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

318 Replies

In the end, we passed on the deal . The rehab costs were about right as were the holding costs, but we could not truly see the ARV in comps as this area is just starting to get developed somewhat a few homes were asking in that range but only one had been sold, and it was not a great comp. Our best estimate took the maximum purchase price down to $240,000 and the seller was not willing to go that low. Also, looking further at the surrounding areas, we found this area to be more mixed than what we were comfortable with, meaning there were mobile homes mixed in with the houses, etc.

This is what makes buying out of state so difficult for us, as we are not really knowledgeable about the areas we are looking at.  We have data, research, trends, scavenging the pages looking at the homes, speaking to wholesalers, RE agents, etc., but not having been to the site makes it all feel so very risky.  Hard to get past the risk as a first timer.  We are analyst types over here and have to be careful not to have that 'analysis paralysis' or we will never get where we want to  be.  

If you have any suggestions for those of us who have never purchased out of town before, that would be tremendous.  We have purchased locally but the market is now out of bounds and we are looking elsewhere.

Thanks again.

Originally posted by @Elizabeth A Shatzkin :

In the end, we passed on the deal . The rehab costs were about right as were the holding costs, but we could not truly see the ARV in comps as this area is just starting to get developed somewhat a few homes were asking in that range but only one had been sold, and it was not a great comp. Our best estimate took the maximum purchase price down to $240,000 and the seller was not willing to go that low. Also, looking further at the surrounding areas, we found this area to be more mixed than what we were comfortable with, meaning there were mobile homes mixed in with the houses, etc.

This is what makes buying out of state so difficult for us, as we are not really knowledgeable about the areas we are looking at.  We have data, research, trends, scavenging the pages looking at the homes, speaking to wholesalers, RE agents, etc., but not having been to the site makes it all feel so very risky.  Hard to get past the risk as a first timer.  We are analyst types over here and have to be careful not to have that 'analysis paralysis' or we will never get where we want to  be.  

If you have any suggestions for those of us who have never purchased out of town before, that would be tremendous.  We have purchased locally but the market is now out of bounds and we are looking elsewhere.

Thanks again.

In general, I don't recommend purchasing out of town for your first couple deals.  It makes a difficult process even more so. 

If you're going to invest out of town, spend a couple weeks in the area where you plan to invest and get to know it.  Also, find a great real estate agent who can assist. 

Originally posted by @James Dean-Howell :

Does you book on estimating rehab costs have an audio book form?

Hey James,

The Book on Estimating Rehab Costs is not sold in the audio format, simply because it contains a LOT of tables, and these wouldn't read well in audio format.  We tried to figure out a way to make it work, but we decided that most people wouldn't be happy with that book in audio format, and we didn't want to put out anything that wouldn't be valuable.

@J Scott I got your books! They're very helpful!

I noticed it lists the labor for installing a new window to be $750-$1100 in the book on estimating rehab costs. I assume that must be a typo? Is it supposed to be $75-$110?

Originally posted by @Adam Moehn :

@J Scott I got your books! They're very helpful!

I noticed it lists the labor for installing a new window to be $750-$1100 in the book on estimating rehab costs. I assume that must be a typo? Is it supposed to be $75-$110?

Hey Adam!

Thanks for pointing this out...  Can you tell me which version of the estimating book you're looking at (PDF, Kindle or Paperback) and what page?

I'm not able to find the error in my copy, but you're correct that it should be $110...

Thanks again!

@J Scott

First off, your first edition of this book helped me navigate so much of the BS I normally faced when dealing with contractors in my neck of the woods.  I used it as a reference manual so that I could sound "smart like" to all the contractors we used, which in turn later helped me develop many of the processes we use today.

Second, who are you more excited to hang out with in April when you come out to Seattle to visit.  Me or @Dave Van Horn ?

Originally posted by @Adam Moehn :

It's in the paperback. Page 142. Here's a photo, with my written note of what I assumed it was supposed to say.

Thank you, Adam!

I'll make sure this is on my edit list for the next update...

Originally posted by @Tarl Yarber :

@J Scott

First off, your first edition of this book helped me navigate so much of the BS I normally faced when dealing with contractors in my neck of the woods.  I used it as a reference manual so that I could sound "smart like" to all the contractors we used, which in turn later helped me develop many of the processes we use today.

