Flipping With Hard Money.. No Way To Profit. I don't believe it.

32 Replies

Using hard money at 10% interest and 3 points... As I run multiple scenarios on a house with an ARV of $200k and say 40K of rehab (thats what one GC blindly told me.) I'd have to offer as little as $89000 to the seller. There seems no way I can find a deal like that in this market. Thats like just 44% of current market value. I think cash is only way to get into this. I dont want to hold a property and do all this for a $10K profit over 6 months... or even a $20K profit over 6 months. That is only worth while if you can have like 5 or 6 going at the same time.

Is making profits of $25-30K in a 5-6 month period difficult on one property?

How do I scale this if it takes me 2 months to find a deal (if ever) and then tie up all my cash in one flip?

People do this mostly as a side job for some extra income or what?

I do them cash, and my profits on paper are thin. With that said I always make much more than expected. I have yet to come across any deals that I could land with an extra $10-15k in fees.

As a lender I've seen dozens of deals here in SoCal, flippers are lucky to make 10%.  Not sure where you come up with 89k purchase price.  For a 6 mo flip I would think a 100k-120k purchase price would give you 10-20% profit.  How are you determining purchase price?

Account Closed You have to realize the current economic cycle we are at. This certainly is not the best time to flip properties, you can definitely do it and still make money, there's a lot of people out there doing money even in an inflated market like we are at right now. How? I'd say PATIENCE and don't get greedy, you gotta understand that you will probably not find deals where you can make a profit like it's 2010, it's just not going to happen, you will mostly make 10%-15% profit in 4-7 months deals. Of course, if you can eliminate leverage of the equation and just focus on finding one big-enough deal, you can do that, but it can take a while for you to find it, again, patience.

Account Closed, The situation you presented is usually why people start in REI as a part time gig and keep their full time job. That way even if you make 'only' 20k in 6 months, which by the way is 1/2 of medium household income in Holiday FL, that 20k is like a bonus half years wage just dropped into your account. You then take the lessons you learned in your first deal, and the extra money you saved up from working half the year, and invest it into a second. etc etc.

Eventually, if you budget right, you will have enough to fund 2 flips at a time. etc etc.

Account Closed We found the same thing in Arizona. Namely that the margins were getting thinner and thinner on flips so we switched our model to a lease option model and found that we could make about 3 times the amount that we make on a flip over a 4-5 year period of time. Basically we are doing long term flips.

90k purchase  40k  rehab  130k all in   lender will want you to have probably 20k of your own money in the deal.

so lets say for fun 110k  at  3 and 10 for 6 month flip ..   3300   points   5500 in interest  5k in junk fees and misc

sell for 200k  commish and closing cost 7%  = 14k  

so lets see where that all adds up to.

130k + 14K + 8800 + 5k misc + another 5k for ut oh = 162,800 minus 200k = 37,200 net... not many flippers I know that would not do that deal...lets say your not that great at it and its another 5500 in interest and 2k in hold now your at about 30k.. where most flippers really miss the boat is they should have a real estate license and save half the commission they should all list their own stuff.. that's just giving money away .. at least once you get to scale.. plus you need advantage of real time MLS and keys to get in with out having to bother a realtor.

this as you laid it out is a home run.. and HML is a small part of it.. but your right.. not many 200k ARV 40k rehabs are going to sell for 90k in todays market..

I was a convention a few weeks ago and guys in the LA basin are doing 700k flips and making 10 to 20k total.. but they do 30 or 40 a year.. lot of work and risk to only make 300 to 500k a year..

@Jay Hinrichs  I totally agree... I was about to do a run down but glad you posted this.      Not many flippers would pass on 35-40k margins.  I do all the work on my flips and  I average 25-35 with a 40-60 day turn around.    With those numbers, Id say the property has major work for 40k rehab and 6 months according to your GC. Then again , budget high and you might be even more surprised .... but if you purchase sub 100k  , id say your in great shape with a lot of wiggle room.  Best of luck !!

Account Closed

Originally posted by @Alex Young :

@Jay Hinrichs  I totally agree... I was about to do a run down but glad you posted this.      Not many flippers would pass on 35-40k margins.  I do all the work on my flips and  I average 25-35 with a 40-60 day turn around.    With those numbers, Id say the property has major work for 40k rehab and 6 months according to your GC. Then again , budget high and you might be even more surprised .... but if you purchase sub 100k  , id say your in great shape with a lot of wiggle room.  Best of luck !!

