First time rehabber
Hi,
I am new to rehabbing/flipping. I found an as-is property that looks to be about 30% undervalued, but it has clothes, furniture and other belongings left behind as well as a kitchen (gross floor, no cabinet doors) and bathroom that needs major work. Wondering if someone would be willing to help me decide whether it is a good investment opportunity. Thanks in advance!
#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
- Investor
- Austin, TX
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#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
- Investor
- Austin, TX
What is your criteria? Do not shop around for deals if you do not know what you are looking for. Determine your rehab budget and factor in closing costs with selling the property.
As Eliott said in the previous reply, you need to be sure of what you are looking for in order to know if you have found it when you come across a property. We come across good deals on a regular basis but to be honest, many are simply not in our wheel house and not what we want to add to our portfolio (flip or rent). But we know what our model is and look for those deals. The rest we pass on and often contact fellow investors that are looking for specific deals as well and it fits what they want . . . we all help each other as our models are different but well-defined.
You did not mention where you are, what type of property it is and is it on on or off market property. Without at least that information, it will be hard for any of us to provide any kind of input as to what type of deal you might be looking at.
If you are not experienced i would try and partner with someone local. That way you can lean on there experience and also learn.
Thank you for the advice. To be honest, I'm not sure what type of criteria I have for fixer-uppers since I haven't done any yet. But I will definitely check with someone local to get an accurate ARV and also verify my numbers for the rehab work. I also read in another post that I should offer 70-75% of ARV minus the rehab costs, so I will definitely take that into account.
Thanks again!
#4 Multi-Family and Apartment Investing Contributor
- Cincinnati, OH
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#4 Multi-Family and Apartment Investing Contributor
- Cincinnati, OH
@Norton Lam, getting started is scary, and even more scary in the relatively hot market we still have today.
That being said, I would attend some meetups and network with other flippers. Hopefully, one of them will take a liking to you and let you tour properties with them, to better understand how they view properties. Then, I would also be looking for properties that are fairly basic updates: paint, cabinets, counters, appliances, bath fixtures, but you aren't opening walls and moving plumbing/electric, etc.
In my market, these types of houses don't leave a ton of profit margin, which I typically don't suggest, but it gets you going, and your risk of uncovering something major is likely lower. As many talk about on these forums, you need to get started. Make educated decisions, but even if you lose money on your first deal, you will have paid for an education, not to dissimilar from going to college.
I don't recommend going into a deal that you think you will lose money, but with how hot the owner-occupied market is in many parts of the country, to really make money you need to be willing to take on a renovation beyond what a homeowner will want, which I don't think you are ready for yet.
To determine a rehab project's financial feasibility, you'll have to calculate the costs of acquisition, the rehab costs (be generous as you never know what will go wrong), and the estimated ARV upon completion of the project.
The fact that the property appears to be 30% undervalued is a positive sign. Evaluate the current market value of similar properties in the area to confirm this estimation. Ensure that the asking price aligns with the potential for a profitable flip. Also, assess the extent of repairs needed and calculate the potential resale value of the property after renovations are complete. Research recent sales of comparable properties in the neighborhood to estimate the ARV accurately. This will help you determine the profit potential.
Where are you located?