Second, who are you more excited to hang out with in April when you come out to Seattle to visit.  Me or @Dave Van Horn ?

Thanks Tarl!!!

And that's a tough question about you or Dave Van Horn.  Dave is a lot more handsome than you...but he doesn't like sushi.

Is there a third option???  ;-)

Thanks for all of your previous advice. One of your recurrent themes for all parts of the process is to personally be there at the site. We leave in Southern California. Home prices are too high for us out west here to acquire and rehab property. We do have enough liquidity to invest in markets quite far from us. Therefore, being at the site involves a high cost in terms of time and money. I am wondering if any of the following surrogates could replace my presence at the site.

  • Obtaining a BPO to determine value. They are cheap and fast.
  • Hiring an inspector to determine the extent of work that needs to be done. He knows what he is looking at better than I do anyway.
  • Relying on the lender's loan approval to validate my value estimate and their construction disbursement systems to control the completion of work by the contractor before disbursing funds.
Originally posted by @Elizabeth A Shatzkin :

Thanks for all of your previous advice. One of your recurrent themes for all parts of the process is to personally be there at the site. We leave in Southern California. Home prices are too high for us out west here to acquire and rehab property. We do have enough liquidity to invest in markets quite far from us. Therefore, being at the site involves a high cost in terms of time and money. I am wondering if any of the following surrogates could replace my presence at the site.

  • Obtaining a BPO to determine value. They are cheap and fast.
  • Hiring an inspector to determine the extent of work that needs to be done. He knows what he is looking at better than I do anyway.
  • Relying on the lender's loan approval to validate my value estimate and their construction disbursement systems to control the completion of work by the contractor before disbursing funds.

All three of those are a great way to help validate the deal and make sure you're not buying something that you shouldn't be buying.  But, they still miss two things:

1. They won't give you a complete picture of the house, the neighborhood, the local housing market, etc. For example, this won't tell you if the neighbor has a giant trash heap in his yard that would make it difficult to resell the property. If you want to cover this gap, this is where having a great real estate agent can be worthwhile. The agent can validate that it's a neighborhood where you should be buying, where you can resell for your target ARV, that there are no issues that would be hard to identify without being on site.

2.  The most important reason to be on site is to manage the contractors and ensure that the rehab is coming along as planned, on budget and at the level of quality you expect.  This can be mitigated by having a local project manager whose job it is to visit the site everyday (or close to every day) and who can stay on top of the contractors until the project is complete.  This can also be a real estate agent who is familiar with the renovation process, and might even be the same agent as you use for #1 above.

Long story short, if you can't be there personally, you need to ensure that there is someone who has a holistic view of the project on-the-ground and looking out for your best interests on an almost daily basis (and this shouldn't be the contractor).

Thank you for your offer. Again, we ask your help. We are just not getting the concept of so many people that suggest one can be overwhelmed with good deals while seated at one's own desk simply by launching effective marketing. Despite the varied information available online, if a property is located just a half mile, this way or that, an ARV estimate can be off by tens of thousands of dollars. As can the repair estimate be off by a like amount without physically inspecting the property. How do these guys do it from their desk without themselves losing 000's as an investor, or doing an injustice to one's clients as a wholesaler. We are trying to do business from out of state because our market is priced way too high for us. The going is arduous. Developing a team on the ground painstaking.

Originally posted by @Elizabeth A Shatzkin :

Thank you for your offer. Again, we ask your help. We are just not getting the concept of so many people that suggest one can be overwhelmed with good deals while seated at one's own desk simply by launching effective marketing. Despite the varied information available online, if a property is located just a half mile, this way or that, an ARV estimate can be off by tens of thousands of dollars. As can the repair estimate be off by a like amount without physically inspecting the property. How do these guys do it from their desk without themselves losing 000's as an investor, or doing an injustice to one's clients as a wholesaler. We are trying to do business from out of state because our market is priced way too high for us. The going is arduous. Developing a team on the ground painstaking.


In my opinion, you can't be effective as a flipper if you don't physically see the property (or have someone on your team do it) and don't know the area tremendously well (or hire someone who does).

If someone tells you otherwise, you should be skeptical.

 

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