{"id":146233,"date":"2023-01-05T11:11:00","date_gmt":"2023-01-05T18:11:00","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=146233"},"modified":"2023-11-07T11:02:54","modified_gmt":"2023-11-07T18:02:54","slug":"lessons-learned-from-out-of-state-flip","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/lessons-learned-from-out-of-state-flip","title":{"rendered":"Flipping Out-Of-State? Here&#8217;s Some Useful Advice"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC2295749138\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n<p><span data-preserver-spaces=\"true\">Every investment I\u2019ve made has been within 60 minutes of my home.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">There\u2019s no rhyme or reason, it&#8217;s simply where I\u2019ve looked for opportunities. It works, so why look elsewhere? Don&#8217;t get me wrong, I have chased shiny objects all over the place but stuck to my market until a certain opportunity presented itself.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">There are opportunities all around, and it is imperative you understand what opportunities align with you. An opportunity to make money or network or build your Instagram following may not actually get you closer to achieving your goals. Don\u2019t be afraid to say no to opportunities if they don\u2019t align with what you are trying to do or how you want to live your life.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">I had an opportunity arise last year that I jumped on. James Dainard, from the <a href=\"https:\/\/www.biggerpockets.com\/podcasts\/on-the-market\" target=\"_blank\" rel=\"noreferrer noopener\">On The Market Podcast<\/a>, wanted to do a YouTube series on partnering with someone to complete their first flip. He wanted to document the whole process and make it easy to understand for someone to follow along if they wanted to flip a house.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Here\u2019s how it would work:&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">We would each contribute 50% of the capital required. James was going to acquire the hard money lender, source the deal from a wholesaler and manage the rehab. My responsibility was to trust James and his process, along with showing up to record the content for his YouTube channel,&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.youtube.com\/playlist?list=PLGICvK0_T3hTLb-WLPzlCQw_waWYYX7Py\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">ProjectRE<\/span><\/a><span data-preserver-spaces=\"true\">. I was not only anxious to finally be able to invest in one of James\u2019 deals but to also learn exactly how he has his systems and processes in place.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Here, I am going to highlight some of my favorite lessons I learned along the way.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">The Importance of Calculating After-Repair Value (ARV)<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">It\u2019s important to rely on a solid comp to calculate your after-repair value (ARV). This means you should comp with a home that\u2019s been sold within the last six or so months. Don\u2019t use a property that is under contract or the listing price of a property, especially in a hot market. Once you have identified the sold properties in the surrounding area, look for similarities in square footage, bedroom count, bathroom count, acreage, and finishes.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">It\u2019s critical that you define the ARV because it could make or break your deal or just lose you a bunch of money.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Create a Budget Contingency<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Add in a 5% contingency for change orders that will affect your budget. You could estimate your rehab costs down to every nail needed, but there could still be issues that arise that you just couldn\u2019t possibly foresee when creating your budget.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">For example, there could be material delays that hold up your project, which increases your holding costs, or opening up a wall and finding dry rot on studs that needs replacing. It is better to be conservative and have a cushion on your budget than to underestimate it.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Find Out Who\u2019s Worked On The Property Before<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">As you go through the house, look for information on licensed contractors that have worked on the property before, whether for installation, maintenance, or repair. Oftentimes they will leave a sticker on the unit with the date they serviced the unit and when the next service date is recommended.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Common places to look are the electrical panel for an electrician, forced air furnace, boiler, or hot water tank for an HVAC tech or plumber. After James brought this to my attention, I even found a sticker for a plumber on the side of a toilet in one of my other properties.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The contractor may be familiar with the property, which could save you money if you don\u2019t have to pay someone trying to figure out what another contractor did. Of course, you still want to do your due diligence on the contractor and verify they are licensed. You\u2019ll be able to see whatever work they did on that property firsthand, so use that as a guide if you would even want to hire them anyway.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Using A Joint Venture Agreement&nbsp;<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Since James and I were partnering on this one deal, it wasn\u2019t worth creating a company together, specifically an LLC. James presented me with a joint venture agreement.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">The pros of using a joint venture agreement far outweighed creating an LLC. We were doing one deal together and wouldn\u2019t need anything long-term. The joint venture was between his LLC (which took the deed of the property) and my LLC, which acted as a partner in the deal contributing 50% and was entitled to 50% of the profit.