J Scott - Author of Flipping/Estimating Book - Ask Me Anything!

318 Replies

Originally posted by @Stephen Masek :

Do you use any project management software (not just PERT and GANTT charts, but critical path analysis and so forth)?     

I've tried several pieces of software (I worked for Microsoft for a long time, so I love software and tools), but I was never able to find anything that provided what I needed without a lot of extra overhead.  So, these days, I pretty much stick with custom spreadsheets -- they are somewhat convoluted (I love pivot tables :), so it's not something that everyone could use...but it works well for me.

I’ve read your books and various posts, what advice do you have for beginners who do not have the cash, family/friends to invest and the minimum credit score that some lenders are looking for? 

My partner and I are just starting and agree that if we could find lenders that gives beginning investors an opportunity to get started and we can get either pre-approved or approved based on the deals we find, then we can really get rolling. 

We both know that one of our things is that we like to have everything in order and in place before we do the next step, yet I am starting to see where it can make sense to step out and just do, whether a flip/rehab....

Is there any advice you can give to us? My partner is going to RE school this month and I will be later in the year. We want to rehab/hold and eventually progress to apartment buildings and commercial properties  

Originally posted by @LaToya R. Warren :

I’ve read your books and various posts, what advice do you have for beginners who do not have the cash, family/friends to invest and the minimum credit score that some lenders are looking for? 

My partner and I are just starting and agree that if we could find lenders that gives beginning investors an opportunity to get started and we can get either pre-approved or approved based on the deals we find, then we can really get rolling. 

We both know that one of our things is that we like to have everything in order and in place before we do the next step, yet I am starting to see where it can make sense to step out and just do, whether a flip/rehab....

Is there any advice you can give to us? My partner is going to RE school this month and I will be later in the year. We want to rehab/hold and eventually progress to apartment buildings and commercial properties  

If you don't have access to funds yourself, the next best option is to partner with someone who does.  The good news is that there a lot of investors out there today who have lots of cash but don't have enough deals.  If you can find a great deal, there are plenty of investors out there who will either:

1. Buy that deal from you (wholesale) to help you build your cash reserves; or

2. Partner with you -- you bring the deal and sweat equity, the investor brings the cash and experience, and you split the profits in some fashion.

Don't give up...  Find some investors who are looking for deals and bring them a great deal!

Originally posted by @J Scott :
Originally posted by @Sunshine Chow:

@J Scott, I am preparing to start a direct mail marketing campaign to find properties to flip and BRRR in SoCal. I've created different demographic segments that I'd like to market to. Can you provide a little insight as to how you would tailor the message in a direct mail campaign to each demographic segment and how you usually segment or bucket each group? For example, I have a group for pre-foreclosures, absentee owners over a certain age with a certain amount of equity, absentee owners who have owned property for a period of time, etc.. etc... I would not want to send each group the same marketing message, but I'm also not sure what the best way to tailor the message to each group is. The market here is also very competitive so I want to make sure that my letters will stand out from other investors'. Any insight you can offer would be helpful

I haven't done a major direct mail campaign in about 4 years, and a lot has changed over the past few years with respect to what's working and what's not.  So, I'm not comfortable giving specific recommendations.

That said, funny enough, I literally just got off the phone with my friend @Justin Silverio, who runs Open Letter Marketing, about 20 minutes ago, getting his thoughts on a new campaign I'm getting ready to start.

Based on my discussion with Justin, it's pretty clear to me that if you want the most up-to-date and comprehensive information, the best people to talk to about direct mail are the ones who run the direct mail companies.  Across all the campaigns they manage and all the A/B testing they do on each campaign, they are really dialed-into what's working and not working at this moment.  

Anyway, that's my recommendation.  I'm sure there are plenty of other great direct mail companies out there, but I'd recommend reaching out to Justin and his team at openlettermarketing.com if you have questions.  And no, I don't mean for that to sound like a commercial and I don't get compensated for that recommendation...he just really knows his stuff (and if you've followed me, you know I don't throw out recommendations very often)... 