@Account Closed

 Alex this is what we have seen in the PDX market the GC's light bulbs have gone off and instead of bidding a 50k rehab they are now buying the asset doing the work them selves and making the profit..  middlemen who do no work and hire it all out are getting squeezed out and cant' compete in many instances.. 

@Alex Young   if your going to be flipping the most successful guys I have seen are fully intergrated..

RE brokerage in house  rehab in house .. all profit centers they do themselves.. 

this way they can and do pay a little more for the property than those that take a guru flipping course and have no real skills in the field.. 

@Jay Hinrichs you've added some great insight to this thread. Your last point about GCs buying the assets themselves riaises a question as a Realtor who is not a GC. The GC won't be the one swinging the hammer still, so would it be safe to say in general terms, that similar tighter margins could be managed through self-managing the project as a Realtor/Investor? One wouldn't need to be a licensed GC if all subs hired were licensed, right? As I plan my entry into my first property this year (likely a BRRRR even if a bit of cash is left in it), I plan to shave costs through the obvious part of being a Realtor, but also since I'm time poor currently running a service business and transitioning to RE, I plan to 'play' GC and PM on my own properties, paying myself a PM fee or GC markup on paper for my time and still hiring out licensed and insured subs like a GC or PM would. If I tried to tackle a DIY flip it'd take me three years, haha
Originally posted by @Alex Young :

@Jay Hinrichs  Love it.   Already there, all I need now is a title company in house so I am not paying ridiculous closing costs!!!

OH I pitty you in IL  the closing process there is the most painful in the entire US.. cost are not the issue.. having it mandatory to deal with attorneys and cant produce your own deeds etc etc.. its extortion in that state..  But hey you deal with the cards that are dealt you.

WE do our own closings frequently throughout the year.. we can call customer service and get a date down on the phone in 90 seconds.. and we can have them send over the last recorded deed in 60 seconds then I can just make a new deed.. go get it signed and notarized and have my secretary run to the recorders office and file it..

I can buy a property in 2 hours all by myself.. of course not title insurance but I as stated get a date down on the phone and they are 95% accurate.. and we don't have utls follow the property so no need to worry about those..

I could not do what I did in the distressed asset field if I worked I that state..  

Originally posted by @Russell Holmes :
@Jay Hinrichs you've added some great insight to this thread. Your last point about GCs buying the assets themselves riaises a question as a Realtor who is not a GC. The GC won't be the one swinging the hammer still, so would it be safe to say in general terms, that similar tighter margins could be managed through self-managing the project as a Realtor/Investor? One wouldn't need to be a licensed GC if all subs hired were licensed, right? As I plan my entry into my first property this year (likely a BRRRR even if a bit of cash is left in it), I plan to shave costs through the obvious part of being a Realtor, but also since I'm time poor currently running a service business and transitioning to RE, I plan to 'play' GC and PM on my own properties, paying myself a PM fee or GC markup on paper for my time and still hiring out licensed and insured subs like a GC or PM would. If I tried to tackle a DIY flip it'd take me three years, haha

its state specific.. in Oregon you MUST be a licensed Property developer or a licensed GC to flip even one house a year.. and the license has to be in the name of the LLC.. I know I have been fined twice on this.. and I have 3 Developers licenses for 3 different entities.. each of our new home communities is a different entity.. But do check with your state contractors board and just ask them.. don't rely on us BP folks that what works in one state is not legal in another.. But as a Property developer ( licensed) I don't have to hire a GC for rehabs.. but for new construction I do need the GC license so I do have to hire one for that.. but I have a new 90 home community that I will break ground on next spring and I will go ahead and bring the GC license in house.. I pay 15k per home for the GC to build my homes now so I need both the developers license in the name of the entity that owns the community or property and a GC for new.. No GC for rehabs because U don't need C of O on rehabs in this state only on new construction and only a GC can get a C of O unless its and owner occ builder and I am not that.. But anyway on this new community 15k X 90 is 1.3 million .. so for that kind of money I will just go get the license myself and try to steal a super from Lennar or DR Horton or someone like that pay them 200k a year to build this out.. take about 2 years so I bring about 800 to 900k to the bottom line .. I still don't have to actually build the home I just take on the GC liability and heck I already have insurance up the ying yang for these new constructions.. I buy a 1million dollar 10 years policy on each one for 30k that just sits there incase we get sued.. its basically there to pay lawyers LOL.. event though a sub is insured you never know where they will be at in 10 years.. and your on the hook in new construction for 10 years.

