1st Flip - under contract, inspection ends Friday - Help!!!

2 Replies

Hello all,

Newbie to bigger pockets making a jump into my first flip. First a little bit about me, I am a licensed general contractor with over 10 years of experience working on mostly commercial projects, I have done about 20 residential projects over the years as well. My wife is a real estate broker who owns her own company as well. We are currently under contract to purchase a 2/2 in east Hollywood FL. See the Zillow link for the property below; interior is only 2,000 sq. ft not 2,556 (2,556 includes the garage)

https://www.zillow.com/homedetails/600-N-13th-Ave-...

Work for this house would include turning it into a 3/3 while leaving the existing 2 car garage, 3 brand new bathrooms, remove the wall separating the kitchen from family room, refinish and/or replace kitchen cabinets (countertops will be reused), replace all exterior doors and windows with new impact glass, new HVAC system with duct work, minor electrical (high hats, new fixtures, inspection repairs), paint, new casing/baseboard, and maybe new interior doors.

I have also listed below my report from bigger pocket calculator on my return for the flip. Numbers are based on list price of $575,000 but i would list at $599,000

https://bp-v-newproduction.s3.amazonaws.com/upload...

Since I am in the construction business these numbers are realistic and I would hope to complete the job at a lower cost.

I have a few concerns/fears (my inspection period expires on Friday so I need to make a decisions ASAP)

1) The street, 13th Ave is a cross street that people cut thru. It is not a highway or a major traffic street by any means but residence cut thru this street to cross Hollywood Blvd at the traffic light on 13th Ave. (not the busiest street but not the quietest) Will the street dramatically reduce our cost per sq. ft even if we are the best of the best on the market at that time?

2) This house is on a corner lot with exposure to 13th ave, house would have a side yard and not a backyard. Is this a problem for people with kids? Homeowners in general? All houses on these Avenues have side yards and they all trade. Example if the kids are playing in the backyard you would not be able to see them from inside the house (unless u were in the 3rd bedroom)

3) ARV price, not so concerned with this because people will pay top dollar for a turn key product. Currently comps are tough because we don't have a true turn key comp to compare ours too. Have other investors gone into flips expecting to sell for the highest comp in the neighborhood or is this a bad strategy? We wont be highest priced in area BTW, you can check other listing on Zillow. My $599,000 listing price isn't outrageous for the area just want it to sell quickly.

4) Multiple houses are for sale in the neighborhood. Most have been sitting on market because they are over priced and need major upgrades. Are these lower priced, outdated, old listing going to be an issue for me when people begin looking at my property?

My gut is telling me to proceed on this property as I believe we are buying at a really good price. First time flipper here maybe getting a little cold feet. Help me analysis this deal and talk me thru my concerns and let me know what I haven't considered yet.

Thanks so much in advance for all your help and responses. I wouldn't even be under contract trying to flip this house if it wasn't for finding bigger pockets!!

Thanks

Drew

Hi Andrew,

You have quite a list of concerns and there are definitely a few flags that I would be concerned about.  

1) Have you asked the planning and zoning department about this street you are referring to?  Are there any future plans for it or what's the demographic living on this street actually like?  What about crime etc...any history about it?  Is there a potential zoning value (commercial or future something) by any chance? That should give you a good start on whether it can cause issues regarding your property value or cause you any other negative issues especially.  

2) This is a demographic related topic.  How many corner lots in a close proximity to your property and have you gone past these areas and do you see families or kids playing on such corner lots?  Families who like to keep an eye on their kids generally like back yards / non exposed corner lots for safety mainly and to keep them away from the road and any traffic dangers.  Traffic noise etc is also more prominent off a corner lot / intersection that a house in-between two other houses adding a sense of privacy (all depending on set back parameters and how much privacy is achieved).  This all depends on what type of buyers you hope to attract.  It could simply just come down to a USF (Unique Selling Feature) of your property that no one else has so pros vs cons will have to be determined by the buyer ultimately.  

3) Turn key usually refers to cash flow generating properties i.e rental income.  If the house is going to be done up then it's mainly going to be for someone to come and use it for themselves or for their family to use.  They will definitely be interested in the location value of the property as real estate is always and still mainly is about location, location and location.  Don't bank on anything selling quickly either...that is a rookie mistake.  A smart seller will always have contingency measures especially if you don't know what the final outcome is going to be as buying is outside of every seller's control.  Have a buffer to carry for at least 6 months no matter what is my professional opinion and if you still can't sell, look at where you can improve or simply lower the price and cut your losses and try again on the next project.  

4) Sounds like a lot of these houses are based more on their land value than building and land values.  So likely prices are high because it's probably easier to demolish them entirely and start building new on them to make any money especially where flips are concerned.  However, sellers won't sell them for cheap if the location value is good.  

I am not from Florida but the principles I have mentioned above in all 4 areas are sound no matter where you go.

I hope this post has given you a bit more to think about.

Thanks,

Amit