Thanks J. 

I'd be happy to answer anyone's questions about direct mail or marketing in general. Feel free to shoot me a DM or start a new thread and tag me so we don't alter the subject of this thread. As always, there are NO strings attached to my advice; I'm just happy to provide some insight based on my experience.  :)

First, we have learned so much from your two books and we cannot thank you enough for them! Also, thank you for being willing to take all these questions and help us gain knowledge in the REI field. I am fairly new to the fix and flip world and would like to run a few numbers with you for a second opinion. We have found a large 4/2.5/2975 sq. ft. home with a private dock onto a lake in Florida. Asked $299,000 but are down to $260,000. Although the house is in good shape, we would like to upgrade throughout so that it commands a much higher selling price. No repairs require permits (roof good, 2 new a/c units, alarm system already in, new vinyl hurricane proof windows in), and to totally upgrade we estimate approximately $56,000 all in for rehab. We have a contractor on the ground who has walked through and gave up his numbers. Non-owner occupied loan rates verses cash buy, holding costs during the 6-8 week rehab process, then selling time, we are no longer sure it is a good purchase. What would you be asking yourself? How much would you pay for a project like this? Your help would be invaluable to us.

@J Scott

I'm beginner in rehabbing and flipping.

I'm reading your book "The book on flipping houses" and loving it.

Thank you so much for putting everything together and in sequential way.

My next read would be your next book related to estimating rehab cost.

Originally posted by @Elizabeth A Shatzkin :

First, we have learned so much from your two books and we cannot thank you enough for them! Also, thank you for being willing to take all these questions and help us gain knowledge in the REI field. I am fairly new to the fix and flip world and would like to run a few numbers with you for a second opinion. We have found a large 4/2.5/2975 sq. ft. home with a private dock onto a lake in Florida. Asked $299,000 but are down to $260,000. Although the house is in good shape, we would like to upgrade throughout so that it commands a much higher selling price. No repairs require permits (roof good, 2 new a/c units, alarm system already in, new vinyl hurricane proof windows in), and to totally upgrade we estimate approximately $56,000 all in for rehab. We have a contractor on the ground who has walked through and gave up his numbers. Non-owner occupied loan rates verses cash buy, holding costs during the 6-8 week rehab process, then selling time, we are no longer sure it is a good purchase. What would you be asking yourself? How much would you pay for a project like this? Your help would be invaluable to us.

How much would the property resell for?

How much profit do you want to make?

What type of financing will you use?

Hi Scott,

My husband and I would like to do our first flipping in the Phoenix - Scottsdale area.

We are extremely new to this business so here is what we would like to start with :

Buying with our own money a condo/small house of about $100.000, remodeling it, and sell it after 3 month more or less, or after whatever time will take to rehab the house.

My husband is form Uruguay (South America) and his family own lands an real estate property down there and he used to manage those, meaning that he’s extremely and exquisitely handy so I’m premature sure he can do the work himself with a few people helping.

The main goal of this operation would be get some experience in this business, without big risks, even if we won’t gain a lot of money it doesn’t really matter but not loosing obviously !

From the highness of your experience, what are the very first steps that we should follow to approach this operation ?

Thank you very much for your opinion,

Carolina

Very few comps to go from.  One house two doors down, 1100 sq. ft. smaller, one less bedroom, but with a pool, sold for $326,000.  Another house is for sale, same footprint, and they are asking $436,000.  

Three realtors have told the wholesaler that it would sell for around $415,000.  No hard data to work from and I am opposed to buying on a gut feeling being so new.  We would like to make at least $50,000 as it is a more expensive project, but that may be unreasonable for this flip.  

We have an investor who can bring cash to the table, but we will have to finance a portion of it.  I believe the investor will go to $200,000 and the rest will be from our  pockets.

Originally posted by @Carolina Brembilla :

Hi Scott,

My husband and I would like to do our first flipping in the Phoenix - Scottsdale area.

