally posted by Jeff S:

It’s a bigger risk but a bigger profit and presumably less competition for the purchase. There still seem to be enough “normal” flips around to keep us busy and we haven’t done any of these (yet?) -- just reading some handwriting on the wall.

What do you guys think of this strategy? Anyone do any of these? Thanks.

Jeff

Jeff: Did the rehabber in this scenario actually have less competition when buying this property? I feel like there is no lack of rehabbers with backing looking for deals like this in the better areas. There are few to no "normal" flips in some markets. Here in Santa Barbara, the rehabbers are always looking at adding value by building out, even in marginal neighborhoods. While they aren't competing with many owner occupants buyers, they all want these deals and are competing with each other. The main issue is the permitting time. You have to be in for the long haul on adding square footage here. OK in an upswing. But declining value during rehab was not on most rehabbers radar in 2007.



Real Estate Investor · Central Valley, California


Originally posted by Karen M.:
Deals? What deals? There's none to be had here in OC. Will Barnard did your big house sell yet?

Karen: I'm getting worried for you. I suggest not even saying the words or thinking the thought "there's no deals to be had". You don't want that to become self-fulfilling. The OC is huge market and I'm thinking there is at least one deal with your name on it. It's probably not going to pop on the MLS though. But it might! It would be easy to miss if you are sure there are no deals there. :)



Developer · Orange County, California


@K. Marie Poe You're right I shouldn't say there are NO deals. The fact is, we don't KNOW all the areas of OC, having just relocated here a few years ago, and have our areas where we are comfortable. The areas that we do look in are pretty healthy, and sellers list for market value. Not many fixers or REOs around, and when there is a fixer, they know the cost of repairs and just back their price down that much, with no room for any profits. What I look for are the ones that are in good areas, where there's potential to add value through increasing square footage, or on large lots with potential to split.

For buy and hold investors, there's more opportunity, as properties are appreciating.

Our focus mainly is more on new construction, and hopefully getting a commercial deal that we are working put together. It's a great project if it all comes together, but takes some time.

Sounds like you're doing good in your niche! Keep it up. Glad to see you back on here posting more.


Karen Margrave, Parlay Investments, 1st American Construction
E-Mail: [email protected]
Telephone: 949-933-3955
Website: http://www.parlayinvestments.com
PARLAY: definition: to increase or otherwise transform into something of much greater value


Rehabber · Santa Clarita, California


What do you guys think of this strategy? Anyone do any of these? Thanks.
Jeff
I think the strategy is fine so long as the new and larger home is conforming to the area. if it ends up being the largest home on the block and largest in the area, you will ahve a hard time getting it to comp out and for buyers to buy.

Secondly, for several years now, the cost to build new is much greater than the cost to buy existing and repair, thus, adding on did not make much sense, especially when you add in permit costs along with longer holding times.

As prices continue to climb, costs to build will finally catch back up and the time to spec build will be back. Right now, i believe we are in the middle, so if you can get a small property where all other homes are larger, you may have a deal there.

I would also be curious to know if this rehabber makes out on that deal, please keep us informed Jeff.


Small_be_logoWill Barnard, Barnard Enterprises, Inc.
E-Mail: [email protected]
Website: http://www.barnardenterprises.com
http://www.InvestorExperts.com


Private Money Lender · Los Angeles, California


@K. Marie Poe, @Will Barnard, and @Glenn Espinosa
I’ll certainly let you guys know what happens. This would not be the largest nicest property in the area. On the contrary, compared to the surrounding homes, it screams “rehab me.” ARV is based on numerous actual comps, not square footage. I’m half sorry we didn’t participate but it looks like we’ll be doing some other deals with this rehabber and I know I’ll be hearing all the stories.

I didn’t ask how much competition he had but he didn’t suggest there was any kind of fight. My guess is little. Paying full price on a relatively expensive dumpy property, that couldn’t be sold easily unless it was improved, is not likely to appeal to many flippers or lenders, at least at this point. Unless he had a hoard of cash or a sucker like me, it would have been difficult to put this together. In fact, he did have cash and wanted us to fund the purchase so he could fund the rehab.

Good point on the permitting, Kristine. We never worked in this particular city (way too high class for us) so I have no idea how long this could take. Remodels and additions are typically faster than new construction, but you never know. This was somewhat of a transitional project; somewhere between new construction and a standard flip. The twist was paying full price for it.

This thread is a great illustration of the current split I see in our industry. Those with lots of experience have to work at least twice as hard to find great deals, but are still successful and busy finding new niches. Others, who are just getting their feet wet or new to the area, haven’t developed the resources or relationships and are having a really hard time. We’d all be naïve to think the gravy train will last forever, so it’s important to think ahead strategically.

Keep your chin up Karen M.

