Newbie From Ypsilanti, MI
Ypsilanti, MI · Member since 2016 · 8 posts · 2 votes
Hello Everyone! I'm so excited to be starting this new journey in real estate investing. I just bought my primary residence earlier this year with a VA loan which was my first experience dealing with real estate. I want to do a combination of fix and holds with fix and flips and eventually get into some multi family properties since I live so close to 2 college towns and could potentially rent to college students. Since I'm very new to this whole experience I am very interested in networking, education, and most importantly gaining experience. I look forward to meeting new people and creating new relationships here on BiggerPockets. It's also my hope that one day I can be a source of inspiration, education, and resourcefulness like so many of the members here!
@Tiara Thomas Since you are interested in fix and flips, I propose the following action plan. The first step would find an Investor Friendly Realtor assuming you do not have access, to the MLS. I would suggest that you interview several Realtors and ask them the following questions, to ascertain if they are truly Investor Friendly, or if they are throwing you a sales pitch.
1. How many investors do you currently work with and how many investors have you worked with, in the past?
2. How many transactions have you closed, with investors?
3. Do you currently own any Investment Properties? If so, what type do you own?
4. Are you a member of any REIAs?
The next step would be to work with the Realtor and determine the hot markets, in your County, with the greatest number of sales over the last 90 to 120 days. Personally, I would prefer 90 days because markets are always changing. This list would contain the zip code and corresponding name of the municipality, and a breakdown of the number of SFRs. This will be your Farming Area. From this data, you can utilize a website bestplaces.net that will give you a breakdown of the percentage of homes that sold, in various price ranges, for a given zip code. This will identify the retail price ranges, in which you can list the rehabbed property and the price ranges, of distressed homes, you should target.
You can use the Realtor to help you find deals and also use Wholesalers. If you acquire a property, from a Wholesaler, once the property is rehabbed and ready for the Retail Market, allow the Realtor that provided you the zip codes, to list the property for sale. This creates a WIN-WIN Situation and gives the Realtor incentive, to work harder on your behalf.
Hello and welcome! I'm also an investor in Ypsi and would love to connect. I've got 2 single family rentals and am starting my first flip. BiggerPockets is a treasure chest of resources with its podcasts, webinars, networking, and the like.
Best wishes,
Keri
@Tiara Thomas Since you are interested in fix and flips, I propose the following action plan. The first step would find an Investor Friendly Realtor assuming you do not have access, to the MLS. I would suggest that you interview several Realtors and ask them the following questions, to ascertain if they are truly Investor Friendly, or if they are throwing you a sales pitch.
1. How many investors do you currently work with and how many investors have you worked with, in the past?
2. How many transactions have you closed, with investors?
3. Do you currently own any Investment Properties? If so, what type do you own?
4. Are you a member of any REIAs?
The next step would be to work with the Realtor and determine the hot markets, in your County, with the greatest number of sales over the last 90 to 120 days. Personally, I would prefer 90 days because markets are always changing. This list would contain the zip code and corresponding name of the municipality, and a breakdown of the number of SFRs. This will be your Farming Area. From this data, you can utilize a website bestplaces.net that will give you a breakdown of the percentage of homes that sold, in various price ranges, for a given zip code. This will identify the retail price ranges, in which you can list the rehabbed property and the price ranges, of distressed homes, you should target.
You can use the Realtor to help you find deals and also use Wholesalers. If you acquire a property, from a Wholesaler, once the property is rehabbed and ready for the Retail Market, allow the Realtor that provided you the zip codes, to list the property for sale. This creates a WIN-WIN Situation and gives the Realtor incentive, to work harder on your behalf.
@Tiara Thomas Many Investors that flip homes use the 70% Rule that says 0.7 x ARV - Repairs = Your Maximum Allowable Offer (MAO). What hurts Investors that use this formula is it does not account for Holding Costs, Backend Selling Costs, etc.
I use the following formula to determine my Maximum Allowable Offer (MAO). This formula is the Profit Margin Formula that accounts, for 99.99%, of everything.
ARV – Desired Profit – Closing Costs to Buy – Repairs – 10% of Repairs – Holdings Costs – Concessions – Realtor Fees – Closing Costs to Sell = Your Offer (MAO or Maximum Allowable Offer).
ARV: After repaired value or what you think it will sell for once repaired.
Desired Profit: This should be taken off the top first. Most people run their numbers to determine what their profit should be. That is backwards, you should use your profit to determine what your offer should be. As a General Rule, my Desired Profit is $20,000 or 20% of ARV whichever is greater. To have an offer accepted, one may need to adjust their Desired Profit; however, it should not be below $20,000, or what one feels is acceptable.
Closing Costs to Buy: What is it going to cost you to buy the property? If you are using hard money you need to budget for the points and fees as well as traditional third party closing fees.
