Wholesaler · Palmetto, FL · Member since 2016 · 54 posts · 6 votes
Hello BP. Can somebody please break down the meaning of getting paid when we buy? If it's a buy and hold, or a fix and flip how do we get paid on the front end? Thanks.
Investor · Sandy, UT · Member since 2012 · 71 posts · 29 votes
10y
It means that you make the money by buying right, buying something that you are sure you can make money on. If you are a flipper and you buy a home at 90% ARV and try to sell it off for 95% of ARV then you are taking on a LOT of RISK!! The market could soften, this happens all the time. and your property that you estimated was worth 150K is now only worth 140K. The home is only worth what someone else will pay you for it...no matter what zillow or any appraiser tells you. SO, if you buy a home at 60% of ARV you have a LOT MORE WIGGLE ROOM if something goes sour. You might have been planning to make 20-30K on the deal and only get 5K, BUT you still make a profit BECAUSE you got paid when you bought it right! If you buy wrong you might not get that payday you were planning on....and as many have attested to on BP and elsewhere could even take a loss. SO, it is worth making sure that you know you will make money on the deal. DO your analysis back and forth, left and right. over and over and over. Then when there is really money on the table worth and you have satisfied your risk tolerance, jump in and go for it. Its a fun ride!
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
10y
If an investor performs proper due diligence and buys right, the investor knows the total return though exit of the property at the time of acquisition. If you buy wrong, pay too much or are uncertain of your exit, it's an uphill battle.
Fix and flip is a good example. If you have modeled your rehab, ARV and other costs properly, you know with a fair amount of certainty what you will make on that flip as you leave the closing table.