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

318 Replies

Originally posted by @Scott Scheel :

@JScott, I just purchased your book and am looking forward to diving in. The struggle that I have is finding a partner to JV with for a fix & flip...

Spend time at your local Real Estate Investor Association meetings and network!!!

Originally posted by @Jeremy England :

Hi Jay, I have both of your books from previous versions and listened to the podcast last week.  

What would you say the optimum ARV is for the projects you do in your market. When I was looking to flip a house here some months back, I was having a very hard time finding something I think I could turn a worthwhile profit on. I set a target profit minimum at 15k. I found financing costs were eating up alot of the profits.

The optimal ARV is typically right around the median sale price in your area. If you live in an area where the median home price is $200,000, then you probably want to flip houses with an ARV around $200,000. If you live in an area where the median home price is $500,000, then you probably want to flip houses with an ARV around $500,000.

Originally posted by @Kate B. :

@JScott, I am working on a long term retirement plan in my RE goals.   One part I am looking at is flipping one house a year, netting $14,000 in broker commissions and about $18,000 in profits after all expenses, for retirement.   I thought I'd do this eight times.   All of the net would be invested in equity and bond funds.   I'd recycle the original about $200,000 cash each time and have that left at the end.   One a year.  I don't intend to take a year each time, just being conservative about the facts, and it's easier to put into a calculator. 

The $200,000 seed money is from property sales.

Any thoughts?

Kate

Seems like a perfectly reasonable plan if that will achieve your goals.  Just remember that you'll be paying taxes on that $32,000 per year in income, so you're going to net less than what your plans indicates.  As long as you've already thought about that -- and as long as this plan meets your goals -- it certainly seems doable to flip a property a year for 8 years.


@J Scott

Thanks taking the time to write to my post. I've considered these issues with out trying to overanalyze a few situations. I've taken a look at quite a few places in my area's market and it's been a tough call so far. Prices have dropped on the foreclosures (SF and MF) but they need that TLC big time. I have a couple buddies that are contractors and professionals in the various subcategories. They don't have a ton of cash but they offer knowledge and expertise. They also want some equity in real estate. Have you seen partnerships work on some projects for an equity play?

Originally posted by @Nicholas Leimbach :

@J Scott

Thanks taking the time to write to my post. I've considered these issues with out trying to overanalyze a few situations. I've taken a look at quite a few places in my area's market and it's been a tough call so far. Prices have dropped on the foreclosures (SF and MF) but they need that TLC big time. I have a couple buddies that are contractors and professionals in the various subcategories. They don't have a ton of cash but they offer knowledge and expertise. They also want some equity in real estate. Have you seen partnerships work on some projects for an equity play?

Sure, equity partnerships can definitely work, but you have to be going into them for the right reasons.  Typically, I don't recommend partnerships with contractors unless the contractors are bringing more to the table than just the contracting work.  Why give away a piece of the project to someone when you can simply hire them (or someone else) to do the work instead.  Remember, when you give equity, you also give control, and that's more important than money (in my opinion).

Imagine a situation where your contractor is your partner and the contracting work isn't going well.  Can you fire him?  Even if the answer is yes, now you're paying another contractor and giving this contractor equity -- that's an expensive situation.  And if you think it's uncommon to have to fire a contractor, just wait until you have a couple projects under your belt -- you'll realize that it (should) happen more than you'd think.

Anyway, start by reading this:

https://www.biggerpockets.com/renewsblog/questions...

Originally posted by @Jy Kasnett :

Hi,

Im in Pikesville pretty close to Ellicott city, and I came across raw land near Fort Washington. Was curious if you are famiiar with that type of RE, thanks!!

Hey Jy -

I actually grew up in that area (I went to Pikesville High School)...

Yes, I'm familiar with developing raw land, though I'm not familiar with the Ft. Washington area.  My general thoughts on developing is that now isn't the optimal time.  We are nearing the peak of this economic cycle, and development tends to be one of the first aspects of RE to slow down during a downturn.  So, it could be a decent deal, but that doesn't mean it will still be profitable in 6, 12 or 24 months when you're done developing and ready to sell.

