What are some core elements of rehabbing and house flipping people should know?

[Christian Walker]

I'm an agent in investment real estate. It would help to hear from investors themselves on what knowledge they value when considering buying a property. What would you expect an agent to know? What are some things you consider when a deal is presented to you? Thanks in advance!

[Bob Stevens]

Quote from @Christian Walker:

I'm an agent in investment real estate. It would help to hear from investors themselves on what knowledge they value when considering buying a property. What would you expect an agent to know? What are some things you consider when a deal is presented to you? Thanks in advance!

 The ONLY thing that matters is the price. You better know your numbers.  Most will tell you location location location, incorrect ( of course you do not want to be in a F area. 

Good Luck 

[Christian Walker]

Thank you Bob!

[William Harvey]

@Christian Walker I agree with @Bob Stevens. I think if you made a pie chart showing the elements to focus on when considering a property, 98% of it would be the price, and the remaining 2% would be everything else.

If you buy a property right, it'll usually lead to a positive outcome no matter what else happens. Best of luck!

[Scott E.]

I disagree with the other posters.

Location matters more than anything else and should be considered before anything else. You should be buying in a sub market that you deeply understand, then buy in the right neighborhood AND on the right street within that sub market. 

Don't buy a house that sits on a busy street. Don't buy a house that backs up to a big commercial complex. Don't buy a house that sits next to a school. Don't buy a house with a neighbor that has a chain link fence, 8 cars in the driveway, and loud dogs that they leave outside all day.

You get the point. Location matters most.

Once the property you're targeting checks the location box, then it's time to look at the price. Paying the right price is equally as important as picking the location. You make money on the buy, as they say. But you shouldn't even be thinking about price until you're looking at a deal that's sitting in the right location.

[Matthew Irish-Jones]

Quote from @Christian Walker:

I'm an agent in investment real estate. It would help to hear from investors themselves on what knowledge they value when considering buying a property. What would you expect an agent to know? What are some things you consider when a deal is presented to you? Thanks in advance!

 Only 1 really.   Can you create an accurate pro forma?

[Bob Stevens]

Quote from @William Harvey:

@Christian Walker I agree with @Bob Stevens. I think if you made a pie chart showing the elements to focus on when considering a property, 98% of it would be the price, and the remaining 2% would be everything else.

If you buy a property right, it'll usually lead to a positive outcome no matter what else happens. Best of luck!

 Correct its ALL about price, You make your money when you buy 

[Bob Stevens]

Quote from @Scott E.:

I disagree with the other posters.

Location matters more than anything else and should be considered before anything else. You should be buying in a sub market that you deeply understand, then buy in the right neighborhood AND on the right street within that sub market. 

Don't buy a house that sits on a busy street. Don't buy a house that backs up to a big commercial complex. Don't buy a house that sits next to a school. Don't buy a house with a neighbor that has a chain link fence, 8 cars in the driveway, and loud dogs that they leave outside all day.

You get the point. Location matters most.

Once the property you're targeting checks the location box, then it's time to look at the price. Paying the right price is equally as important as picking the location. You make money on the buy, as they say. But you shouldn't even be thinking about price until you're looking at a deal that's sitting in the right location.

 Incorrect, its ALL about pricing, but like I said you do not want an F OR G area. People will live and buy anywhere. How many areas have you driven by and said wow I would never live there, but people are. Buying RIGHT is the key. I have many properties in areas I would never live, but guess what, there occupied, PRICE is the key

All the best 

[William Harvey]

@Scott E. What if a property in a warzone with loud dogs, 8 cars, chainlink fence..... was offered to you for $1? I know it is an extreme example, but the point is that even for the most undesirable properties, they are always a deal at the right price. 

