First Dallas Flip! Deal or No Deal?

[Nicole Johnson]

Hello Everyone! I am under contract on my first flip in Dallas. I would love some advice and input. It is a hard money foreclosure already gutted with Demo, Framing, Mechanical, Electrical and Plumbing done. The home also comes with brand new windows and sliding glass door.

Address: 305 High Brook Drive Richardson, TX 75080

MLS info : 3/2.5 2,330 square feet w/ pool

Currently: 4/2.5 2,500 square feet w/ pool

Rehab: LVP flooring, quartz counters, ect.

Purchase Price: $450k

100% HML @ 11% $25k closing out of pocket

Rehab Budget: $70k-$80k maybe

ARV: $730k+++ (
-2 most recent comps sold at 288/ sq ft (no pool)

-1 active comp $338

-1 pending comp @ $340 sq ft

Questions:

1) ARV Opinion? Good or Bad Deal? (2 most recent comps sold at 288/ sq ft)

2) Rehab Budget Opinion?

3) Investor Friendly Contractor Recommendations?

4) I see about 20k delinquent taxes. Is that the seller's responsibility?

5) Typically, will the seller (hard money lender that foreclosed) allow me to have GC's walk thru for quotes prior to our closing in 2 weeks?

Thank you so much for any input!

[Jose Jacob]

Hi Nicole,

It seems like you are buying an out of state fix and flip. I am not sure where you got these ARV and the comps from ? Was these from the Realtor or wholesaler who is selling you the property ?

You are aware that the market is declining. You must be very careful about your ARV. I am not familiar with the area you are buying this property but prices are coming down all over. Fix and flip is very risky unless you have some prior experience with out of State investment. If I were you, i will chap off 15 to 20% from the current sale to get your ARV after the reno.

Reno cost (70-80K) seems like extremely low for a 2500 sq ft house.  

This forum will help you to get some recommendation for investor friendly contractors.  

Delinquent taxes of 20K is the matter of negotiation between you and the seller.

Getting access to the property for your GC also part of negotiation.

My overall suggestion is that you should look for some fix and flip deals in your backyard first.  Fix and flip is not that easy.  Getting the right team and getting the property 60-65cents a dollar will be the key.

I get wholesale deals from wholesalers and their number are way off from my numbers. Most of them exaggerate the ARV and under quote the Reno cost. You need to do your own numbers.

Good Luck

[Nathan Gesner]

Quote from @Nicole Johnson:

I'm with Jose. I think your finishing costs may be low and your ARV may be high, particularly in a declining market.

You're closing in two weeks so it seems a little late to be asking for opinions.

[Nicole Johnson]

Hi @Jose Jacob and @Nathan Gesner, 

Thanks for your input! I am not out of state, I am local to Dallas, just new to the area. I had a GC walk the house with me during the showing. He quoted $85k finish and the ARV came from the MLS checking it myself and two realtors. I definitely did not just make the number up or rely on a wholesaler lol. Per the title company this morning, there are only $96 in taxes due and it's the seller's responsibility. I did my due diligence prior to making an offer, I was just trying to get local eyes on it. Thank you.

[Nathan Gesner]

Quote from @Nicole Johnson:

I just don't understand why you would ask a bunch of strangers on the internet when you already have confirmation from a local GC and two local REALTORS? It sounds to me like you've got a good deal and should move forward.

[Jay Hurst]

Quote from @Nicole Johnson:

Hello Everyone! I am under contract on my first flip in Dallas. I would love some advice and input. It is a hard money foreclosure already gutted with Demo, Framing, Mechanical, Electrical and Plumbing done. The home also comes with brand new windows and sliding glass door.

Address: 305 High Brook Drive Richardson, TX 75080

MLS info : 3/2.5 2,330 square feet w/ pool

Currently: 4/2.5 2,500 square feet w/ pool

Rehab: LVP flooring, quartz counters, ect.

Purchase Price: $450k

100% HML @ 11% $25k closing out of pocket

Rehab Budget: $70k-$80k maybe

ARV: $730k+++ (
-2 most recent comps sold at 288/ sq ft (no pool)

-1 active comp $338

-1 pending comp @ $340 sq ft

Questions:

1) ARV Opinion? Good or Bad Deal? (2 most recent comps sold at 288/ sq ft)

2) Rehab Budget Opinion?

3) Investor Friendly Contractor Recommendations?

4) I see about 20k delinquent taxes. Is that the seller's responsibility?

5) Typically, will the seller (hard money lender that foreclosed) allow me to have GC's walk thru for quotes prior to our closing in 2 weeks?

Thank you so much for any input!

 @Nicole Johnson   Canyon creek is a very sought after area in an establisher inner ring suburb.  I have not looked at comps of course but the neighborhood it self is solid.   Great choice for those looking to be close to the city but without paying city prices and having Richardson schools. 

Does seem like your hard money costs are way to high as we do these types of deals at 2% points typically and looks like your total cost is closer to 6%. 

[Mohammed Rahman]

Hey @Nicole Johnson - congrats on your first flip and for chugging along. Yes the market is shifting, and has been for several months, but deals are still being done. 

Most comments on the forums are cautiously optimistic but don't let it deter you! 

[Nicole Johnson]

@Mohammed Rahman  thank you so much

[Nicole Johnson]

@Nathan Gesner  You're 100% right. Im new to posting and I didn't think that I would get out of state baseless replies such as "ARV is too high" without knowledge of area. Even after seeing the last sold of $750k ARV (2 weeks ago) and 2 currently at $900k pending and active. I only received one GC quote so I mainly was looking for LOCAL recommendations and numbers because my rehab in Florida is going to be totally different from a rehab in Texas. Different material and different costs all together. I should have specified that I was looking for local advice. :)

[Nicole Johnson]

@Jay Hurst Thank you so much for your input! I was quoted at 2.99 points if I'm not mistaken. Do you offer 100% financing as well?

