$150K cash to invest on fix-and-flips

22 Replies

Hi all,

I'm a new real state investor from out-of-state who is considering investing in fix-and-flips in the Phoenix area. The main reason for Phoenix is that, based on my research, the area seems great (read average ROIs > 30%) for flips right now, despite the fierce competition. 

I've got flexibility from my "day job" to work from anywhere (I'm a remote worker) so I'm willing to be on the ground to make this a successful business. Additionally, being out of state, I'm planning on networking as much as possible with locals (via BP, local meetups, real state investment clubs, etc.) to get a "good pulse/feel" for the local market before my first deal.

My question are:

1) how realistic is it to find great deals (net ROIs > 30%) with $150K total to invest? I figured with this kind of cash I'd have to target the low end of the market (under $100K) which, in general, is where there is fierce competition;

2) how realistic is it to make this a success given that I'm out-of-state? I figure a considerable learning curve is need to learn the local market and establish trusted relationships.

What are your thoughts?

Thank you all in advance for your answers!

Put in the work and success will be more likely.

I’ve been interested in investing in AZ as well. Would you be interested in partnering? I have access to hard money and have family there. Also have a connection in the area.

@Nilton Santos

Flipping in the low end (100k) would be more trouble than what it's worth. Properties listed or acquired at less than 100k won't be worth more than 120k or so in most areas as these neighborhoods are the worst in the city and offer very little appreciation and are not desirable at all. I'd shoot for price points at 150k-200k,  that sell for 220k-280k as the majority of homes in Phoenix sell for between 200k and 300k (like 25% or so of all homes in the city). From 0-300k, it's like 45% of all houses. With 150k, you'd need to utilize hard money or a conventional loan to get into a flip and have money to rehab it.

For you second question, you'd need to have a good team to make these things happen. It'd be awesome if you could be out here to see things yourself the 1st time around since you can work remotely. Feel free to PM me if you have any more questions.

@Nilton Santos

@Bob Okenwa gave some great advice. Flips are really meant to be performed in the "bread and butter" of the housing market, meaning close to the median price. That's where you're going to find your largest selection of properties to potentially buy and your largest pool of buyers to resell to.

The thing about flipping in the lower end of the spectrum is that it's WAAAAY too easy to over-improve the property. Nobody cares about marble countertops in the ghetto! So investors often overimprove and lose money on deals. 

With your budget, I would suggest teaming up with a private lender or perhaps another investor in the area. If you could find someone else with $150k or a private lender who will give you that, you'll have more than enough to start getting into some deals and doing some flips. 

For example, you find a $200k property, put 25% down on the private money loan ($50k) and still have the $100k left over for rehab which in most cases will be way more than enough. Even if you find a lender who wants 40% down ($80k) you'd still have $70k liquid which is probably double what you'll need in most cases.

Hope this advice from Bob and I helps! Good luck!

@Wes Blackwell Thanks for echoing and validating Bob's point. Do you have access to HMLs (or potentially other partners) willing to work with a new investor in the Phoenix are? It's clear to me now that the only realistic way I'll make this a success if to JV/equity partner with someone else.

@Dennis Canon Thanks for reaching out. In light of what I read here it's clear that with my budget I'll have to do a JV. So, yes, I'm interested in partnering. Please PM the details. Thanks.

Hi @Nilton Santos

I think like @Bob Okenwa said you have more than enough money to utilize a hard money lender to flip something in the 150-200k purchase price range.

Let's say you find a letter that will lend 85-90% of purchase price plus escrow a portion of the rehab amount. You may find a property with an ARV 225k, 35k rehab, and your purchase price is 150k. In this case your lender will lend 135k (90% of purchase price) and maybe escrow 20k into a draw account for repairs.

You would be out of pocket $15k for the 10% purchase price not covered by the lender, plus the $20k that goes into the escrow account, plus maybe $3k for closing costs and 1 point on the loan ($1350) for a total of just under $40k.

That leaves you over 110k in reserves, 15k of that for the remainder of your rehab. You could do two flips simultaneously with that 150k and net a lot more than putting all that cash into one flip. You're also spreading out your risk. Yes you will net a little bit less on each flip because you're paying a point for loan origination and you're paying probably 12% interest or so which will be about 1% a month ($1350 a month in this example) but overall you'll be able to make a lot more if your goal is to do multiple flips.