I'd rather get a great deal on a property in a bad area than overpay or get an "okay" deal on a property in a good area. I can tell you from personal experience that (in the case of flipping) I have made more money on the deals in bad areas, busy streets, etc than the ones in good areas. Likely because I've been more intentional about buying for a discount because of all the negative factors. Sellers also are (usually) aware of these issues and would be more likely to discount the price compared to someone with a property in a good area. 

For rentals, I would agree with you that for the sake of your own sanity and not having terrible tenants and problems to deal with all the time, it likely makes more sense to focus on good areas first and then price as a close second. But for flips where you are in and out of a property quickly, I think price is the ultimate thing to focus on above all else. Just my two cents! 

[Scott E.]

Quote from @William Harvey:

@Scott E. What if a property in a warzone with loud dogs, 8 cars, chainlink fence..... was offered to you for $1? I know it is an extreme example, but the point is that even for the most undesirable properties, they are always a deal at the right price. 

I'd rather get a great deal on a property in a bad area than overpay or get an "okay" deal on a property in a good area. I can tell you from personal experience that (in the case of flipping) I have made more money on the deals in bad areas, busy streets, etc than the ones in good areas. Likely because I've been more intentional about buying for a discount because of all the negative factors. Sellers also are (usually) aware of these issues and would be more likely to discount the price compared to someone with a property in a good area. 

For rentals, I would agree with you that for the sake of your own sanity and not having terrible tenants and problems to deal with all the time, it likely makes more sense to focus on good areas first and then price as a close second. But for flips where you are in and out of a property quickly, I think price is the ultimate thing to focus on above all else. Just my two cents! 

I respect your opinion on the matter. And of course if I was offered a deal in a war zone for $1, it would be foolish to not consider it.

But I still stand by my principles. Nobody is offering properties for $1. So coming back to reality, the reality is we're all running a business here. And in my business, location comes first. Then price comes as an equally important 2nd consideration.

[Mike Hern]

I respectfully disagree with the above responses.

Reason for buying, and exit strategy are where to start. There are a lot of reasons for buying real estate: Fix & Flip, Rental, STR, Apprecation, you're bored and want to have a project to work on, to clean up a blighted house in the neighborhood, and so on.

There's "cash flow", "appreciation", "tax write offs", "estate planning" , "generational wealth" all are various reasons people buy properties and all have varying needs regarding taxes, asset protection and estate planning.

If it's just price, there is a lot that is missed and it's no longer an "investor" it's a "Job".  

[Chris C.]

@Mike Hern Considering this is the Rehabbing and Flipping forum it is already a job.  If you are actively rehabbing and flipping properties, it is a job.  Even if you do it like I do, primarily relying on contractors for the work, you are still finding properties, analyzing deals, managing materials, managing contractors, handling negotiations, and selling the property.  (My wife is our agent)  My wife, son, and myself all work full time to flip 10-12 homes a year.  The money we make off of flipping is then used to make the decisions you mention.  If we get a deal we pursue no matter what our thought are on "cash flow", "appreciation", "tax write offs", "estate planning" , "generational wealth".  We need to profit to make those decisions.

@Scott E. I have bought, rehabbed, and sold properties with all the issues you mention.  If you buy right then it makes up for the rest.  You got a D or F property in the Upstate of South Carolina please forward that lead to me.  I have flipped everything from singlewides to lake homes and have actually made my highest margins on flipping mobile homes.

Obviously my vote is price is king.  Location only matters if you can get it at the right price.  You do not by a class A area for to high a price and you don't buy a class F property for to high a price. Common denominator.  Price.

[Scott E.]

Quote from @Chris C.:

@Mike Hern Considering this is the Rehabbing and Flipping forum it is already a job.  If you are actively rehabbing and flipping properties, it is a job.  Even if you do it like I do, primarily relying on contractors for the work, you are still finding properties, analyzing deals, managing materials, managing contractors, handling negotiations, and selling the property.  (My wife is our agent)  My wife, son, and myself all work full time to flip 10-12 homes a year.  The money we make off of flipping is then used to make the decisions you mention.  If we get a deal we pursue no matter what our thought are on "cash flow", "appreciation", "tax write offs", "estate planning" , "generational wealth".  We need to profit to make those decisions.

