Are some markets just impossible to flip in? (70% Rule)

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Are some markets just impossible to flip in? (70% Rule)

Josh Anders
Hartselle, AL · Member since 2016 · 10 posts · 1 vote

Hello, first time poster long time lurker. My wife and I started getting interested in real estate in January. We started listening to the bigger pockets podcast and since Jan, I have listened to over 80 of the podcast trying to learn everything I can. We have studied our target market everyday pretty much since then. I have alerts setup to see every house posted in my market under 150k and I look at them every day. 

We have enough cash/credit to rehab and purchase most of the reasonably priced homes in our market. I am also a contractor so my main focus is fix and flip. That being said after 7 months of looking we have yet to find a property on the MLS that meets the 70% rule. Matter of fact a few weeks back I placed an offer in at 85% rule (doesn't exist I know) and they sold it to someone the next day for more. My offer was only around 8k less than asking. 

Overall most of the bank foreclosures here are listed at ARV or listed at ARV minus repairs and that leaves no room for profit but they are selling despite all of them needing lots of repairs. I don't plan on giving up anytime soon, but I honestly feel like I am wasting a lot of time and not getting anywhere. We have also spent months looking at courthouse auctions but most of them don't have enough equity. We ended up finding one house in the last 4 months with equity and went to the courthouse auction only to be bidding against 3 other investors. Needless to say they were willing to take more risk than I was.

Is my whole problem with finding deals is because I am using the MLS? Shouldn't I have at least found a few on there in 7 months? At this point I am open to all advice and tips you guys can give me.

Thanks and have a great day!

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John Patton
Investor · Birmingham, AL · Member since 2016 · 315 posts · 206 votes
10y

Welcome Josh. I know the feeling. Until this year, I had not bought a property in 2.5 years and boy was I surprised how proud they are of them now, so just keep looking. Try the HUD site and the Fannie Mae site along with all the banks sites like Regions etc. Check them twice a day for new & price change listings.

 Keep up with your strategy and make adjustments along the way but if the numbers don't work then don't do it. Be patient. There will be some deals come late fall and early winter. I strongly urge you attend and join the Alabama Investors ***. in Huntsville or Birmingham. Both are very good. I have been a member 11 years. If I can help let me know. Good luck JP.

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  • Simen Gundersen
    Investor · Oslo, Oslo · Member since 2016 · 86 posts · 17 votes
    10y

    Hi, i'm pretty new to investing myself so this is just my own look at it.
    (closed my first deal about a month ago)

    While I don't know the market in Hartselle, Alabama, I think you should try other means of marketing. Looks like the MLS is dried up and you're in a hot market, so why don't attend local meetups to connect with bird dogs, wholesalers, real estate agents and let them know you're looking for a deal and show you're a serious buyer. Tell everyone you meet you're looking for a property

    You should also consider looking into DM. When the "standard" ways of finding deals gets you nowhere, you gotta be creative. The deals are most likely out there, you just gotta find them

    Keep analyzing and looking and you will find one

    1Reply
  • Christian Sifuentes
    Flipper/Rehabber · Fair Lawn NJ · Member since 2016 · 382 posts · 87 votes
    10y

    I would recommend attending local meet ups if you haven't done so already and connect with wholesalers and agents and let them know your ready to purchase. The connections made at and REI meet up was helpful to me in finding my first property in MD to flip about a month ago. Good luck and keep pushing forward!

    1Reply
  • Michael Williams
    Investor · Palmetto, GA · Member since 2014 · 190 posts · 77 votes
    10y

    I guarantee if join your local REI club and say that you are a buyer that's ready to buy and give them your criteria, you will be bombarded with deals. The wholesalers and birddogs are there. My REIA has a session called "Haves and Wants" where wholesalers and buyers are encouraged to meet and do deals. They tell the wholesalers to bring deals to the meeting so they can evaluate them. Good Luck

    1Reply
  • John Patton
    Investor · Birmingham, AL · Member since 2016 · 315 posts · 206 votes
    10y

    Welcome Josh. I know the feeling. Until this year, I had not bought a property in 2.5 years and boy was I surprised how proud they are of them now, so just keep looking. Try the HUD site and the Fannie Mae site along with all the banks sites like Regions etc. Check them twice a day for new & price change listings.

     Keep up with your strategy and make adjustments along the way but if the numbers don't work then don't do it. Be patient. There will be some deals come late fall and early winter. I strongly urge you attend and join the Alabama Investors ***. in Huntsville or Birmingham. Both are very good. I have been a member 11 years. If I can help let me know. Good luck JP.

    3Reply
  • Anastasia Jordan
    Investor · Birmingham, AL · Member since 2016 · 446 posts · 305 votes
    10y

    Are you just looking only in Hartselle?

    0Reply
  • Josh Anders
    OP
    Hartselle, AL · Member since 2016 · 10 posts · 1 vote
    10y

    Thanks for all the tips! I will be looking into the meetings, we have discussed going in the past but never committed. I think we will check it out. We have also considered DM, actually I sent out my first two letters this week to absentee owners, just ones I found while driving for dollars. I may end up purchasing a list soon and starting to mail more. 