We are extremely new to this business so here is what we would like to start with :

Buying with our own money a condo/small house of about $100.000, remodeling it, and sell it after 3 month more or less, or after whatever time will take to rehab the house.

My husband is form Uruguay (South America) and his family own lands an real estate property down there and he used to manage those, meaning that he’s extremely and exquisitely handy so I’m premature sure he can do the work himself with a few people helping.

The main goal of this operation would be get some experience in this business, without big risks, even if we won’t gain a lot of money it doesn’t really matter but not loosing obviously !

From the highness of your experience, what are the very first steps that we should follow to approach this operation ?

Thank you very much for your opinion,

Carolina

Hi Carolina... 

Unfortunately, it would take a book to answer that question. Luckily, there is just a book out there... :-)

Seriously though, I would recommend reading The Book on Flipping Houses. It provides a step-by-step guide to flipping your first house. The book is written with 20 chapters, each corresponding to the next step in the process.

www.biggerpockets.com/flippingbooks

@jscott, Have you or anyone on this thread ever used the services of a professional (company) to act as trustee in a land trusts. If so, which one(s) would you recommend? Also, what personal experiences could you share regarding this topic?

Originally posted by @Elizabeth A Shatzkin :

Seller dropped to $256,000 cash only bottom number.  Rehabber dropped to $50,000 from $60,000.  How does that change things?

Thanks again.

Elizabeth

The Flip Formula that I use to calculate maximum purchase price is:

Purchase Price = ARV - Rehab Costs - Fixed Costs - Desired Profit

I think you mentioned that your ARV is $415k, your rehab costs are $50K and your desired profit is $50K. And let's assume your fixed costs are 15% of the ARV, or about $60K.

Then, your maximum purchase price should be:

Purchase Price = $415K - $50K - $60K - $50K = $265K

Assuming those numbers are accurate, you should pay no more than $265K for the property.

Check out Chapter 8 of the flipping book for more details...

Originally posted by @Scott Scheel :

@jscott, Have you or anyone on this thread ever used the services of a professional (company) to act as trustee in a land trusts. If so, which one(s) would you recommend? Also, what personal experiences could you share regarding this topic?

I have not...sorry...

Hi @j scott and anyone else willing to lend advise.

First, let me apologize in advance, this is going to be a long post, but want to give as much details as needed to get good advise. 

J.Scott, I've read (listened to on Audible) your book The Book on Flipping houses and read The Book on Estimating rehab costs. I am about to re-listen to the book on flipping, I have learned so much my brain hurt, lol. Thanks for putting that out, it is a great tool for us newbies.  I also frequently visit your 123flip site. Thanks again for the wealth of knowledge you put out there for free!

We (husband and I) are new to investing and are contemplating our first "fix and flip". We currently own a 5/2/2200 Sqft SFR in the suburbs of Chicago (used to be our primary residence but has been rented for the last 6 years). We have to pay the mortgage balance (approximately $50K) off fairly quickly (1-2 months) the reason behind that is too long to get into here.

The house is in fairly decent condition so decided we will fix and flip it to command a higher sale price and to get the experience in doing a fix and flip. I am a part-time realtor so I can pull comps,I believe the AIV of the property is between $150-180K but ARV will be about $250K (conservative estimate likely more like $285K). I've had one GC guve me an estimate of $80K for rehab costs, waiting on another one, as I think that's a bit high. Calculated fixed costs to be about another $30K

We both have good W2 jobs but husband has a heavy dti due to our primary residence being in his name only and all of our other credit obligations. My debt is not that high but credit situation isn't good right now, therefore we need a 100% financing option.

Not many HML offer this option so we are considering going with Do Hard Money (I know there are mixed opinions about them) but we do not have any family or friends that we want to get involved in this at this stage. And I also don't want to split profit 50/50 with someone, so DHM is our best option, expensive but best option, in the end we expect be able to clear between $80-100K in profit, which we plan to leverage to obtain more rental properties, and pay down some debt. This will allow us to leverage more traditional lending options, as we have the income.

