First of all, love the site, thanks to everyone on here!
A little info about my situation:
I'm a newbie with many questions. I MIGHT know a little more than a normal newbie because I did have a real estate license a few years ago and I have continued to educate myself on the subject. I am interested in rehabs, REO's and foreclosures (or any other good deals) in the Knoxville area. My plan is to fix and flip as quick as possible. Financing is already in place and is not an issue. Just within the last week, I have looked at about 100 properties with no real luck.
My questions are:
1. I'm hearing that Knoxville is an extremely competitive area for a flipper. Is this true about Knoxville? Is this true about most places?
2. The formula that I have seen many times for buying investment property is ARV (after repair value) x 70% - repair costs = max bid. Is this truly the formula for success? What would be the highest % that an investor could go up to, i.e. 75%, 80%?
3. Any suggestions on what I should focus on, or not focus on?
4. Should I get my license again? Is there a significant benefit to having a license and flipping even though I wouldn't be a normal everyday agent?
That's all for now, but I'm sure I'll come up with more questions soon.
Any guidance would be appreciated. Thanks in advance for your help!
Flipster (wannabe, for now)
If you want to make money you need to stick to that formula. If you are buying the house as your own residence you could pay more. I will take that formula up to 75% IF and only IF I am paying cash and will not have any financing cost. In that case my financing cost is my loss of earnings on the cash while it is tied up. I am in the process of buying my next property, I am paying cash but still wound up getting the house for about 65% of ARV. The deals are there, you just have to look. If you are looking on the MLS you will have to look at hundreds to find one. The fact that you looked at 100 and found nothing suggests to me that you are looking on the MLS. Are you?
Yes, primarily I have been looking at the MLS. I have also been scouring the internet for foreclosures and REO's. What would you suggest?
Join a local real estate investing club. Let people know what you are looking for, find local wholesalers and bird dogs. Look for ads that say “I buy houses” and call them. Those are usually people looking to wholesale houses by buying them cheap and assigning the contracts to investors. There is a ton of information on this site, read it all.
Let me start by saying that I don't have ANY experience with REI clubs. I looked up the local club (there's only one) in Knoxville and it only has about 15 members. How valuable of a resource could this be with so few members (real question, not being a smartass)? Thanks for any and all input!
The only way to find out if the club is any good is to go check it out. A small club could be better if the members are good. What do you have to lose by going?
Any other advice?
Keep in mind that the price you see listed is what they would like to get out of the house, not what you feel its worth. I looked at one 4 months ago. The home owner needed to dumped it quick due to relocating and it was listed since 07/06. The house was completely finished and would have made a perfect rental. The market in his area certainly didn't support their asking price. He paid 22k for it 7 years ago and dumped a lot of money into it and was simply trying to recoup. I told my agent that the offer was going to be embarassly low. I offered based on comps of the area, which was 24K. The guy was oftened, even after my agent explained why the offer was so low. He came back with his orginal price of 34,9K. Due to the area, the best rent I could have gotten out of the house was $450 a month, which there would have been no cash flow. The house is still sitting on the market. Don't be afraid to offer what you feel the property is worth. Just do your home work by basing your price off real facts, not gut instinct.
That brings up another question. Do most agents have a problem submitting low offers? So far, that's what it seems like. An agent told my partner a couple of days ago that our offer was to low and that she would not submit it. Is this even legal?
I think most agents are more worried about their image than their pocket book. If your agent told you that, I would definitely find a new agent. Agents do have a duty of lawful obedience to their client, but I don't think its worth the fight. I would focus on finding an agent that understands investors.