first flip property

10 Replies

Hello,

I'm considering buying a property to flip in an affluent neighborhood. This is a bank owned foreclosure. I'm a little nervous about it being a previous foreclosure. Would that affect the price I could get. It needs a significant amount of work - some flooring, new kitchen cabinets, possibly expanding a half bath to a full bath - to fetch a good price. Its listed for 200K. So if, I put in 50-70K, it would be nice to be able to sell it for 350K.

Neighboring comps are in the range of 350 - 400K. One home that was not updated were sold last year for 250K too.

Appreciate any input you might have.

Thanks.

Rose Bush.

Sounds like a slam dunk. Don't hesitate. IF those are the numbers.

I would wonder why it is still on the market if those are the numbers.

@Rose Bush

70% rule would state that purchase price based on your renovation #'s would be $175k - $195k if you sold it for $350k. If you were able to sell it for $400k then the purchase price would be between $210k and $230k again based on your renovation #'s. 

If you have interest in the property you can always put it under contract with a contingency for an inspection. During that inspection period have contractors come out to the home and give you estimates for the the work you plan on doing. Make sure you get qualified contractors and at least 3 - 4 bids. 

The #'s provided from the contractors will help you understand the budget. The next thing you want to do is talk to a Realtor or an appraiser to give you comps of properties that are fixed up in the area. You most likely want comps to be similar size and amenities within 0.25 miles of the property that sold within the last 6 - 12 months. See what types of finishes they have and make sure your budget is similar or better than what those houses have. 

Note: If the appraisal / comp is $350k and the budget is $45k then you've got a good deal. If the appraisal / comp is $400k and the budget is $80k then again you've got a good deal.

Thanks guys, I will double check my numbers and get estimates. Appreciate your input. I'll let you know how it goes.

there are no inspection times for a foreclosure.   The house is probably sold.  

@Arlan Potter  

What are you basing your response "there a no inspections times for a foreclosure" on? I have been witness to multiple successful offers on foreclosures that are contingent on the following:

- Sale of existing house
- Home inspection
- Professional appraisals

every foreclosure I have purchased were as is where is. Take it or leave it. Cash deals.

Maybe I am not understanding the issue but I doubt any bank owned property will sell with any contingent contracts. 

That is why the prices are slashed.  As/is deals. Most if not all foreclosures I see are pretty distressed so appraisals are not necessary, of no value. 

It may be take it or leave it, but usually there is a period to get the home inspected to see if you want to take it leave. 

Originally posted by @Barry Cohen:

It may be take it or leave it, but usually there is a period to get the home inspected to see if you want to take it leave. 

That is possible.

But here is what I see in the foreclosure market. The houses are out there at a deep discount. The reason for the discount is that they are usually very distressed, and the banks are wanting to unload them. They have discounted them for the investors to buy them knowing that they need a lot of repairs.

In my cases, I would not even make the offer unless I had a pretty good idea what the house was going to need done to get it ready for rent or to sell. What good is an inspection to tell me what I already should know.

I make offers - Low ball - cash - quick close - no contingencies. The best way to get the offer accepted. 

That said, I guess there may be buyers out there that don't know what they are getting into and need some help. I would suggest that they get that before they make an offer. I also think that after one or two deals, most investors figure it out. They get educated.

The neighborhood has a lot of inventory. Homes have been sitting on the market for over a year, so that makes me a little apprehensive about this one. The people who owned the house before tried to do a remodel and tore down a lot fo walls on the first floor. So yes, it needs a lot of work. Needs a new kitchen and anotehr bathroom.

But the amount of unsold inventory in the neighborhood makes me nervous. I had to go back to 2013 to look at comps in the area.

Would like to hear some thoughts. Appreciate all your input.  

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