If you buy land now, ask yourself what you'd do if the market crashed tomorrow.  Could you hold that land for the next 5 years?  If so, maybe consider it if the price were great.  But, more times than not, I'd pass on land right now (unless I were flipping it or holding it long-term).

Originally posted by @Jill Thomas :

I really enjoyed the podcast! Wondered if you could recommend a book on marketing?

Hey Jill -

There are lot of different types/aspects of marketing.  Are you interested in marketing houses?  A business?  Yourself?

What's the goal?  If I know that, I'm happy to recommend based on what I've read...

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The neighbor has a dog in chain outside the property that bark at any visitor. Is this an issue when I try to flip or rent out the property? Also my friend live nearby said the property is in a drug dealer territory. Should i pass on this property?

Originally posted by @John Lee :

The neighbor has a dog in chain outside the property that bark at any visitor. Is this an issue when I try to flip or rent out the property? Also my friend live nearby said the property is in a drug dealer territory. Should i pass on this property?

I talk about this situation a lot.  We once had a property that we purchased, after looking at it on a Sunday afternoon.  Everything was great, until we closed on the property and started renovations on a Tuesday morning.  The neighbors two pit bulls ran to the fence on the side of the house and barked literally all day long.

Long story short, it turned out that the neighbors left their dogs outside all day, every day...except Sunday.  We didn't realize it because we only saw the house on Sunday before buying it.  Took us a long time to sell it, and for a lot less than we expected.

This type of thing can cause a lot of issues. Make sure you factor this into your ARV (it will be considerably lower) and don't move forward unless you have a plan for mitigating the issue (or are happy selling far below market value).

@J Scott hey, first I’d like to start by saying thanks for answering questions from everyone here. What I’d like to ask is advice for me, since every situation is different so I’ll start by talking about my situation. First off, I’m 26 (27 in March), own 1 rental property renting for 1,050 and it costed 75,050. I put about 15k into it not expecting I’d be putting in that much but I’ve had some lessons learned there. The home next door was sold for 75,000 just recently and mine has an attached garage (theirs in the back), 1 more half bathroom, more lot space, chimney, and about 200 more sqft. Houses in the area usually go for 80,000 if they’re as neat on the inside otherwise than they’re obviously cheaper so I’m guessing my house is currently worth between 80,000-85,000 but I’m not expert in appraisals or anything. Anyway, the home was purchased all cash, and I have to repay family back a total of 50,000 by May 2020. I’ll be paying half of it this May. Since I’m living at my parents, I’m able to save quickly but I do plan on buying a duplex right before marriage sometime in 2021 if all goes as planned haha. I earn 80,000/year at the moment as a software developer but salary increases annually like 3%. I pay 300 for living at home so I save up most of my money. Anyway, I want to retire by 45 latest (preferably 42). So my questions are:

1. Would you recommend getting an FHA if I qualify for the duplex or get a conventional loan if I can afford both?

2. After the duplex I'll have to restock in cash and wait. I'd want a quadplex next so the down payment will need to be higher. What do you suggest I do with the home I have paid in cash (heloc, refinance), or should I leave it as is. I personally wouldn't want a heloc because they're variable rate loans and if I mess up my next deal and I can't pay back by not being able to refinance (by doing BRRRR), then I'm screwed so I'd like to play it a little safer since I'm not very experienced in the rehabbing area. If I refinance, I wouldn't want to affect my cash flow where I have none. 200 is reasonable since it's a single family home.

Anyways, this seems too specific but I just want to see what my options are to line up to meet my goals. Thanks!

Loved your last podcast! We are looking to purchase a burned home that was previously a rental from one of our investor friends. They just don't have the capital or time to put into it and they are selling it to us for $20k. ARV is probably $120k on the conservative end. We are looking to flip instead of buy and hold so we can get some more cash for other deals. Have you ever worked on burned homes or have any advice? New territory for us, we flipped our first home last year.