    0Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    10y

    It sounds like based on your description of the properties being priced at market costs minus repairs that the area is likely a very desirable area to live in. This will often not be the best area to flip in. Often times you need to look at areas that are less desirable. That is where there will be a bigger price spread of rehabbed vs nonrehabbed properties. Look to areas where incomes and property values are below the median price points for your metro or gsa area.

    [email protected]301-893-4635Podcast Guest on Show #192
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    1Reply
  • Josh Anders
    OP
    Hartselle, AL · Member since 2016 · 10 posts · 1 vote
    10y
    Originally posted by @Anastasia Jordan:

    Are you just looking only in Hartselle?

     We have been looking in Morgan county (Hartselle, Decatur, Falkville, Danville,Priceville is our main target areas). I was hoping if I was patient I could find a deal close to home. I figured that would be best for a first deal and make the whole process  alot easier to manage.

    0Reply
  • Adam Hays
    Huntsville, AL · Member since 2016 · 9 posts · 3 votes
    10y
    Hey Josh, I fee your pain. I'm in Huntsville, a mere 30 minutes from you, and I too am having a hard time finding good deal properties. I do have my eye on a couple right now, and will happily stay in touch with you if you'd like and let you know how they go :) a few other comments so far have mentioned an REI meet up group. I'm actually attending my first meet up next week (the 18th). I figured it was worth the shot to meet some local like minded people. Maybe you should/could join. At least then I won't be the only REI toddler there :) Link up with me and let's chat :)
    1Reply
  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    10y

    @Josh Anders The learning curve you are using to find deals is the same curve all new investors go through. Your problem is you are looking in the same places as everyone else. Just having MLS alerts set up and acting when a new listing hits the market is not enough if you're serious about flipping.

    I live in a area in Connecticut where rehab projects are competitive to acquire as well and here are some things that worked for us to land deals. Basically you need to zig while others zag. 

    • email the agents on expired listings to see if their clients are interested in selling and give them both ends of the commission as an incentive
    • Try flipping duplexes or triplexes instead of single families (typically less competition)
    • Target properties that have price drops soon after listing 
    • Target places with high DOM
    • Check in with landlords or realtors that have outdated single families or multi families for rent and inquire if the owner is interested in selling 
    • Most people will give up on a property if it's not easy to set up a showing for. Be the guy who is persistent and gets in the house and no one else does
    These are just some of the ways we have had success finding deals in a competitive market. Doing these will work because 99% of investors are to lazy and just think MLS alerts or checking Zillow is enough. Well in a competitive market, it isn't. And oh yeah, all of the things I mentioned are free ways to look for deals. 
    3Reply
  • Jason Arcuri
    Real Estate Agent · Southbury, CT · Member since 2013 · 160 posts · 98 votes
    10y

    @Michael Noto is absolutely correct.  I'm one of those lazy investors lol.  I do not have the time or care to go out of my way to look for a flip.   I'm also in Connecticut and since I'm lazy, I generally find putting offers on short sales that have been on a long time or homes that have mold have been the best way to find a house.  It seems like even investors don't want to mess with mold remediation.  I haven't had any luck finding good multi family flips.   Doesn't mean they don't exist just my personal experience.

    0Reply
  • Brice Hall
    New York City, NY · Member since 2013 · 110 posts · 15 votes
    10y
    Maybe another factor is that the real estate market is a bit frothy at the moment and we are in a sellers market.
    0Reply
  • Paul Kaflinski
    Real Estate Agent · Fairfield, CT · Member since 2015 · 17 posts · 10 votes
    10y

    If you like mold @Jason Arcuri you may want to look into 1091 Black Rock Tpke in Easton. I checked it out today, as I pulled up I see the entire roof tarped and as expected inside there is mold growing pretty much everywhere. It's listed under 300k and has the potential for up to 600k ARV but way too big of a project for me to attempt as my first flip.

    0Reply
  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    10y

    @Jason Arcuri Good point on the short sales. If you have the patience those can be a good way to find deals. I prefer to look for short sales in areas where it is worth the wait.

    I get real impatient in my personal investing with them when I look into ones in so-so at best neighborhoods and often find myself thinking "is this place really worth the wait and hoops I have to jump through"

    With clients of mine I tend to have a lot more patience with them and have had people I work with do very well on both multi family and single family short sales. 

    0Reply
  • Jason Arcuri
    Real Estate Agent · Southbury, CT · Member since 2013 · 160 posts · 98 votes
    10y

    @Paul Kaflinski Thanks for the tip.  I'll look into it but currently have 2 about to be 3 houses under contract and one up for sale.  All my cash is tied up in the hard money loans I have on each.  I haven't taken on any real big projects yet just small ones with finished basements that have mold. Currently going with easy and quick flips.  The high priced ones scare me because I always see them sit so much longer.  