@Scott E. I have bought, rehabbed, and sold properties with all the issues you mention.  If you buy right then it makes up for the rest.  You got a D or F property in the Upstate of South Carolina please forward that lead to me.  I have flipped everything from singlewides to lake homes and have actually made my highest margins on flipping mobile homes.

Obviously my vote is price is king.  Location only matters if you can get it at the right price.  You do not by a class A area for to high a price and you don't buy a class F property for to high a price. Common denominator.  Price.

My average buy price on my flips over the years is ~$500,000. With your logic, I should be searching everything available in the United States that is priced at ~$500,000.

That doesn't make sense and that's not how it works.

Location comes first. The first decision in my flow is picking Scottsdale, AZ as my location because that is where I live, that is where my contractors live, that is where my realtors live, that is where my lenders live, that is where my designers live, that is where my architect lives. After I hone in on my location of Scottsdale, now I'm ready to start looking at homes in my price range of $500,000.

And after I find homes available for ~$500,000, now it's time to underwrite those deals to see if they make sense.

It's kind of a pointless argument. We're basically talking about what came first, the chicken or the egg. As I said earlier in the thread, location and price are equally important. But the location consideration comes first.

[Chris C.]

Quote from @Scott E.:

Quote from @Chris C.:

@Mike Hern Considering this is the Rehabbing and Flipping forum it is already a job.  If you are actively rehabbing and flipping properties, it is a job.  Even if you do it like I do, primarily relying on contractors for the work, you are still finding properties, analyzing deals, managing materials, managing contractors, handling negotiations, and selling the property.  (My wife is our agent)  My wife, son, and myself all work full time to flip 10-12 homes a year.  The money we make off of flipping is then used to make the decisions you mention.  If we get a deal we pursue no matter what our thought are on "cash flow", "appreciation", "tax write offs", "estate planning" , "generational wealth".  We need to profit to make those decisions.

@Scott E. I have bought, rehabbed, and sold properties with all the issues you mention.  If you buy right then it makes up for the rest.  You got a D or F property in the Upstate of South Carolina please forward that lead to me.  I have flipped everything from singlewides to lake homes and have actually made my highest margins on flipping mobile homes.

Obviously my vote is price is king.  Location only matters if you can get it at the right price.  You do not by a class A area for to high a price and you don't buy a class F property for to high a price. Common denominator.  Price.

My average buy price on my flips over the years is ~$500,000. With your logic, I should be searching everything available in the United States that is priced at ~$500,000.

That doesn't make sense and that's not how it works.

Location comes first. I'm first picking Scottsdale, AZ because that is where I live, that is where my contractors live, that is where my realtors live, that is where my lenders live, that is where my designers live, that is where my architect lives. After I hone in on my location of Scottsdale, now I'm ready to start looking at homes in my price range of $500,000.

And after I find homes available for ~$500,000, now it's time to underwrite those deals to see if they make sense.

It's kind of a pointless argument. We're basically talking about what came first, the chicken or the egg. But as I said earlier in the thread, location and price are equally important. But the location consideration comes first.

 Generally, when speaking of location with real estate investors and professionals, they are referencing the type of locations in their investing area.  You are correct in that I only buy in my area of expertise. However, within that area, location takes a back seat to price.  In the general definition of location, used by most real estate professionals, it will always take a secondary position to price.  If you want to apply the definition of location on a national scale, then of course I believe most investors stick to their areas of expertise.  Even if they have expertise of various areas around the country, they stick to those areas.

I believe we can all agree for this conversation, and I believe the intent of the original post, is that location references the type of location within someone's area of expertise.

[Reed Rickenbach]

Quote from @Scott E.:

I disagree with the other posters.