Another thing to consider is that even if you plan on doing just one flip to start and you get to the point where it's about to go to market or is on the market, and another sweet deal comes along, you have the funds to wrap it up without having to wait for that first property to close.

PM me if you have any other questions and good luck!

Originally posted by @Nilton Santos :

@Wes Blackwell Thanks for echoing and validating Bob's point. Do you have access to HMLs (or potentially other partners) willing to work with a new investor in the Phoenix are? It's clear to me now that the only realistic way I'll make this a success if to JV/equity partner with someone else.

The best thing you can do is network on here. Ask for referrals and you'll definitely get some. And be sure to ask for more than one. Compare what everyone is offering and ultimately you'll have to go with your gut and who you trust the most.

@Grant Greene is someone in AZ who will either be able to help you directly or get you in touch with someone who will. Reach out to him and see what you can come up with. 

Let me know when you get the financing situated and I'll try to point you in the right direction to help you find a deal :-)

Greetings 

I am looking to expand my real estate investing to the Phoenix area and looking for either a wholesaler or realtor who has Chicago ties. My goal is next time I come to visit, usually around holidays, is to purchase an inexpensive buy and hold or a rentable airbnb.  I have relatives in Phoenix who will act as my eyes and ears while assisting me with some due diligence.  I am also open to partnering in a fix n flip with a phoenix based investor (if you have chicago ties that's even better)

So if you are looking for a wholesaler looking for some business during the off season or looking for a long distance partner private message me.

@Dustin P.

Hi Dustin, thank you so much for the advice.

At this stage I've secured 3 private lender offers with pretty competitive (short) terms.

So the next step is, as you suggested to network with people in the Phoenix area.

Nilton.

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If you have the flexibility, come out to Phoenix and start attending some of the local meetings. The REIA group here is pretty active, and you'll be able to get a lot of information there. There's even a Flipping subgroup, where you can find someone to partner with.

@Dustin P.

Very sound advice and guidance you offered here. Do you flip sfh in Phoenix? Sounds as though you’re speaking from experience.

@Wes Blackwell

Hi Wes, I’ve enjoyed reading your comments on this thread. Do you focus on “flip listings”?

@Sam Grooms

Hi Sam - where in Phoenix do those groups meet? Do they have a website, or some contact info which I could find out when and where these groups meet? 

From my remote investing experience your 30% ROI is likely going to get eaten up pretty quickly with the extra team that you’ll need.

My suggestion is that if you go the JV route, that you do so with a realtor that also flips so as to at least try to remove that cost. You should have sales in house as you scale anyway, so ideally you would start with that.

Originally posted by @Jared Carpenter :

@Sam Grooms

Hi Sam - where in Phoenix do those groups meet? Do they have a website, or some contact info which I could find out when and where these groups meet? 

Here is the link for the local REIA:

https://azreia.org/

You can also find information about the Fix n Flip subgroup on there. 

Originally posted by @Nilton Santos :

Hi all,

I'm a new real state investor from out-of-state who is considering investing in fix-and-flips in the Phoenix area. The main reason for Phoenix is that, based on my research, the area seems great (read average ROIs > 30%) for flips right now, despite the fierce competition. 

I've got flexibility from my "day job" to work from anywhere (I'm a remote worker) so I'm willing to be on the ground to make this a successful business. Additionally, being out of state, I'm planning on networking as much as possible with locals (via BP, local meetups, real state investment clubs, etc.) to get a "good pulse/feel" for the local market before my first deal.

My question are:

1) how realistic is it to find great deals (net ROIs > 30%) with $150K total to invest? I figured with this kind of cash I'd have to target the low end of the market (under $100K) which, in general, is where there is fierce competition;

2) how realistic is it to make this a success given that I'm out-of-state? I figure a considerable learning curve is need to learn the local market and establish trusted relationships.

What are your thoughts?

Thank you all in advance for your answers!

This post has been removed.

Hey all, new to BP but have been investing in the Phoenix area since 2009. Mainly doing fix/flips and wholesales, and am also beginning to get into multi family. I'm also a general contractor, so anyone looking to link up and build each others network, feel free to email or pm me. I look forward to meeting new faces

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