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">It also listed out our roles and responsibilities. His LLC would maintain the books, which I had access to at any time, he\u2019d manage the rehab, and I\u2019d fly out to the property at least four times to record walkthroughs on the property. Joint venture agreements still offer liability protection, defined responsibilities, clear expectations, and a legal contract.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Excellent Communication<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Every week was an update. There was an email sent out with the progress on the rehab, any change orders, and what was coming up next. After the property was completed and listed, the updates continued with detailed notes on each open house or showing. As a partner on the deal that was pretty hands-off, this was extremely helpful.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">For future deals, I am implementing this process for my partners on deals. It will keep us aligned and on the same page as to where we are headed with the property. Here\u2019s where you need to be cautious, though. There needs to be clear expectations in the partnership as to who is the operator and who is the investor.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Maybe both of you are managing the rehab or just one of you. Either way, you have to trust each other in their roles. James gave me the courtesy of letting me know that the market was changing right when we were ready to list our property. He thought we should get ahead of the shift and decrease our asking price. Right away, I told him that I trusted his judgment. The communication should be informational, and you have to be willing to trust and not overstep.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Final Thoughts<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">Even though I learned this through flipping a house, they are lessons or tips that can be carried over to most investing strategies or even partnerships. If you\u2019re new to real estate investing, then you need to check out my new book,&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/store.biggerpockets.com\/products\/real-estate-rookie\" target=\"_blank\" rel=\"noopener\"><em><span data-preserver-spaces=\"true\">Real Estate Rookie: 90 Days To Your First Investment<\/span><\/em><\/a><span data-preserver-spaces=\"true\">!<\/span><\/p>\n\n\n\n    \n  <div id=\"visibility-group-block_64dd51292c9f9\" class=\"visibility-group  hidden\">\n        \n\n<div id=\"hero-block_62df1a82bfc88\" class=\"first:mt-0 hero-block py-4    has-background has-slate-200-background-color has-text-color has-theme-gold-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-slate-800-color has-text-color has-large-font-size\" style=\"font-style:normal;font-weight:800\">Ready to get your first property in 90 days?<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-slate-900-color has-text-color\" style=\"font-size:16px\">When you&#8217;re a rookie, real estate investing can seem overwhelming. This comprehensive guide gives you everything you need to buy your first property within 90 days!&nbsp;<\/p>\n\n\n\n<div id=button-custom-event-block_64134fe56b103 class='button-custom-event'>\n      <a href=\"https:\/\/store.biggerpockets.com\/products\/real-estate-rookieutm_source=blog&#038;utm_medium=marketing_block\" x-on:click=\"window.analytics.track(&#039;Blog Block | Publishing: Rookie Book&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/lessons-learned-from-out-of-state-flip&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-gold-background-color has-text-color has-white-color\" target=\"_blank\">Get Your Copy<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\" first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2023\/01\/rookiecover1-e1673044874197.png\" alt=\"\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>\n\n  <\/div>\n  \n\n\n    \n  <div id=\"visibility-group-block_64dd516d2c9fa\" class=\"visibility-group  \">\n        \n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n    \n  <div id=\"visibility-group-block_64dd31c79f00f\" class=\"visibility-group  \">\n        \n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div id=\"hero-block_64dd2875dba9d\" class=\"first:mt-0 hero-block py-4    has-background has-slate-100-background-color has-text-color has-theme-slate-color\">\n    <div\n        class=\" flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 w-full \">\n            <main class=\"py-4\">\n                \n\n<h3 class=\"wp-block-heading my-0 tracking-tight font-extrabold has-theme-slate-dark-color has-text-color has-large-font-size\">Join the community<\/h3>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color\" style=\"font-size:16px;font-style:normal;font-weight:400\">Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more. <\/p>\n\n\n\n<div id=button-custom-event-block_64dd2888dba9e class='button-custom-event'>\n      <a href=\"https:\/\/www.biggerpockets.com\/signup\" x-on:click=\"window.analytics.track(&#039;Blog Block | Acquisition | Free Membership Signup&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/lessons-learned-from-out-of-state-flip&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Sign Up<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n            <\/div>\n<\/div>\n\n\n<div style=\"height:10px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n  <\/div>\n  <\/div><\/div>\n\n\n  <\/div>\n  ","protected":false},"excerpt":{"rendered":"<p>Every investment I\u2019ve made has been within 60 minutes of my home.&nbsp; There\u2019s no rhyme or reason, it&#8217;s simply where I\u2019ve looked for opportunities. It works, so why look elsewhere? [&hellip;]<\/p>\n","protected":false},"author":273816,"featured_media":146235,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5525,7119],"tags":[],"class_list":["post-146233","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-flipping-houses","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/146233","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/273816"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=146233"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/146233\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/146235"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=146233"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=146233"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=146233"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}