Hey! I am a retired Veteran who is wanting to buy a multi family house and live in one unit while renting out the others. Jacksonville, FL is my home but I am having difficulties in finding the right one. They are either too old or just in the wrong neighborhood. I was thinking around universities or colleges. Do you have any advice for me? Thanks! Ashland

Hello! I am 17 year years young. I'm planning on purchasing a foreclosure, short sale, or a tax deed auction single family property within 2 years. Then I'll renovate it & sell it for more (flip the home). Personally I've been using excellent educational sources like BiggerPockets as a way to learn everything there is to know about real estate investing & being an agent. 

I'm looking at anything under the 300k price tag due to wanting to learn more about the process of flipping a home. I believe that education through experience is more valuable then major profits as I start out.

GOOD HOUSE FLIP OPPORTUNITY?

Link: https://www.zillow.com/homedetails/8336-Golden-Val...

Location: Maple falls

States it will be auctioned. But, the price estimate on zillow is around $220k

On other websites like redfin, it states the house has been listed for well over $385k

Neighboring homes have sold for $285k and over

If I got my hands on this property for say, 200k. Renovated it for 30k tops. And listed it for $295k. Do you think a situation like that could turn out positive for me, as an investment?

Thank you for your time. Please keep in mind that I'm not an expert, but working towards it!

Originally posted by @Sergio Aguinaga :

@J Scott hey, first I’d like to start by saying thanks for answering questions from everyone here. What I’d like to ask is advice for me, since every situation is different so I’ll start by talking about my situation. First off, I’m 26 (27 in March), own 1 rental property renting for 1,050 and it costed 75,050. I put about 15k into it not expecting I’d be putting in that much but I’ve had some lessons learned there. The home next door was sold for 75,000 just recently and mine has an attached garage (theirs in the back), 1 more half bathroom, more lot space, chimney, and about 200 more sqft. Houses in the area usually go for 80,000 if they’re as neat on the inside otherwise than they’re obviously cheaper so I’m guessing my house is currently worth between 80,000-85,000 but I’m not expert in appraisals or anything. Anyway, the home was purchased all cash, and I have to repay family back a total of 50,000 by May 2020. I’ll be paying half of it this May. Since I’m living at my parents, I’m able to save quickly but I do plan on buying a duplex right before marriage sometime in 2021 if all goes as planned haha. I earn 80,000/year at the moment as a software developer but salary increases annually like 3%. I pay 300 for living at home so I save up most of my money. Anyway, I want to retire by 45 latest (preferably 42). So my questions are:

1. Would you recommend getting an FHA if I qualify for the duplex or get a conventional loan if I can afford both?

2. After the duplex I'll have to restock in cash and wait. I'd want a quadplex next so the down payment will need to be higher. What do you suggest I do with the home I have paid in cash (heloc, refinance), or should I leave it as is. I personally wouldn't want a heloc because they're variable rate loans and if I mess up my next deal and I can't pay back by not being able to refinance (by doing BRRRR), then I'm screwed so I'd like to play it a little safer since I'm not very experienced in the rehabbing area. If I refinance, I wouldn't want to affect my cash flow where I have none. 200 is reasonable since it's a single family home.

Anyways, this seems too specific but I just want to see what my options are to line up to meet my goals. Thanks!

Hey Sergio,


Because this is a very specific question and I don't have all the details, I'm not sure I can really provide good answers.

That said, as for #1, whether you go FHA or conventional really shouldn't matter. Talk to a good mortgage broker and he can help point you to the right loan product.

Originally posted by @Nicole Greene :

Loved your last podcast! We are looking to purchase a burned home that was previously a rental from one of our investor friends. They just don't have the capital or time to put into it and they are selling it to us for $20k. ARV is probably $120k on the conservative end. We are looking to flip instead of buy and hold so we can get some more cash for other deals. Have you ever worked on burned homes or have any advice? New territory for us, we flipped our first home last year.

Hey Nicole,

I would recommend two things:

1.  Get a good GC who has experience with fire-damaged homes to come take a look and give you an idea of how bad the damage it.  With fire damage, it can be difficult for an untrained eye (and I'm in that category!) to determine the extent of damage.  For example, even if there is only smoke damage, structural components may need to be replaced.  A good GC with experience in these types of flips can give you an idea of how extensive the damage and repairs are.

