A look at the south florida flip market/competition

9 Replies

I was looking at comps for a property and stumbled upon a flip.  Same neighborhood, same house.

The other house was bought for 145k, 1248sqft single story on slab 3/2 with carport.  Installed all new tile throughout, remodel 2 bathrooms and a kitchen completely (new tile, tub, shower, appliances, cabinets, counters, etc) and new Dade impact windows (I count 12) and impact doors (3) and a new central AC unit.

Sold for 208k.

Say they accepted 20% as their margin, that means they did 2 new bathrooms and a new kitchen (appliances/granite) and all new floors and all new trim and all new paint (interior/exterior) and all new windows and doors and a new central AC unit and clean up exterior and permits and demo for 21k.  After 6% min sales cost, profit would be 28k on 166k invested, 5 months from close to close (2 months was waiting for offer.)

Seem legit?  Someone tell me how to remodel a house for 21k.  Or are we taking 10% return on our money? Where are the lenders accepting those numbers?

If you're aiming for 75% of ARV, that means the remodel must cost 11k. Considering they BOUGHT it for 70% of ARV.

That's the competition.

Oh, and the house I was looking at, they want 165k. Before all of the same remodeling.

I think a ton of people are trying their hand at house flipping because they have seen TV shows on flipping. I've seen a number of flipped houses listed for sale that have sat, and sat, and sat without selling, and the owners are going to end up losing money. I'm starting to think the real money in RE may be in HML (for those who want to do it) to these people who think they are going to get rich quick like they have supposedly seen on TV.

@Stuart M. do you have any insight on the actual owner and their financials? Do you know who did the work (was it the buyer or did he hire a GC or subs)? Do you know if they used a realtor, or sold it themselves through a direct entry MLS service for $200-500 and offered 2-3% commission? Do you know the rehab cost $21,000? Did they get a loan (you mention lenders) or pay cash?

The reason I ask all these questions, is the fact that not everyone hires out every scope. Not everyone gets loans. Not everyone pays a realtor to sell. I personally could get a kitchen and two bathrooms completely redone for $11-12,000. Not sure what impact adds to cost, but I could do replacement windows, 12 for $3000 or less. Exterior doors, not impact, I could do 3 for under $1000. Central AC unit, if there is already ductwork and it is just the condenser, etc. I could see getting done for $5000 (maybe less). Painting can be done for the cost of materials by the HO, so maybe $1000. I am coming in around $21,000 using this quick and dirty math. I have done kitchens and baths cheaper than I describe above. I am also a cash buyer, no loan, no points, just basic Heat/AC, taxes and insurance holding costs ($1500 or so, assuming lower taxes down your way). I also have sold all of my houses for $449 MLS entry and 2.5% commission. In the deal you described above, my profit would/could be closer to $30k...

I do also agree that there are a LOT of new investors looking to flip (I would be considered one, only been at it a couple years). I have lost a LOT of houses to these guys. Whether they are making money or not, I am not sure. Part of me hopes they are, as I don't want anyone to lose their shirt. Part of me hopes it wasn't what they expected and they don't want to flip anymore, so there are more deals for me!

As another example my father and I flipped a house a few down from another guy flipping one. Very similar houses. He ended up making $3000 profit, we had a big miss with a bad septic ($12,000+ hit) and only cleared $25,000 profit. On paper I call that house a dud for me, maybe the other guy was happy making $3000... I was not happy splitting $25,000.

Originally posted by @Brian Pulaski :

@Stuart M. do you have any insight on the actual owner and their financials? Do you know who did the work (was it the buyer or did he hire a GC or subs)? Do you know if they used a realtor, or sold it themselves through a direct entry MLS service for $200-500 and offered 2-3% commission? Do you know the rehab cost $21,000? Did they get a loan (you mention lenders) or pay cash?

The reason I ask all these questions, is the fact that not everyone hires out every scope. Not everyone gets loans. Not everyone pays a realtor to sell. I personally could get a kitchen and two bathrooms completely redone for $11-12,000. Not sure what impact adds to cost, but I could do replacement windows, 12 for $3000 or less. Exterior doors, not impact, I could do 3 for under $1000. Central AC unit, if there is already ductwork and it is just the condenser, etc. I could see getting done for $5000 (maybe less). Painting can be done for the cost of materials by the HO, so maybe $1000. I am coming in around $21,000 using this quick and dirty math. I have done kitchens and baths cheaper than I describe above. I am also a cash buyer, no loan, no points, just basic Heat/AC, taxes and insurance holding costs ($1500 or so, assuming lower taxes down your way). I also have sold all of my houses for $449 MLS entry and 2.5% commission. In the deal you described above, my profit would/could be closer to $30k...

I do also agree that there are a LOT of new investors looking to flip (I would be considered one, only been at it a couple years). I have lost a LOT of houses to these guys. Whether they are making money or not, I am not sure. Part of me hopes they are, as I don't want anyone to lose their shirt. Part of me hopes it wasn't what they expected and they don't want to flip anymore, so there are more deals for me!

As another example my father and I flipped a house a few down from another guy flipping one. Very similar houses. He ended up making $3000 profit, we had a big miss with a bad septic ($12,000+ hit) and only cleared $25,000 profit. On paper I call that house a dud for me, maybe the other guy was happy making $3000... I was not happy splitting $25,000.