My question, should we go through with this option or take our chances and try to sell as-is and possibly end up with the same end result?

Originally posted by @Naema N. :

Hi @j scott and anyone else willing to lend advise.

First, let me apologize in advance, this is going to be a long post, but want to give as much details as needed to get good advise. 

J.Scott, I've read (listened to on Audible) your book The Book on Flipping houses and read The Book on Estimating rehab costs. I am about to re-listen to the book on flipping, I have learned so much my brain hurt, lol. Thanks for putting that out, it is a great tool for us newbies.  I also frequently visit your 123flip site. Thanks again for the wealth of knowledge you put out there for free!

We (husband and I) are new to investing and are contemplating our first "fix and flip". We currently own a 5/2/2200 Sqft SFR in the suburbs of Chicago (used to be our primary residence but has been rented for the last 6 years). We have to pay the mortgage balance (approximately $50K) off fairly quickly (1-2 months) the reason behind that is too long to get into here.

The house is in fairly decent condition so decided we will fix and flip it to command a higher sale price and to get the experience in doing a fix and flip. I am a part-time realtor so I can pull comps,I believe the AIV of the property is between $150-180K but ARV will be about $250K (conservative estimate likely more like $285K). I've had one GC guve me an estimate of $80K for rehab costs, waiting on another one, as I think that's a bit high. Calculated fixed costs to be about another $30K

We both have good W2 jobs but husband has a heavy dti due to our primary residence being in his name only and all of our other credit obligations. My debt is not that high but credit situation isn't good right now, therefore we need a 100% financing option.

Not many HML offer this option so we are considering going with Do Hard Money (I know there are mixed opinions about them) but we do not have any family or friends that we want to get involved in this at this stage. And I also don't want to split profit 50/50 with someone, so DHM is our best option, expensive but best option, in the end we expect be able to clear between $80-100K in profit, which we plan to leverage to obtain more rental properties, and pay down some debt. This will allow us to leverage more traditional lending options, as we have the income.

My question, should we go through with this option or take our chances and try to sell as-is and possibly end up with the same end result?

So, it sounds like if you rehab it, you'll generate $80-100K in profit.  If you sell it as-is, you'll generate about $60-80K in profit?  Is that correct?

While there is no absolutely right or wrong answer here, if those numbers I just posted are correct, I personally would try to sell as-is.  Sure, I'd lost about 20-25% of my profit, but in return I'd get:

- A faster sale

- Less effort in rehabbing

- Less risk in rehabbing

- Less headache having to find a loan

Now, another thing you can do is to list as-is, and then if you can't command the price you were looking for, do the rehab at that point.  That way, you give the quick-and-easy route a chance, and if doesn't work, you go with the higher-effort (and higher-profit) Plan B.

If you were to tell me that money wasn't an issue and you weren't in a time crunch to get out there, I might suggest a different option, but given the time and money situation, I'd recommend the quick and lower-stress route.

Originally posted by @Elizabeth A Shatzkin :

Terrific.  Thank you for your time and expertise.  I hope we can get that property in the next few days!

Before you finalize the deal, I would recommend:

- Verifying your ARV

- Verifying your Rehab Costs

- Calculate your Fixed Costs in more detail

And then sticking all those variables back into the Flip Formula and make sure your purchase price still works!

This is a great thread, thanks for doing it. 

My partner and I are currently in the process of buying our first real estate property as an investment. 

Many real estate podcasts and books that I have read state that a big regret that the real estate investor had was not investing fast enough/ taking too long to invest in their first property. That being said, your recent BP podcast + your new book has some warning signs on the economy and a potential recession around the corner. If you were a first time buyer (as an investment), would you wait until prices are cheaper or would you jump in now, when prices are potentially higher? 

Obviously one cannot time the market perfectly and you also have to make sure the numbers work for you, regardless of when you buy. But what is your advice for timing your first home purchase? Wait 3-6 months? Buy now? 

Thanks!

Updated 10 months ago

Note: I am talking about mainly buying and holding vs. flipping.

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