Flip that Baby !

32 Replies

Hi BPers,

This is my latest rehab. One of biggest and ugliest house that i have purchased. The garage has ceiling damaged by water and everywhere else some kids has vandalize the house.  Found the deal through my direct marketing.   House has been vacant for past 5 years. That means....all mechanical items need to be replaced.

Smells money inside the house. Awesome deal in terms of numbers . The numbers are below 68% ARV after repairs and closing cost included. This is expected to be a Buy and Hold. I would do double close on this with hard money and later Conventional financing.

1 month rehab estimate but i am not rushing as it would be hard to find good tenants during Winter months anyway.  I usually do my own rehabs with subcontractor but in this case i am trying a General contractor with good credibility.  Its going to be beautiful after its done. Will post as the project continues.

James

Looks like a lot of work but fun work!  My wife and I are new to this kind of deal and we ready still trying to get our first one under our belt.   Good luck to ya!

Good luck and keep us posted!  My husband and I are contemplating our first flip.  I would love to see your 'after' photos and hear how this project panned out for you.

The challenge at this stage is managing the FC and also how to handle unexpected cost.  I have learned from the past that the more rehab that it needs the chances of going over budget in terms of % beximes higher. I also used the GC for the major work, some repairs which does not need human interaction and cheaper that the contractor bid is being done by myself. for example windows glass replacement and fence.

James

Mid Way Rehab update 11/28/14. Location : Converse, San Antonio, TX.

- Removed pop corn from the ceiling. Done by GC

- Replaced damaged sheet rock except the garage. Done by GC

- Interior painting completed.  Done by GC

- Removed all trash from the house.....what a difference it makes in terms of interior energy. Done by GC

- Replace all boarded windows with new windows glass. Did with my own sub- contractors. Saved $1000.

- Installed new Fence on side side of the house. Tried asking the neightbor to share the cost but the neighbor was lecturing me about how he's making ends meet.  I just did it myself. Did with my own sub- contractors . Saved $500.

- Trimmed trees surrounding the house. Did with my own sub- contractors. Saved $300.

- Roof repairs. Did with my own sub- contractors.  Not sure how much we saved as we have reliable roofer.

- Installed cameras to ensure no vandalism . Had bad experience in the past when one of my house had the wires stolen during rehab. Also bought builders risk insurance rather than TDP rental insurances. The builder risk cover for up to months vacancy and stolen wire scenario.

One strategy that we use is to mingled the rehab with GC and my own Subs. We do that to minimize cost as i have established really good sub contractors for specific work like windows repair and tree trimming. The Fence repair sub is a new person who we found on craigslist. they gave us a great deal on the fence. Another well trusted carpenter gave me a quote for $100 less for the fence. I chose to go with the fence contractor as they are the specialist in fence. Same thing with the tree trimming nd windows repairs. They are the specialist in their area. Even though the GC will make our life easier by managing the specific work, nothing beats hiring the specific professionals. Work that needs a lot of co-ordination and working side by side like painting, sheetrock repair, popcorn removal , thrash hauling  better to be done by a GC as there is too much project management and too much Interdependencies between them. Just to let you know that this house is 120 miles aways from my city so need a balance between time and rehab cost.

Cool surprises. Electrical work came up 4K less as another electrician thought the 2nd floor copper wires were stolen as part of the vandalism.  

Next Steps

- Finish Exterior painting, install light/wall electrical fixtures, Install new toilets, vanities, new 3.5 ton AC. new appliances, resurface the counter top and fix.clean chimney.

- Start advertising for renters. This is expected to be interesting as we're entering into winter months.

Overall, this project seems to be one of the smoothest project we have done until now.. experience counts here. Will wait for completion to share my overall experience.

Happy Thanksgiving !

@Charmaine M.   @Frankie Woods 

@Tina Scarisbrick @Jayagowri Deenadayalan @Craig Harpestad 

Nice. You've accomplished a lot in 2weeks. My question is does all of those trees have to remain(can you take down one or two)?? It seems like they are blocking the front's view. If that's the back of the house, nevermind. 

Kudos,

Mary

Thanks for posting this, James! I'm learning lots and I look forward to your success!

Originally posted by James and Shanti Kandasamy:

I am surprised that nobody ask about the camera !. That is a cheap strategy to secure from getting vandalize during rehab.

 Looks great, what a difference! OK, I'll bite, tell us about the camera!

Originally posted by James and Shanti Kandasamy:

Hi BPers,

... Awesome deal in terms of numbers . The numbers are below 68% ARV after repairs and closing cost included. This is expected to be a Buy and Hold. I would do double close on this with hard money and later Conventional financing…

Thank you for sharing all your info on this flip. I'm just starting out and would appreciate it if you explained a bit more on the numbers. What exact numbers are you referring to when you say, "number are below 68%"? Is there a certain percentage range you look for in a flip? Also, can you please elaborate on how a double close works? I hope my questions make sense. 

Thanks again for helping out a newbie ; )

@Troy S.   Hi Troy, Thanks for asking. I have started using the "real" camera in all the rehabs that i do to ensure that it keep the property safe. You can buy the "real" camera in amazon for $7.2 per piece. Imagine spending $7.2  vs. spending 4-5K due to vandalism or stolen copper wire...

@Rosalina Brenda Berk Brenda, The numbers are your yardstick on the deal. For example the ARV ( after repair value) is 131K. I purchased it at 47K, rehab around 35K. So total money into this is 82K. So 82/131 is 62%. That's a smoking hot deal. In general if you can get a deal around 70% of ARV, that's a super deal in this market.

The double close is a strategy that you buy a house with hard money lender/Private lender to purchase the house and rehab them. After the rehab is done (few months for rehab), then you refi the loan to conventional hard money lender at prime rate. If you follow this strategy, any deals that is below 66% of ARV would means that you have a zero cash out of pocket. This is an example of zero money down investing by creative financing.

james

James and Shanti Kandasamy Thank you so much for explaining that! It all makes sense now. I didn't realize that I had to divide my total cost by the ARV. At what percentage, in your opinion, is the deal not worth it?

Originally posted by James and Shanti Kandasamy:

@Troy S.  Hi Troy, Thanks for asking. I have started using the "real" camera in all the rehabs that i do to ensure that it keep the property safe. You can buy the "real" camera in amazon for $7.2 per piece. Imagine spending $7.2  vs. spending 4-5K due to vandalism or stolen copper wire...

Do you happen to have a link? I was looking at the simplisafe systems for two flips I have under contract now but wouldn't mind a reasonable camera system as well! 

@Rosalina Brenda Berk  Brenda ,

The percentage depends on the investor. There are many investors who buy at 100% and still be happy with just investing in rental for the some cash flow purposes . The lower the % the more equity you will capture on top of. Cash flow. In Austin it's common to buy from wholesalers for more than 80% ARV.. Of course the lower % it's going to be harder to find the deals.

James

@JamesKandasamy Thank you for all the useful info. I'm going to practice running number this weekend. Have a great day!

Originally posted by James and Shanti Kandasamy:

@Troy S. Here is the link  

Keep in mind when you click on the link that investors always look for deals at the cheapest price with highest perceived value...

http://www.amazon.com/Outdoor-Security-Camera-Blin...

James

 I've actually used these before! A place I worked had a small-ish budget for security so I was able to install 8 real cameras with DVR but it didn't cover everything else they wanted. We installed a few of these to fill in the gaps...

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