Location matters more than anything else and should be considered before anything else. You should be buying in a sub market that you deeply understand, then buy in the right neighborhood AND on the right street within that sub market. 

Don't buy a house that sits on a busy street. Don't buy a house that backs up to a big commercial complex. Don't buy a house that sits next to a school. Don't buy a house with a neighbor that has a chain link fence, 8 cars in the driveway, and loud dogs that they leave outside all day.

You get the point. Location matters most.

Once the property you're targeting checks the location box, then it's time to look at the price. Paying the right price is equally as important as picking the location. You make money on the buy, as they say. But you shouldn't even be thinking about price until you're looking at a deal that's sitting in the right location.

I'm with you on those principles for buy and hold. But the question was about flipping. In that case, factor those variables into a discounted sale price.. I only buy and hold in areas I'd live, and I take quite a bit of qualitative data when making those decisions. Flipping is mostly quantitative in my process. 

[Scott E.]

Quote from @Reed Rickenbach:

Quote from @Scott E.:

I disagree with the other posters.

Location matters more than anything else and should be considered before anything else. You should be buying in a sub market that you deeply understand, then buy in the right neighborhood AND on the right street within that sub market. 

Don't buy a house that sits on a busy street. Don't buy a house that backs up to a big commercial complex. Don't buy a house that sits next to a school. Don't buy a house with a neighbor that has a chain link fence, 8 cars in the driveway, and loud dogs that they leave outside all day.

You get the point. Location matters most.

Once the property you're targeting checks the location box, then it's time to look at the price. Paying the right price is equally as important as picking the location. You make money on the buy, as they say. But you shouldn't even be thinking about price until you're looking at a deal that's sitting in the right location.

I'm with you on those principles for buy and hold. But the question was about flipping. In that case, factor those variables into a discounted sale price.. I only buy and hold in areas I'd live, and I take quite a bit of qualitative data when making those decisions. Flipping is mostly quantitative in my process. 

How many homes have you flipped in bad neighborhoods? I'm not claiming to be some "know it all" but if you flip houses and don't follow the principles in my post that you just responded to, you will eventually get burned. No doubt about it.

[Mike Hern]

Quote from @Chris C.:

@Mike Hern Considering this is the Rehabbing and Flipping forum it is already a job.  If you are actively rehabbing and flipping properties, it is a job.  Even if you do it like I do, primarily relying on contractors for the work, you are still finding properties, analyzing deals, managing materials, managing contractors, handling negotiations, and selling the property.  (My wife is our agent)  My wife, son, and myself all work full time to flip 10-12 homes a year.  The money we make off of flipping is then used to make the decisions you mention.  If we get a deal we pursue no matter what our thought are on "cash flow", "appreciation", "tax write offs", "estate planning" , "generational wealth".  We need to profit to make those decisions.

@Scott E. I have bought, rehabbed, and sold properties with all the issues you mention.  If you buy right then it makes up for the rest.  You got a D or F property in the Upstate of South Carolina please forward that lead to me.  I have flipped everything from singlewides to lake homes and have actually made my highest margins on flipping mobile homes.

Obviously my vote is price is king.  Location only matters if you can get it at the right price.  You do not by a class A area for to high a price and you don't buy a class F property for to high a price. Common denominator.  Price.

Rehabbing & Flipping are two different things.
I rehab to hold.

[Chris C.]

Quote from @Mike Hern:

Quote from @Chris C.:

@Mike Hern Considering this is the Rehabbing and Flipping forum it is already a job.  If you are actively rehabbing and flipping properties, it is a job.  Even if you do it like I do, primarily relying on contractors for the work, you are still finding properties, analyzing deals, managing materials, managing contractors, handling negotiations, and selling the property.  (My wife is our agent)  My wife, son, and myself all work full time to flip 10-12 homes a year.  The money we make off of flipping is then used to make the decisions you mention.  If we get a deal we pursue no matter what our thought are on "cash flow", "appreciation", "tax write offs", "estate planning" , "generational wealth".  We need to profit to make those decisions.