How are you finding this house? Was it listed on the MLS, if so then there is a good chance that it is not a good deal and that is why you are worried about the margins. My advice would be to send some mailers or if you don't have time to do that, then find a wholesaler who can feed you deals as they come across them. It does take time and many deals might not be the deal for you but eventually you will find one that works and jump it. It will be the best money that you have spent in terms of experience. I totally agree with what @Jay Hinrichs said. Seems like a deal to me, I would do it if you can have a good GC that has time. For me finding a GC that isn't overloaded with work is the problem right now.

Originally posted by @Russell Holmes :
@Jay Hinrichs you've added some great insight to this thread. Your last point about GCs buying the assets themselves riaises a question as a Realtor who is not a GC. The GC won't be the one swinging the hammer still, so would it be safe to say in general terms, that similar tighter margins could be managed through self-managing the project as a Realtor/Investor? One wouldn't need to be a licensed GC if all subs hired were licensed, right? As I plan my entry into my first property this year (likely a BRRRR even if a bit of cash is left in it), I plan to shave costs through the obvious part of being a Realtor, but also since I'm time poor currently running a service business and transitioning to RE, I plan to 'play' GC and PM on my own properties, paying myself a PM fee or GC markup on paper for my time and still hiring out licensed and insured subs like a GC or PM would. If I tried to tackle a DIY flip it'd take me three years, haha

too funny I just got this email a second ago from our state CCB

National Enforcement Action Targets Unlicensed Contractors

Oregon CCB investigators turn up 32 alleged violations

The Oregon Construction Contractor Board (CCB) found more than a dozen unlicensed contractors and other alleged violations of contracting regulations during unannounced visits to 157 job sites earlier this month. The “sweep” was part of a multistate action targeting the construction industry. In Oregon, the CCB concentrated its investigators at job sites along the northern Oregon Coast from Newport to Astoria. Oregon joined nine other states in the broader action coordinated by the National Association of State Contractor Licensing Agencies (NASCLA).

The largest number of Oregon’s 32 alleged violations involved people working on home improvement projects without a CCB contractor license, including contractors that hired unlicensed subcontractors or worked on homes built prior to 1978 without the required Lead-Based Paint Renovation license.

The CCB is now sending notices of intent to issue civil penalties to those suspected of violations.

Additionally, the agency shared the information about suspected instances of employers “paying under the table” with state revenue and employment departments to ensure employers are reporting payroll and paying taxes.

“These concentrated enforcement efforts highlight the work our individual field investigators do every day in an effort to protect consumers from unlicensed contractors and to level the playing field for legitimate contractors,” Lead Investigator Eric McLauchlin said.

Verify contractor licenses

Nearly everyone who repairs, remodels or builds a home needs a CCB license, meaning they are bonded and insured and can pull required building permits. Addionally, the CCB provides mediation services to help iron out disputes that arise between homeowners and licensed contractors. People who use unlicensed contractors don’t have access to the service.

“These are important protections for the public,” McLauchlin said. “And, all contractors working legally are required to display their CCB license number in advertising so consumers can easily verify they are legitimate.”

To verify licenses:

  • Visit  
  • Enter the license number or name in the orange “Search” feature.
  • Verify that the license is “active,” that the contractor carries the endorsement for residential work, and that the name and other information on the license matches the contractor you are considering.
  • Call  for help searching or understanding the results.

Contractors and consumers can report unlicensed contractors and other illegal activity on the CCB’s website or by calling .

In looking for contractors, the CCB advises consumers to get references from friends and neighbors, or others in the construction industry, such as supply stores. Contractors seeking work through online lists must include their CCB number in all advertising. However, the CCB advises consumers against relying on online references alone.

The CCB has a variety of consumer tools on its website, including a  View details of the recent national operation 

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@Jay Hinrichs

"I can buy a property in 2 hours all by myself.. of course not title insurance but I as stated get a date down on the phone and they are 95% accurate.."

Isn't the cost of title insurance worth the savings on that 5% inaccuracy?

Originally posted by @Account Closed :

@Jay Hinrichs

"I can buy a property in 2 hours all by myself.. of course not title insurance but I as stated get a date down on the phone and they are 95% accurate.."

Isn't the cost of title insurance worth the savings on that 5% inaccuracy?

David on normal transactions yes but when I was buying foreclosures on a Wednesday that were going to sale on a Friday.. only way to do it.. yes risk.. but calculated and I did it for a living and we are well capitalized so If a made a slight boo boo we could live to fight another day.. I got caught a few times.. one cost me 60k but when I was really active at this I was buying 50 plus homes a year.. so just the cost of doing business.. the SMOKIN deals in the pre foreclosure game were 48 hours before the folks lost the house.. No hard money lender could move that fast.. uncle bob was not going to rescue them .. so it worked for us..

