Feedback wanted on my first SFH flip analysis
Hi everyone,
I've been reading, thinking, getting excited, getting nervous, etc about getting into real estate investing for almost a year. I've been attending local club meetups, created an LLC, have a partial team (GC, realtor, wholesaler contacts, hard money lender, etc) and finally looked at my first property to flip yesterday. Below are the details. I'm really interested in what you all think about the process and would appreciate any feedback.
Property details: This deal was through a realtor I met at a REI meetup. This realtor works with investors and this particular property was a non-MLS wholesale deal. The realtor adds 3% to the wholesaler's price (I don't know who the wholesaler is and the realtor obviously protects his relationship with them). The property is in Ramsey, MN which is a further-out suburb of Minneapolis that has many larger lots... this one being 0.9 acres.
Purchase Price: $134,400 (including realtor's 3%)
Year Built: 1982
Style: 4 level split
TFSQ: 2100
Beds: 4
Baths: 2
Garage: Detached over-sized 2-stall (could be 3 stall with larger door installed)
Comps (realtor provided comps plus info I could find for recent sales on Zillow) estimate ARV at $210,000.
I visited the property yesterday with the realtor, my GC, and my GC's "main handyman". This was probably an awesome first rehab property to look at and get "initiated". The smell of dog urine and unreal amount of junk piled up everywhere was almost overwhelming but I focused on trying to see the potential and actually really enjoyed the process.
So... the deal analysis:
ARV: $210,000
Rehab: $45,000 (this is somewhat of a "rough estimate". If the deal looked good I would have done a more thorough review, septic and well inspections, and created a detailed SOW)
Purchase Price: $134,400
This "deal" is at 85.4% of ARV so I'm not looking further into it but learned a lot for my first property viewing. J Scott writes about the "100 House Rule".... I hope to find my first flip before looking at 100 houses, but I'm glad that I've finally taken at least some action and am viewing properties (I tend to get stuck in analysis paralysis).
What I've learned so far:
1. I need to rely on my GC for estimating rehab costs at this point but I'm making a strong effort to learn enough to filter through deals and only pull him in when there is potential so I can have more scheduling flexibility and don't burn him out looking at deals that aren't good.
2. Trust my numbers. My realtor is trying to tell me how good of a deal this is. He's also telling me that I'm trying to get too involved (learn too much) and that I need to trust my team. I agree that I need to trust my team, but I haven't worked with any of them before and don't have the finances to make mistakes that could've been prevented with more knowledge on my part. I'm currently contemplating my future with this realtor.
3. Looking at houses is fun. My only experience looking at houses prior to yesterday was for my own residence.... totally different. I really enjoyed checking out the property yesterday and trying to analyze if a deal existed and can't wait to look at a bunch more.
4. I'm rethinking my strategy of using realtors and wholesalers to bring me deals without doing any marketing. I'm sure deals are out there without marketing, but I haven't seen anything very close to the 70% rule. I did score what I think is a good domain name: www.webuyhousesminnesota.com and I intend to build that site in the very near future. Any recommendations for a great web designer that someone just starting out can afford????
5. I'll never understand how people could actually live in those conditions with pet waste, piles of junk, and boxes of half eaten pizza everyone..... but I'd like to turn those properties into profits.
6. I've got a lot to learn.
Thanks in advance for any replies and wisdom,
Chris
Dream Bigger Properties LLC