Looking at Flip but Contractor & Realtor Strongly Disagree

9 Replies

Hey Everyone,

I'm trying to flip my first house but I'm running into a serious dilemna & I could definitely use some advice to steer me in the right direction. I'm currently looking for a house to flip in the market I live in. I'm using a realtor who help me with my 1st rental property (she works with many others investors as well) and she lined up a wholesale from another investor who doesn't have the time to put into it. Current price is $113k , she was saying it should only need about $7k-$8k in rehab and she should be able to sell it for 150k, which is on pa for comps in the area.

However, my contractor (who's a close friend but is a legit contractor) went to take a look at it with me & believes the rehab is gonna be closer to $12k-15k and doesn't believe the realtor can sell it for what she's saying she can. He's been in construction for a longtime but mostly doing commercial & some residential work. So I'm not sure if all the repair is absolutely necessary to sell the house.

I'm stuck between a rock & a hard place because I trust them both in their knowledge & abilities. My realtor is adamant the house doesn't need that much repair & that she can sell it at that price point. My friend (contractor) thinks I'm a fool if I think this is a good deal. But my contractor doesn't know what it takes to sell a house & my realtor isn't a contractor.

This is problematic for me because I'm still new to this & this flip could make me a good deal of money or be horrible depending on who's right. How have you guys dealt with these situations?? How did you come to your conclusions?? And what am I missing or not asking?? Thanks in advance!

@Jacob Rivera i buy and sell 3-4 properties a month and you have to gather information from good resources. I am nearly always over budget and I have done hundreds of these. One of my partners is always way under budget and the other one is better at pointing out things I may have missed. Be liberal on how much its going to cost for repairs and how long you will have to hold the property. Make sure you factor in all the holding costs and all the costs to buy and sell. Be very careful especially on your first deal. Lets do some quick math. 

Contractor says 15k for repairs plus 113k purchase price plus 15k to buy hold and sell. You are now at $143,000.

You have zero room for error. There is not enough margin here.

The numbers you throw out actually sound to me like the realtor and contractor are in near agreement. One with a high of an $8k estimate and the othernwith a low of $12k are virtually the same to me.  What I can tell from the data points here is both agree that the rehab is very minimal. I can barely get paint and carpet and cleaning done for these amounts.

But I would think that even a pretty minimal rehab would be higher than what both estimated...and with the slim margins, I dont see a property worth buying here.

Personally, even if I went by the real estate agent’s numbers once I paid selling commission there is almost no profit

Find something which needs more money to fix up and easy to be upside down

There is no deal even st the realtors numbers.
-You’ll have at least $12k, probably more in closing costs, both transactions.
-$2-3k at least in holding costs
“Hoping for a $4k profit”?????

This is a deal at more like $85k purchase price. I agree with others rehab budget always runs over. Sub $10k rehab will get light cosmetic rehab. Look for a deal with more meat on the bone.

If they're firm on the price, this could result in an upside down first deal for you with numbers that tight - simply not enough room for "uh-oh's" or "we better fix that" scenarios.  If all is as it seems with your contractor and realtor, a negotiated price range of $75-90K would put you in a better place.

Thank you all for your input......Had another realtor run comps and the ARV is correct but I do now see that the numbers are way too tight. Yea my biggest concern is getting sunk on my very first deal. Thank you all

Originally posted by @Jacob Rivera :

Thank you all for your input......Had another realtor run comps and the ARV is correct but I do now see that the numbers are way too tight. Yea my biggest concern is getting sunk on my very first deal. Thank you all

 Good choice moving on!