Repairs: The money it is going to take you to rehab the property plus an extra 10% of estimated repair costs to account for unexpected repairs.
Holdings Costs: Here is where a lot of investors get tripped up. Start by determining an amount of time that you will hold the property, probably 4-6 months. Then add ALL costs related to holding the property (utility costs, insurance premiums, property taxes, loan payments, etc.).
Concessions: Concessions are what you give back to the buyer at closing. It could be for closing costs, unfinished repairs or something else. I typically subtract 3%, of the ARV.
Realtor Fees: What is the commission you are willing to pay your listing agent (unless you are the listing agent) and the buyer's agent. Utilize 6% of ARV.
Closing Costs to Sell: Title fees and other closing costs. You can budget around 4% of the sale price to cover these.
This is a conservative formula. If you come out ahead without Buyer Concessions, on budget, etc., this puts more money in your pocket, when you close at selling.
@Thomas Franklin Thank you so much for the info! I'm definitely going to check out this strategy.
@Keri Middaugh Thanks for the welcome! Since we are in the same area if you ever want a shadow during your first flip let me know.
Hello and welcome to BP! This is a great site to learn and ask questions to people that have allready has been there. It sounds like you have a good game plan. Yes. By the way, thank you for your service. That in being in the service will help you probably. I have a lot of things to tell you but I will keep it to a minimum. I am 59 years old and have been in the construction business since I was 17. Unfortunately I had a brain aneurism and a stroke about 5 years ago and I am still recovering. I have had a wife for 31 years and I am lucky that she can help me. Her boss has been real cool to her and allows her to do half of her work at home.
She is a computer programmer and has been saving in a 401K for about 25 years so I am not under tremendous stress. Form some sort of a corporation to save you personally. I also had a real estate broker license for about 30 years and I used it to close several deals. Get a pre-qualification letter if you are planing on financing. Of course the nest way to finance is from the owner of the subject property.
Always do the math analysis and try to look at the property before you make an offer or at least have a clause in the sales contract that will allow you some inspection time without a penalty that is any greater than your earnest money amount has "and/or assigns" after your name in the sales contract which will allow you to transfer or wholesale the property in question.
Also, have a Team of professionals who will call you back. The typical main aTeam members are Attornies, real estate Agents, CPA's (or accountants), Inspectors, General Contractors, and Handeymen. As soon as you close a deal make sure you get an insurance policy that will protect you if there is a loss. As soon as you close a deal change the exterior door locks. Please contact me through BP at any time. Good luck to you!
Tiara welcome aboard
Welcome, take a good look at student housing see below.
You might consider Niche or Specialized Housing like student housing. Rents can be 2-4 times more. Remember you don't have to own a property to control it. I have an article I wrote on student housing email me for a copy.
Paul
@Ramon Jenkins and @Paul Timmins Thank you so much for the welcome!
Hi @Travis Biziorek - Congrats on the move. I assume UofM is the draw from SF to AA.
I'm an Ypsilanti native, went to UM for undergrad and law school, and now live nearby in Plymouth. If you have any questions about Ypsi, I'd be more than happy to answer them. @Sarah Lorenz is a friend of mine and she's incredibly knowledgeable about the Ann Arbor area if you have questions there. I'm a real estate attorney and a broker, so could help you out on either of those ends if need be as well.
Thanks @Account Closed!
You're absolutely right in regards to UofM being a draw. We wanted somewhere liberal, at least medium sized city, etc. AA just checks a lot of boxes for us.
Our home here in the Bay Area will be hitting the market in mid-March and will likely sell within a couple weeks. So we're hoping to be in Michigan right after that, house hunting and ready to pull the trigger in A2, but we're flexible on timeline.
We're already working with an agent in A2 but my wife and I have always wanted to flip houses. We just haven't had the opportunity out here because everything is so expensive.
We'll likely have ~$80-$100k cash after settling into our new place in A2, and that got me looking at Ypsi seeing as there seem to be a lot of houses that need some TLC in the <$50k range. Seems like a great way to to get some experience without putting too much at risk.
My wife stays at home with our 7-month old son, and I just started working remote. So we have the flexibility to flip. We'd like to start doing it more and more seriously as we gain experience.
So at this point I'm really hoping to network with folks that understand the market, especially Ypsi since that's where I think we'd be able to afford doing our first flip. I'd love to link you to some properties I'm seeing and try to understand if they'd be worth looking at or not.
Eventually we'd want to build our flipping "team" (e.g. realtor, attorney, contractors, etc.).
I know that's a ton of info, and maybe I'm getting ahead of myself but that's our current situation.
Happy late welcome to Bigger Pockets. A great resource is the webinars section of the website. https://www.biggerpockets.com/proreplay