Thanks for the reply. My point was more on the margin end than getting into the nitty gritty. Do you purchase places for 70% ARV and expect to be into them for 83% ARV commonly? What is your limit? Will you go to 85% or 90% ARV all in?

It wasnt a homeowner flip, it was an LLC that does many, Im sure their own guys are doing all the work, but they arent getting the HO self paint discount and their guys are costing them 20/hr either way (cash/taxes) or theyre working for someone else. Im sure its cheapest materials and poor work allthe way around to cut costs but just adding up min hours + costs for goods, 21k seems unrealistic. The have a 2k+ countertop. 3.5k min AC. 3.5k+ windows, no labor. 1k cabinets. 1k doors, no labor. 1.5k appliances. 1.5k tile and thinset if no leveler, no labor. 1k dumpster. Say you have only 2 ninjas working 3 months. Thats 10k labor. (No contractor is doing ALL this for anywhere near that.) We are at 25k so far, on the cheap end! And sinks, vanities, toilets, tub, interior doors, hundreds of LF of trim, faucets, fixtures, caulk and paint, fix the yard and clean. You cant just find this stuff "free" laying around or pay guys half the market rate or expect one guy to do all this himself at double speed.

I would like to know where you cut costs here, maybe itll help me in the future. I guess labor must be half where you are?

Taxes are insane down here btw, we dont have an income tax, only RE taxes. So like 2%/yr, or 300/mo here.  Many wouldnt carry insurance on the flip cause its another 2.5k builders policy for 6 mo (cant fake it with HO policy, they all do inspections.)

It seems more likely theyre on tighter margins, 8-10%, and just do volume. 67 flips/yr at 15k profit is a million, 25% return on 4 mil invested w 4/mo average carry, 23 at a time. 

But like i said, competition is crazy down here. 

@Stuart M. I think you found your answer... if they are doing 67 houses a year, they can afford to do them for $15k profit. The holding time you see, could have been the fact that they chose to not start the project for a few months, maybe they had other deals going, and holding costs are not substantial. 

Competition is crazy in most places. I got a wholesale lead the other day. It went to me and 116 other "flippers/investors". Houses are selling within hours, and houses are going over asking prices, when even at the asking price I couldn't make any money on the deal. I have only seen 1 or 2 out of 50 I have looked at that sold for what I consider a reasonable price. The rest sold for FAR too high to make any money (again in MY opinion, someone elses was different).

@Stuart M. I know of a guy in Boca that's doing 100+ flips a year. There's some big sharks around our area!

Originally posted by @Brian Garrett :

@Stuart M. I know of a guy in Boca that's doing 100+ flips a year. There's some big sharks around our area!

What numbers does he take? ARV etc. I can definitely see doing 100 at 10% margin and making a boatload. But I cant do that volume unless someone wants to loan me a few mil at 0%.

PM me an address of one if you can. 

Originally posted by @Brian Pulaski :

@Stuart M. I think you found your answer... if they are doing 67 houses a year, they can afford to do them for $15k profit. The holding time you see, could have been the fact that they chose to not start the project for a few months, maybe they had other deals going, and holding costs are not substantial. 

Competition is crazy in most places. I got a wholesale lead the other day. It went to me and 116 other "flippers/investors". Houses are selling within hours, and houses are going over asking prices, when even at the asking price I couldn't make any money on the deal. I have only seen 1 or 2 out of 50 I have looked at that sold for what I consider a reasonable price. The rest sold for FAR too high to make any money (again in MY opinion, someone elses was different).

A new one here, bought for 330k listed at 385k. So already 85% ARV before a dollar spent. New roof, AC, tile throughout, kitchen, bathrooms, etc. I guess the percentages are out the windows, now its "can i make 15k?"

I know some successful flippers. Sometimes they hit a home run, other times get to second base. They are steady doing quite a few deals a year here in SW FL. LOTS of competition though.

John Thedford, Real Estate Agent in FL (#BK3098153)
239-200-5600
Originally posted by @Stuart M. :
Originally posted by @Brian Pulaski:

@Stuart M. I think you found your answer... if they are doing 67 houses a year, they can afford to do them for $15k profit. The holding time you see, could have been the fact that they chose to not start the project for a few months, maybe they had other deals going, and holding costs are not substantial. 

Competition is crazy in most places. I got a wholesale lead the other day. It went to me and 116 other "flippers/investors". Houses are selling within hours, and houses are going over asking prices, when even at the asking price I couldn't make any money on the deal. I have only seen 1 or 2 out of 50 I have looked at that sold for what I consider a reasonable price. The rest sold for FAR too high to make any money (again in MY opinion, someone elses was different).

A new one here, bought for 330k listed at 385k. So already 85% ARV before a dollar spent. New roof, AC, tile throughout, kitchen, bathrooms, etc. I guess the percentages are out the windows, now its "can i make 15k?"

This is happening everywhere. I have lost out on 20-30 deals in the past 5 months or so to people willing to pay prices that I can't see any profit in. Some people have ways to make profit (volume, cheap labor, cut corners, lesser finishes) and some people are good with making less per deal. The answer is to look at and write more offers, stick to your numbers (forget about everyone elses) and find that next flip.

It took me a lot of time but I am finally under contract on a deal here in NY. The numbers aren't great, but I will do what I can to make it work, make it profitable and gain some local knowledge. It's all part of the game. 

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