Now the laws as you probably know all changed in 07 08 in CA and OR and WA.. so I have not done it since at least with pre foreclosures.

in Or.. if you flip the house and you bought it while in foreclosure you and you sold it in less than 12 months you have to give the old owner 80% of the profit.. so that took the fun out of  it.. most don't even know the law exist but at our level we are prime targets for someone taking a poke at us.. so not worth the risk. 

Ok I can personally speak to this insanity!  I am a licensed general contractor in CA and have been since 1993. In moving to Oregon we purchased a parcel of land on which to build a spec house. Since I wasn't licensed, and it would be my son getting licensed as a GC, but wasn't yet, we put my nephew on as the GC to start construction. 

Low and behold, I get a call from the CCB telling me we were being fined $1000 because I (the property owner) had contacted subcontractors and obtained bids, and hired subs without me being licensed. In Oregon you are not allowed to do anything as an owner/builder if you are going to sell the property, as you then need to be licensed as a developer or GC. 

Originally posted by @Karen Margrave :

Ok I can personally speak to this insanity!  I am a licensed general contractor in CA and have been since 1993. In moving to Oregon we purchased a parcel of land on which to build a spec house. Since I wasn't licensed, and it would be my son getting licensed as a GC, but wasn't yet, we put my nephew on as the GC to start construction. 

Low and behold, I get a call from the CCB telling me we were being fined $1000 because I (the property owner) had contacted subcontractors and obtained bids, and hired subs without me being licensed. In Oregon you are not allowed to do anything as an owner/builder if you are going to sell the property, as you then need to be licensed as a developer or GC. 

Yup and get this I have a developers license for my personal LLC.. and my personal LLC will usually own half of the new LLC created for a new community or job.. but I got hammered for 5k on one and 1k on another.. even though as a 50% owner of the company the actual LLC has to have the license not the owner of the company.. but there will be scores of folks flipping in Oregon with no developers license. And the state will continue to fine them..1k is for you first offense.. the 5k was because we had a buyer go bat crazy on us.. and that is the max fine.. but if I did it again it could become criminal.

also in the fire ravaged areas of Nor Cal.. Napa Sonoma Lake  they are arresting non licensed subs and filing criminal complaints..

So I think we should all move to Texas no license's required LOL 

Originally posted by @Account Closed:

@

Michael Randle your comment speaks volumes about where your at in business and social skills.  Good luck to you.

 I do not know if I should feel insulted or complimented by that comment.

Ok @Jay Hinrichs I just reread your post, and I'm at a loss. So, if my son is licensed as a GC, and we want to be able to do both fix/flips and spec new construction, we'd need to have a license as a developer also? From talking with the Contractors Board, I thought if he was licensed as a GC he could do development too, but you can't do GC if licensed as a Developer. How many GC licenses can one person have?  

Also, is the test for developer different than GC? Oregon is strange in some of this as it seems all the subs get the same licenses, and there are only a few sub categories that have specific licenses. 

I'm totally lost up here! 

Originally posted by @Karen Margrave :

Ok @Jay Hinrichs I just reread your post, and I'm at a loss. So, if my son is licensed as a GC, and we want to be able to do both fix/flips and spec new construction, we'd need to have a license as a developer also? From talking with the Contractors Board, I thought if he was licensed as a GC he could do development too, but you can't do GC if licensed as a Developer. How many GC licenses can one person have?  

Also, is the test for developer different than GC? Oregon is strange in some of this as it seems all the subs get the same licenses, and there are only a few sub categories that have specific licenses. 

I'm totally lost up here! 

OK here ya go.

Who owns the property ???  they are the ones that need to be developers... ( licensed in the state of Oregon)

the licensed developer can do rehabs but not new construction.. new construction requires a CO and only a GC can get a CO. on a non owner occupied build.

Now the GC can own the ground and does not need to be a developer.. GC license is all that's needed..

But most building companies have both.. developers license for the LLC that owns it and a GC license to build it..

NO test for developer just bond and insurance.. and 300 bucks or so to the state but it cost a few grand for the bond and insurance and this can be the rub for those that don't have good enough credit for a bond or insurance..  

Originally posted by @Michael Randle :
Originally posted by @Account Closed:

@

Michael Randle your comment speaks volumes about where your at in business and social skills.  Good luck to you.

 I do not know if I should feel insulted or complimented by that comment.

 he shot you this zinger then closed his account :)  as threads go I thought this one was doing fine.. LOL