Jeff



Rehabber · Santa Clarita, California


This thread is a great illustration of the current split I see in our industry. Those with lots of experience have to work at least twice as hard to find great deals, but are still successful and busy finding new niches. Others, who are just getting their feet wet or new to the area, haven't developed the resources or relationships and are having a really hard time. We'd all be naïve to think the gravy train will last forever, so it's important to think ahead strategically.
I could not agree more!!!

Great speaking with you Jeff, thanks for the call and PM.


Small_be_logoWill Barnard, Barnard Enterprises, Inc.
E-Mail: [email protected]
Website: http://www.barnardenterprises.com
http://www.InvestorExperts.com


Real Estate Investor · sioux falls, South Dakota


I'm creating my own deals by finding land or lots and building smarter and less expensive than my competition. I've been very happy with the recently constructed homes. I have another one here in southern Utah that I just listed yesterday and will finish by February 1. I wanted it done in time for the giant parade of homes that occurs mid February and I will be surprised if it isn't sold by the end of February. I'm also working on another small lot subdivision here that I hope to be able to turn into a gated community just like my subdivision in South Texas. Rich

P.S. building in South Texas and southern Utah, I just can't relate to some of the prices and rehab costs being discussed in this thread!



Real Estate Investor · Central Valley, California


Originally posted by Jeff S:

Good point on the permitting, Kristine. We never worked in this particular city (way too high class for us) so I have no idea how long this could take. Remodels and additions are typically faster than new construction, but you never know. This was somewhat of a transitional project; somewhere between new construction and a standard flip. The twist was paying full price for it.
Jeff

I like the twist of paying full price. That can sometimes be the smartest move. Even experienced investor buyers can lose out when they get hell bent on getting a deal/discount instead of looking at their own bottom line.



SFR Investor · Rancho Cucamonga, California


Originally posted by Jeff S:
Here’s another option. We’re getting more and more calls from some experienced rehabbers who want to pay close to full market price for relatively expensive, yet run down homes in really nice areas. One criterion is they have to sit on lots large enough to build out and expand the footprint. They are typically older properties and can’t command the rent that would result in a positive cash-flow, so they’d be of little current interest to a hedge fund.

We've done 2 of those. One in OC and one in Inland Empire. Both of them were profitable and we learned some things.

1. You will own it longer than 6 months.
2. City Fees vary greatly. We added 800 sq ft in both cities. One was 2k in fees one was 18k.

I think Will makes a great point that the resulting property must be conforming and that was a big qualifying factor for us.

We have not found the magic City that allows us to buy these with ease and when we do I probably won't be talking about it.



Real Estate Investor · Round Rock, Texas


We bid on rehab deals several times a week and almost always lose. Folks willing to make a lot less than us generally pay more. I set our minimum profit margin for these deals at $40k given that we make at least $60k on new construction deals. The velocity of money on rehab deals is much quicker though if we don't need permits. I still like building new stuff because it is easier to sell.

Deals are primarily found from a few selective brokers and agents we work with, but a couple of wholesalers are worth dealing with too. We're considering ramping up a new yellow letter campaign in selective zip codes for some subject-to purchases with thinner equity to add to our portfolio properties later this year. Risking the marketing dollars is something I'd prefer for other rehabbers strapped for cash or wholesalers to do though so that I can pick from their lists ;-).

We also see REO lists from a few lenders and deals from our fund's submission engine. The best deals I find are from our network though.


Small_inner10_logo__updated_Bryan Hancock, Inner 10 Capital
E-Mail: [email protected]
Telephone: 1-800-577-0401
Website: http://www.inner10capital.com/invest/
Join Our Investor Base - Currently Growing 12% Per Week


Developer · Orange County, California


@Jeff S @K. Marie Poe We actually just finished construction on a new 2350 sq. ft. house in Lake Forest. (I will post pics later) We built it on a lot that was a REO. The house had burned down and we picked the lot up. From start to finish it took about 6 months to buy it, do plans, get permits and final. Closed a few days ago. One of the neighbors asked us to try to split his lot so he can build a new home, so we're working on that too.

@Will Barnard, you're right in that the cost of purchasing older properties and rehabbing reaches the point to where new construction makes sense, and that's where we are. I'd love to do some more of those, but lots are a rarity, as are "deals" on houses.

We have a pretty good market here in many parts of Orange County.

@Rich Weese I wish we could find some of those lots!! I don't know how you guys build for as cheap as you do!

Helpful hint to builders: regarding permits, if you buy a lot and there's ever been a home on it, talk to the building department about giving you credit towards new permits. We do it all the time!


Updated: 08:23PM, 01/18/2013

I'm sorry, my timeframe is off, that didn't include the time in escrow waiting for the bank to get their stuff done.

Karen Margrave, Parlay Investments, 1st American Construction
E-Mail: [email protected]
Telephone: 949-933-3955
Website: http://www.parlayinvestments.com
PARLAY: definition: to increase or otherwise transform into something of much greater value




Sign up