@Scott E. I have bought, rehabbed, and sold properties with all the issues you mention.  If you buy right then it makes up for the rest.  You got a D or F property in the Upstate of South Carolina please forward that lead to me.  I have flipped everything from singlewides to lake homes and have actually made my highest margins on flipping mobile homes.

Obviously my vote is price is king.  Location only matters if you can get it at the right price.  You do not by a class A area for to high a price and you don't buy a class F property for to high a price. Common denominator.  Price.

Rehabbing & Flipping are two different things.
I rehab to hold.

 Agreed.  That was my mistake in assuming only reselling properties in my post.  

The considerations you mentioned do carry much more importance in a rehab and hold strategy.

[Eliott Elias]

I never know anything, but i'd be an idiot if I didn't learn from previous experiences. You're going to learn a lot by yourself, as you should. And you should make it your goal never to make the same mistakes again. 

[Reed Rickenbach]

Quote from @Scott E.:

Quote from @Reed Rickenbach:

Quote from @Scott E.:

I disagree with the other posters.

Location matters more than anything else and should be considered before anything else. You should be buying in a sub market that you deeply understand, then buy in the right neighborhood AND on the right street within that sub market. 

Don't buy a house that sits on a busy street. Don't buy a house that backs up to a big commercial complex. Don't buy a house that sits next to a school. Don't buy a house with a neighbor that has a chain link fence, 8 cars in the driveway, and loud dogs that they leave outside all day.

You get the point. Location matters most.

Once the property you're targeting checks the location box, then it's time to look at the price. Paying the right price is equally as important as picking the location. You make money on the buy, as they say. But you shouldn't even be thinking about price until you're looking at a deal that's sitting in the right location.

I'm with you on those principles for buy and hold. But the question was about flipping. In that case, factor those variables into a discounted sale price.. I only buy and hold in areas I'd live, and I take quite a bit of qualitative data when making those decisions. Flipping is mostly quantitative in my process. 

How many homes have you flipped in bad neighborhoods? I'm not claiming to be some "know it all" but if you flip houses and don't follow the principles in my post that you just responded to, you will eventually get burned. No doubt about it.

I live in Memphis so the rent-to-price ratio is probably more favorable than your market. I have flipped 11 homes in C areas so far. There seems to always be a buyer here in any area of the city due to rental returns. 

[Patrick Hayes]

I would want my agent to know the market in your case Nashville, be connected to good lenders, contractors etc. and understand my investing strategy 

[Joshua Ferg]

Location. THEN price. Especially in this market where some areas are less insulated against market volatility. Everything is moving south of Nashville. Pull up a topography map and look for glacial and tectonic valleys southwest of Davidson. These areas appreciate faster than piedmonts. 

[Timothy Howdeshell]

Must have: 

1. understanding of deal structure (financial and operational)

2. understanding of rehab costs generally

3. Good communication and a positive attitude

Nice to have:

1. willingness to check on property periodically during rehab (if listing agent)

2. knowledge of contractors and other vendors

3. Working knowledge of modern communication (video chat, file sharing, docusign)

Really nice to have:

1. List of investor buyers and relationships with them

2. Ability to negotiate and structure creative finance deals that you can sell to investors

3. Return all phone calls immediately

[Bill J Fay]

All great and important points in this thread. I want to point out that providing Value is the MOST important in my experience. If you can purchase a deal on the front yet, dial in the renovation, and list the property slightly below or at the same price as older comps, you are providing value to a buyer. Put yourself in the buyers shoes though. Would you buy a property that sits on a double yellow that is fixed up, or opt for a property on a quiet street that is slightly outdated? In a seller's market, it shouldn't matter too much as long as the numbers work. When the buyers scatter, you need to look at external factors as well.