How much money can you make fix and flipping?

Question

This article details my experience with fix and flipping and what profits we are seeing.  http://investfourmore.com/2014/03/20/much-money-can-make-fix-flipping-homes/

Account Closed · Answer

Great article @Mark  Ferguson !

I have been in the fix n flip arena since 1998 full time.  I have flipped hundreds of properties - a lot of them wholesale flips when the market was hot.  The last several years we needed to completely rehab deals.  I also try to average 25-30k a flip.  I love this business but also realize it is hard work.  I have built up another business that provides a steady stream of cash flow for those months when the flips aren't going so well.

Multiple streams of income is a key to long term financial success in whatever method or real estate investing you go with.

Mark Ferguson · Answer

Bill Gulley one thing to remember with me is I am an agent. I save a commission on the buy and sell side of every deal.  I did an analysis of my deals on a BP blog article and most of my buys were 60% to 72% of ARV.  I do look at some deals with less than 25% profit potential, but never below 20%.

Karin Crompton · Answer

Truth, @Bill Gulley. Here in CT, it's next to impossible to do that kind of volume off of the MLS alone. You can find maybe 3-5 per year, depending on which area of the state you're located. But 10 or more - time for another strategy. And as for making 25% profit on those MLS listings ... probably not gonna happen. I have done around 20%. But in my observation - watching a property, seeing the original purchase and then the resale and guessing at what the flipper put into it - I think most properties purchased on the MLS in CT are in the 10-15% range.

I think, as with a lot of things, it's a bit location specific. And I think the overall point, about having a minimum profit in mind heading into a project, is a good one. There are too many things that can go wrong, so you'd better have a good parachute!

Andy Luick · Answer

Once you build a good team, you can rely on them.  It's true in any business - any one man show is far less productive or profitable than a well honed team.  I see so many new investors getting hyped int buying the wrong property at the wrong price....and it's a quick disaster.  I've been in this field since the age of 5...as free labor back then....learned it  from the ground up and it still took me a couple of decades to create the right model.

Our model is timely...we create affordable housing where renters can get back on track after a divorce, job loss (or losses), health issues or other financial setbacks.  We provide them a nice furnished or unfurnished room, with all utils and often internet for a set monthly fee all inclusive.  It's harder to set up the initial rental but once set, it runs well.  We basically turn a single family home into a tri-plex, quad or five-plex.  We're good neighbors and good landlords so we don't get complaints from neighbors...in our area you can only have 4 unrelated people living in a dwelling.

I mostly raise money from private investors to purchase properties that we source from off-market sellers...usually,  The JV partners control the property and remain secured.  We handle repairs & rent/manage and most units are sold off to foreign investors with a 10% net return for 18 months.  We actually offer to buy back the properties for whatever they paid for them if they don't perform.  Our video marketing keeps a steady flow of prospects...who in turn refer more renters to us.  I am tied into quite a few HR departments who send us contract workers needing places.

The key is, we created a unique niche and the returns are disgustingly large. Our model really makes it easier for an investor to earn solid passive returns without ever getting their hands dirty.  We do everything by JV agreement so they can control the property.  Some of our recent investors want to just be lenders and earn 15% on their funds.  These investors usually have smaller amounts of cash ($5k to $25k) but can still earn a better return than in the bank. Others with at least $45k, can earn 10% on funds plus 1/2 the profits when we sell out on projects where we are fronting the repair funds or earn 20% and up to 70% of the profits if they take the whole deal...purchase & rehab.

It's not an easy model to set up and make work.  The property management is still a nightmare for us.  Investors look at the property and roll their eyes because they "think" they can buy the same property for $25k!  We get that all the time especially from CA investors.  We hand pick the properties and there is never a mark-up on them...JV partner pays what we  would.  The value is made in successfully renovating and renting the property where our net cashflows are 3 times a normal rental and we have minimal vacancy.