2.  Get the local inspector(s) in there to assess the damage and let them tell you what would need to be done to pass city/county inspections and get your CO at the end of the project.  Ultimately, they have the authority over whether you can get your CO, so even if you have a good GC and engineer come in, the local inspector needs to buy into the plan.  He may require you to get a structural engineer into the project (or maybe not), but he should at least be able to tell you what you need to do to eventually pass a CO inspection.

Originally posted by @Ashland Bishop :

Hey! I am a retired Veteran who is wanting to buy a multi family house and live in one unit while renting out the others. Jacksonville, FL is my home but I am having difficulties in finding the right one. They are either too old or just in the wrong neighborhood. I was thinking around universities or colleges. Do you have any advice for me? Thanks! Ashland

Hey Ashland -

Finding good deal is HARD!  Unfortunately, the best advice I can give is to keep working at it and don't give up.  Focus on off-market deals -- either deals you're soliciting yourself (direct mail, door knocking, bandit signs, advertising, etc.) or through wholesalers (who will be marking up the deals).

If you have neighborhoods that you're specifically interested in, perhaps consider a direct mail campaign to all the houses in those neighborhoods basically saying what you said above, "I'm interested in purchasing a house in your neighborhood to live in; if you're interested in potentially selling, call me!"

We've found houses in specific neighborhoods by doing this in the past...

Good luck!!!

Originally posted by @Stanislav Kupcha :

Hello! I am 17 year years young. I'm planning on purchasing a foreclosure, short sale, or a tax deed auction single family property within 2 years. Then I'll renovate it & sell it for more (flip the home). Personally I've been using excellent educational sources like BiggerPockets as a way to learn everything there is to know about real estate investing & being an agent. 

I'm looking at anything under the 300k price tag due to wanting to learn more about the process of flipping a home. I believe that education through experience is more valuable then major profits as I start out.

GOOD HOUSE FLIP OPPORTUNITY?

Link: https://www.zillow.com/homedetails/8336-Golden-Val...

Location: Maple falls

States it will be auctioned. But, the price estimate on zillow is around $220k

On other websites like redfin, it states the house has been listed for well over $385k

Neighboring homes have sold for $285k and over

If I got my hands on this property for say, 200k. Renovated it for 30k tops. And listed it for $295k. Do you think a situation like that could turn out positive for me, as an investment?

Thank you for your time. Please keep in mind that I'm not an expert, but working towards it!

Hey Stanislav,

Pick up a copy of The Book on Flipping Houses or check out my previous posts on this forum on how to analyze flip deals.

Ultimately, there are 5 important pieces of information:

1.  The Purchase Price

2. The ARV

3.  The Estimated Rehab Cost

4.  Your Fixed Costs

5.  Your Desired Profit

You need to know 4 of those pieces of information -- and then you can determine the 5th.

If you're considering the deal above, which 4 pieces of information do you know? For example, if you know the ARV, Rehab Cost, Fixed Costs and your Desired Profit, I can tell you how much you can pay. If you know the Purchase Price, the ARV, the Rehab Costs and your Fixed Costs, I can tell you how much profit/equity you'll have.

But, you need at least 4 pieces of info before you can determine if you have a deal on your hands.

Originally posted by @Paul Strauss :

Best real estate investor's club in the country? 

I haven't been to enough to say what the best are.  But, I've noticed that those that DON'T have national speakers, that tend to be centered around BP members and that don't have fancy websites and expensive annual memberships tend to be the clubs that offer the most value.  They aren't geared towards selling or making their owners rich -- they are geared towards breaking even on costs and providing tremendous value.

If you're in the Baltimore area, I can definitely recommend a few.  And I've seen (and spoken at) several great ones around the country.  But, I'm hesitant to throw out any names publicly, as these things can change, and I this post may be here long after a club has gone downhill.

Originally posted by @Eric Shackelford :

@J Scott

Where can I buy your book

They are available either here on BP or on Amazon.  I would recommend buying them here on this site, simply because if you buy here, you get a bunch of bonus materials with them!  Here's a link:

www.biggerpockets.com/flippingbooks

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