    0Reply
  • Jay DeCima
    Redding, CA · Member since 2016 · 224 posts · 143 votes
    10y

    Josh

    After 40+ years and 200+ of my own rental homes in Northern California, and teaching on this subject for 30+ years here are some things I did and recommend:

    1.  I buy groups of older houses on a single parcel.  Maybe 5-12 small homes, duplexes, etc on a single lot.  It would have taken me lots of time if I bought my 200+ homes, one at a time. Because the banks won't finance them, 80-90% of my buys are with seller financing and average down of 10% (about the amount of cash you would put down on a single family home).

    2.  I do not recommend going out of state, especially IF YOU ARE A NEWBIE. You give up almost all your control.  I like to control all aspects of MY business.

    3. I like all kinds of real estate and have bought most kinds, like flips, wholesale, etc.  I bought different kinds at different times in my career.  But keep in mind that flipping and wholesaling are jobs. You are buying and marking up and reselling things like a retail store would.  You pay ordinary income taxes, get really no tax benefits, pay social security tax and have to start over again after you sell.

    4. I teach my students to EXPAND THEIR VISIONS FOR PROFITS.....like the following:

    One question that I’m asked constantly: “Where can we find the kind of properties you talk about?”

    The most common alibi I hear is, “There’s no property in my home town like the ones you write about.” With very few exceptions, I must disagree. The proper­ties are there! You simply haven’t found them yet. There are several different reasons why you haven’t, however, I’ve found most folks simply haven’t been looking for them.

    Most investors I know tend to do the traditional kind of prop­erty searching. If they decide to be apartment owners, they look mostly at tradition apartment buildings. Single house investors generally drive through the ‘burbs’ in search of prey. Hardly anyone is goofy enough to buy 5 house on one lot or an old motor lodge. I’m going to suggest that you broaden your vision a bit. After all, non-traditional properties can be lots more fun-as well as more profitable.

    First of all, don’t panic. My kind of properties are almost always avail­able; you just haven’t found them yet. Finding the right properties,meaning the kind that will produce monthly cash flow and long-term profits, is one of the most important skills you must develop to enjoy any success in this business.

    You must always keep in mind that finding profitable deals is our goal, not just finding lots of deals!

    Good luck.

    Fixer Jay DeCima

    2Reply
  • Sara Oubre
    Investor · Hartselle, AL · Member since 2012 · 5 posts · 0 votes
    10y

    Hi Josh,

    We've been investing in the Hartselle/Morgan County market for 6 years now. Flipping can be interesting in this area, but we've built a steady portfolio based on rentals/remodels. If you'd like to message me feel free!

    Sara Oubre

    0Reply
  • Anne Stickney
    Real Estate Investor · Duncanville, AL · Member since 2013 · 2 posts · 0 votes
    10y

    I'm thinking Sara's remodel/rent strategy might be what you need: we are definitely not a high population density area like California and Atlanta- so there are fewer houses to chose from. Also, people always mention, "buy a Duplex!". Here again, that doesn't apply so much here in Alabama, duplexes are a rarity.  It being semi rural bama- what about buying a trailer foreclosure, putting it on a piece of land, and selling it as a package?  Maybe a student rental in the university areas of Huntsville or Florence? They are only an hour from you, both areas. You may have to think more outside the box

    0Reply
  • Ryland Taniguchi
    San Francisco, CA · Member since 2015 · 786 posts · 717 votes
    10y

    In a seller's market, you are unlikely to find a lot of flips on the MLS at least in my area Seattle.

    Need to call every wholesaler every week. Consistently calling wholesalers is the best bang for the buck. I think there are development deals on the MLS.

    Also, I have driven and systematically documented very ugly home in the entire city of Seattle (took a couple of years with about 10 hours of week). So now I have a goldmine of a database for my marketing team and door knocking team to go after.

    Be the center of infleunce and contribute greatly to other investors. Run your own meet-up, REIA, self-directed IRA or real estate brokerage. I do all of the above minus running a REIA group and have my own radio show. Leads flow in constantly by being the center of influence.

    1Reply
  • Denise Evans
    JD, CCIM , Real Estate Broker · Tuscaloosa, AL · Member since 2014 · 1k+ posts · 1k+ votes
    10y

    Hi @Josh Anders. I know the Hartselle area, and I know Sara. She is a very solid and respectable and conservative investor. Connect with her. I think Hartselle will become more of a bedroom community for people who work in SE Huntsville, so there are some good growth opportunities.  You might want to look at entire mobile home communities to purchase. Maybe between Hartselle and Lacy's Springs.  People get fed up with the management headaches and just want the mailbox money. As a result, they are willing to sell and hold the financing.  Reach out to all of those owners. Today's mobile home community might be tomorrow's Target or Lowes.  Plus, cash-on-cash, mobile home communities provide the best returns. Also the most management headaches.  Reach out to me via private message if you want to talk more. Good luck!

    0Reply
  • Kevin Schulte
    MHP Investor · Green Valley, AZ · Member since 2013 · 85 posts · 26 votes
    10y

    "we have yet to find a property on the MLS that meets the 70% rule"

    I would say yes, just using the MLS is a no go (kudos on looking into REO's and hitting auctions though)

    I'f i'm not mistkane you can use listsource and target properties with lots of equity , so IMO a direct mail campaign would be the next step (or looking in different markets)

    0Reply
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