It's fun...it's different but the coolest part about our model is that we all can earn good by doing good....in providing affordable housing,  We get all kinds of properties from basic housing to million dollar homes.  Shared housing isn't "rooming houses" as you can see here: http://youtu.be/3PW6AcsKX38

Mark Ferguson · Answer

@Andy Luck great info. I would add the best way to fix and flip is to learn the business yourself.  Don't rely on an agent to tell you what to do.

How does your shared housing work?

Andy Luick · Answer

I had a lengthy chat with a husband/wife team who were trying to replace his income flipping (he'd lost his job).  They bought 2 houses without a real team...even though they were here in Atlanta.  They took advice from realtors but ended up over improving both houses and they didn't sell.  They then rented them out and the real disaster started.  They rented both houses out to 2 "sweet" nice looking families....while still trying to sell the houses as turnkey rentals.  Neither set of renters were cooperative. Both ended up not paying the rent....first they started paying slower...then not at all.  Owners had to file evictions on both....got one out but they did $20k in damages to the property.  the other filed for personal bankruptcy.  To date, the investments have almost cost them everything including a marriage.

We have convinced the tenant who filed bankruptcy to move immediately.  The house needs minor painting.  We will turn both units into shared housing and sell them off with a 10% net return to passive investors for 18 months as we do with all of our products.  Even with our program, they will still suffer a loss on the sale.  Once they sell, they will redeploy with us and earn at least 20% on their funds without the headaches of landlording.

So how much can you make flipping?  just depends on who you are, where you are, the model you are using and who you have on the team.  These were both very well educated and smart people.....they nearly lost everything.  If you want to invest in your market....find an agent or broker who is also an investor...those that are not, have no clue what they are talking about as was the case with the agents used by this couple.  happy investing...and happier returns!

Mark Ferguson · Answer

Thank you @Andy Luck for the info.  I an not in a position to give up my license since I run a team of 9 people and we sell a lot of houses.  I always close as well if I say I am or put a contract on a house.

Andy Luick · Answer

Just network like crazy....and give newbie wholesalers a moment of your time...every once in awhile one will surprise you although I have many of them shilling me the same property at different terms.  Personally, i'd get rid of the license or have your significant other get one.  I think it places you at a disadvantage with disclosures.  Networking is key...and not dickering is the other.  I pay what they ask for the properties unless it's trashed and their pricing isn't even in the ballpark.  Also, close your deal no matter what.  Most wholesalers have tied the property up with earnest money and need to do a simultaneous close....I have several that give me a few days heads start on their listings because they know I am going to close no matter what..  A couple of them I steer deals to that I either have no interest in or it's their area of specialty...like HUD and i don't mind paying $5k more for it when they have the system and connections to get it for me.

Mark Ferguson · Answer

@Andy Luck

What is your most successful way of getting off market properties right now?  I have been trying to move in that direction as well, but have not had much luck lately.

I think being an agent can help and hurt.  I think some people trust me more because I am an agent.  They can look up my website, see I have lisitngs and a team and that I am most likely not going to screw them.

Andy Luick · Answer

If you took those houses and turned them into shared housing as I do....I realize a totally different model....then you are effectively turning a single family into a multi-family with a much higher net rent.  We get 3x's the net rents on our units and that's how we sell them to back-end investors.  I love BP but I think it's utterly ridiculous for people to invest making $100 a door as I've seen discussed here elsewhere.  Mark seems to be hitting great numbers and must know his market very well.  Being an agent helps in accessing current market information but it can hamper you on the buy side when you have to disclose it and every seller thinks you know some secret or that they must be giving the property away.  I got tired of disclosing it so I gave my license back.  I understand that Mark is flipping retail and that's a whole different animal...I've done those too.  The key to successful investing is finding the right niche, exploiting it and/or partnering with those who can exploit the niche fully.  Most of the successful investors here are buying off-market deals through private sources...by the time it's hits the MLS in most major markets, you're already too late.  90% of what I buy if off-market but I am in huge market so the numbers might be different for others.  Thanks for sharing

How much money can you make fix and flipping?

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