[Nicole Johnson]

@Jose Jacob this was great advice. the ARV and comps are derived from own research and 2 local agents. the wholesaler estimated at $775k-$800k. Their numbers are always high lol. There are homes that also sold over $350 per square foot, however, i ran my numbers conservative at $288 per sq ft. The mechanical, electrical, plumbing and framing are already complete in the rehab. It also comes with brand new windows that just need to be installed. I was hoping that cuts down costs compared to a start to finish rehab. It looks like the neighborhood's value is increasing with a lot of investor activity. Again, I ran the numbers conservatively, I think :) Last 2 comps sold at the first open house, but we will see! Thank you for your input! 

[Jay Hurst]

Quote from @Nicole Johnson:

@Jay Hurst Thank you so much for your input! I was quoted at 2.99 points if I'm not mistaken. Do you offer 100% financing as well?

 @Nicole Johnson we will lend up to 75% ARV or 100% loan to cost. So, yes, on this deal it would be 100%. However, I overlooked the part that the flip had already been started. Those deals paid are tricky because in Texas a contractor would have 105~ days to attach a lien for work that was done but not paid for. So, you as a buyer and a lender has to be careful you are not buying old mechanic liens.

[Jay Thomas]

Don't forget that, even in a changing market, there are still plenty of great opportunities out there. If you're willing to put the work in and be smart with your investments, you can make a nice profit flipping properties. Keep up the great work and don't let the naysayers bring you down! Good luck on your future deals!

[Nicole Johnson]

@Jay Hurst Thank you. That would be revealed during title search by the title company correct? It has been over 1 year since the work has been done according to the permit inspection records. 

[Nicole Johnson]

@Jay Thomas Hi Jay! Thanks for the vote of confidence! Greatly appreciated! Best of luck to you as well. 

[Rob Beeman]

@Nicole Johnson Nicole, in reading the heading of your post, I am not certain if this is your FIRST FLIP ever, or the First Flip in DFW area. If its your first ever, my suggestion is to NOT flip too far from home, and do not do a gut rehab. If however you are a seasoned flipper/rehabber and this is the first in that market, then you may be comfortable with the location/distance from home and the heavy lift on the rehab.

Not certain on DFW rehab pricing, but the Northeast where I am at, a rehab to the studs would be much larger than your budget shared. As for ARV, like others have mentioned, you should allow for reductions. In the Philly market (and other also I am told) I have seen as much as a 25% decline in SFR values in the last 6 months. So investors here are adjusting their anticipated ARV accordingly.

As for the 100% financing, it can be gained depending on the ARV and the borrower's track record over the last 3 years.

[Nicole Johnson]

@Rob Beeman Hi Rob, I live in Dallas. Recently moved from Florida this year. The rehab is already 40-50% done as well.It just needs cosmetics now. My ARV is based upon on comps sold in the last 2 weeks-30 days only, nothing older. The active and pending comps actually show an increase in value of the neighborhood. Thanks for your input!

[Jay Hurst]

Quote from @Nicole Johnson:

@Jay Hurst Thank you. That would be revealed during title search by the title company correct? It has been over 1 year since the work has been done according to the permit inspection records. 

 @Nicole Johnson   yes, if the work is all that old then any mechanics lien would have to have already been filed if they were going to be filed. 

[Matt Bishop]

@Nicole Johnson, Richardson Texas is a very nice suburb on the North side of Dallas. Also great area for buy and hold because of price appreciation. I know of several local experienced flippers who work and are familiar with that area and if this is a good deal, I would expect they would already know about it and would have already purchased it. The best wholesalers give them first look at the best properties. North Dallas and its suburbs are very competitive and would be unlikely for a newcomer to break into that specific market. If you can make it work, i think you should. I also think something may have gone wrong with the rehab. Why would a person let it get foreclosed since there are tons of investors who would buy it. I hope you are able to purchase it.

[Nicole Johnson]

@Matt Bishop i think they ran out of money. carrying costs are over $5k per month. permits were pulled and all inspections were passed except final inspection. already under contract and close in 2 weeks! thank you so much for the info. Richardson looks very promising. 

[Eliott Elias]

Don't use $/sqft method. Use sold comp numbers and see like properties, same bed/bath/similar square footage. 

[Lucia Rushton]

@Nicole Johnson with no walls and no ceiling I believe your estimate is way too low. Also if you’ve had realtors check the comps , did they include days on market ? You need to factor in your holding costs especially at your sale price, that range hits the jumbo loan buyers. Best wishes

[Victor S.]

the "quote" that a GC provided, was it detailed line-by-line or was it simply a ballpark he blurted out while walking the property? there appears to be meat on the bone if (big if) your repair estimate is anywhere near what it will take to complete and you sell the home quickly. we're in the winter time now, so not exactly the perfect time either.
how much are your carrying costs, btw? i've read you said it's around $5k/mo. that will add up very quickly if you cannot finish and sell this one withing a few months.

[Bob Stevens]

What do you mean MAYBE 80k rehab budget" This is the most important factor, you better know your numbers 

[Nicole Johnson]

@Bob Stevens @Victor S. it was definitely just a ballpark. I am getting 3-5 itemized quotes on Thursday. We have walkthru's scheduled. I set aside 6 months reserves for the payment. Im going to go double check the budget again to try to account for more. Thanks for your input!

[Nicole Johnson]

@Eliott Elias thank you! that was my original way of doing it, but then another realtor advised the square foot method. now i will take both into consideration!