When you call GC to go look at home

Question

Hello everyone im looking to get into my first flip. Its hard getting a good deal under contract. Someone suggested getting a deal under contract at 65% ARV and then renegotiating the price once GC looks at it and gives you quote. They said i would get more houses under contract this way. Is this something that you do? I was planning on looking at the home with my GC and realtor and then giving an offer after i knew what arv and hard money costs are.

It was brought to my attention that this could take too long and i could lose deals that way.

what do you think? Offer after GC looks at it or or before?

It was brought to my attention that this could take too long and i could lose deals that way.

what do you think? Offer after GC looks at it or or before?

Bonnie Low · Answer

Hey @George Rodriguez congratulations on being ready to get started! We flip homes in California. To give you an example, we probably looked at 50-75 properties, offered on 20ish, and got 2 under contract. That's not at all uncommon. Given those numbers, it is VERY, VERY hard and inefficient to have a GC go with you to give you a repair estimate each time. Unless your real estate partner happens to be a GC, you'll burn your bridges real quick. Instead, I recommend you educate yourself as much as possible on estimating repair costs. BP published a book on estimating repair costs - it's a bit dated now but still gives some really solid information. You can also call around your area to get an idea of big ticket costs, like replacing an HVAC system, windows, interior and exterior painting and a new roof. All of those are very common repairs/replacements. Knowing some of the major costs should allow you to run your numbers and see if the deal makes sense. If it does and you're able to get into contract, make sure you have an inspection contingency and during that time period, get your GC to look at it and give you an actual repair estimate. Hopefully, you were in the ball park and the numbers still make sense. I wouldn't waste my GC's time on anything I'm not in contract in. Where we live, they're just too busy and we want them to know that we're serious customers, not just tire kickers.

Jon K. · Answer

"Just get it under contract at 65% of the ARV and renegotiate later" is very arbitrary and not very productive. In order to be able to renegotiate a contract based on a GC's estimate you would have needed some kind of inspection contingency. Contingencies in general weaken contracts. The more you have, the more ways you have to renegotiate or back out. Buyers know this, especially ones represented by agents or realtors.

Speed with which you make your offer is a factor too because good deals don't last. So...

You should know roughly what the ARV should be before you even go to look at the property. You mentioned a realtor so I'm assuming you're talking about MLS deals. If you communicate your goals to your realtor (to find a property to flip) you should also ask them to have an ARV with supporting comps ready for you for any property that they present to you before you even go see it because you will need that number in order to make an offer anyway. All that's left after that are the rehab costs (and financing of course).

As for rehab costs:

• You can have your GC go with you as you suggested, pushing them to provide the estimate quickly. The benefit of this is that over time even if you don't get deals you'll begin to get an idea of your GC's prices for various things to the point where you won't need them with you all the time. Often times with MLS listings your realtor can communicate to the seller's agent that there is in fact an offer coming from your camp. They're trying to get the best price possible for their client so they're often willing to wait a few days for everyone to get it together.
• You can do some homework to otherwise figure out what your rehab costs will be. I won't expand on this because J. Scott wrote the book on it available through BP here: "The Book on Estimating Rehab Costs"

So in summary, offer ASAP after seeing the property regardless of whether your GC has seen it or not. This of course requires you to know your numbers if they haven't seen it.