Thinking of flipping out of state with a friend, how do I do this by the numbers?

Question

I've been a landlord for a few years now. I feel like I've stagnated. I want to grow my net worth actively, rather than passively wait for the proverbial rising tide. Inflation always seems to out pace the rising tide. I am giving serious thought to flipping with an old high school friend of mine. I live in CT, she lives in MI. Because homes are much less expensive in the Midwest, we're most likely going to flip in MI. I'll be providing the funding ($200-$250k) and she knows a large network of contractors through personal connections and is willing to do most of the leg work.

Understanding the market for fix and flip strikes me as a much more complex beast than identifying a rental market. What tools do we need to fully analyze a market for potential flips? We are oscillating between flipping in an area that seems to be increasingly popular for vacation homes and just picking an area that seems to be gentrifying on the periphery of Metro Detroit.

I don't want to guess.

I want to make data driven decisions about the market. And then about a potential flip itself. As a new soon to be flipper, how do I do that? How do I get good at it? What separates the proverbial rock stars who can do it well and not fool themselves from the groupies who just think they can?

This isn't 2008, the market is weird. I can in fact flip the wrong house lose my shirt if I'm not careful. I want to do this right from the start. Any help would be appreciated. Thanks!

Marcus Auerbach · Answer

Hi Jeff, I wish I could tell you differently, but you have too many potential failure points in this plan and their probabilities multiply. I have done a LOT of rehabs and a few of them were flips. Flipping is hard enough if you do it 15min from your house and without a partner. As far as price point you want to go up high enough where people are will to pay for great design and not just necessities like a functioning HVAC. The secret to flipping successfully is always in the design part: exceptional design makes money. Just repairing broken properties is not a profitable business model.

When you look at the amount of work, ROI, risk and taxation, flipping is not a great business. Don't flip because you love RE. I'd much rather buy a coffee shop or a car wash. Or any other cash-flowing business and then use that cash to buy more rentals.

When you look at the amount of work, ROI, risk and taxation, flipping is not a great business. Don't flip because you love RE. I'd much rather buy a coffee shop or a car wash. Or any other cash-flowing business and then use that cash to buy more rentals.

Sultan Ali · Answer

Hi Jeff, great that you’re looking at flips with a data-driven mindset. The main tools investors lean on are detailed comps (recent solds, not just listings), after-repair value estimates (ARV), and rehab cost estimates. Many use platforms like PropStream, BatchLeads, or even MLS access through an agent to get solid comparable sales. For rehab numbers, a clear scope of work + contractor bids is key.

At the market level, you’ll want to track days on market, average resale price trends, inventory levels, and buyer demand in the areas you’re considering (vacation vs. gentrifying neighborhoods).

What separates the “rock stars” is consistency in running the numbers the same way every time - ARV, minus purchase, minus rehab, minus holding/transaction costs, minus desired profit = your max offer. Having this framework before you buy keeps emotions and guessing out of it.

Since you’re funding and she’s managing, it might also help to clearly define responsibilities and profit splits upfront so expectations are set for both sides.

Jeff G. · Answer

I see your point. You're saying the secret to success is the "ooh, shiny" effect that some people get, leading them to pay a premium for the product. That's something I hadn't considered.

I'm still going to try to find a real estate related path that works. Not "make it work" and lose my shirt. If I can't move forward, I can't move forward. I genuinely appreciate your candor, thanks.

I'll absolutely dig into non-real estate alternatives. I've thought about automating a laundromat for example.

Nicholas L. · Answer

@Jeff G.

hello.  it sounds like you're being thoughtful and cautious about this, which is great, and like you said, very warranted given the status of the market right now.  with that said, I'm just going to give you my honest reactions to your post.

-can you say more about why you feel like you've stagnated?  "feeling stagnated" is not a great motivation to do something.  owning rentals IS growing your net worth actively.  building equity through mortgage paydown is nothing to be trifled with.

-the upside of properties being less expensive is that they're easier to acquire, the downside is the thinner margin.  so to me, it's not obvious that if you're in CT, you should flip in MI.  i'm in Pittsburgh, and i look at "cheap" properties all the time where: the purchase price + the rehab = the ARV.  and as you know, that doesn't make a good flip.

-if you're the money guy, then your partner should be handling everything else.  so if she doesn't know the answers to all these questions and have a plan... i wouldn't move forward.  and, i know almost nothing about you, and nothing whatsoever about the partner... but again, being honest, "connections to contractors" isn't bringing much to the table if you are both an experienced landlord and have funds.

hope this helps

Jeff G. · Answer

@Nicholas L.

Yes, sure.

I lost my job (IT) a few months back and I have no idea how long I'm going to be unemployed due insanity in the job market. Economically, I can cover a decent portion of my expenses with my rental income but not all of it. I have enough saved up to start flipping AND still have enough savings to live off for a year, probably more if I'm frugal. This isn't a desperation move, I'm not drowning. I just don't want to sit here and spin my wheels in the mud and wait and wait for fate; I'd rather actively do something.

My soon to be business partner has worked for remodeling companies and knows a lot of the players in her area and nearby. She knows a decent chunk of the rehab process, but not every nook and cranny. Some of that is because she has focused on only certain kinds of renovations where with a flip it's (potentially) everything. But I think her knowledge set is mostly transferable. Crucially, she is very good at keeping a renovation on budget and has a better head for numbers than I do. Every renovation I've had in my buy and hold real estate so far has gone significantly over budget. She's going to save me a lot of aggravation.

To your point about division of labor, we are working on a detailed plan where she does nearly all of the heavy lifting and I supply the money. That said, I'm going a bit stir crazy here, so I'm voluntarily taking on some tasks for my own sanity. I am operating under the assumption that all profits will get reinvested back into the business for the first two years. I don't want to use leverage or credit until I have proven to myself we can operate without it if we have to.

To your point about inexpensive properties. You're right, we'll have to find properties that have the right things wrong with them and are close to the limits of what my budget will tolerate. I'm avoiding CT because the taxes are insanely high here. We might have the highest property tax in the nation and that's just for starters. They tax everything here.

Right now we're trying to identify a market and figure out how to get and field leads. She, having a day job, can't take random calls all day. Logistically, she can carve out time for calls with contractors and other vendors as well as do property inspections. She just can't be tied down taking every random call that comes in that might be a lead. Normally that would mean I would take incoming sales calls as I'm unemployed and have sufficient free time. Unfortunately, that's not possible: I'm partially deaf. So, we're trying to figure out how to handle leads. Most likely we'll start on the MLS.

You gave a detailed response and I'm trying to cover every point you raised, but I feel like I'm missing something in my reply but I'm not seeing it. Please speak up if I missed something.

Oleg Donets · Answer

@Jeff G. while there are certainly plenty flippers who source their deals from wholesalers, I see more and more of them turn to direct-to-seller marketing. Sure you save time on seller negotiation phase, but you still need to run the numbers (like you'd normally do if you were marketing directly to sellers) as well as you will pay wholesalers' (often very hefty) assignment fee.

Jeff G. · Answer

For lead generation I'll most likely network with wholesalers who know what they're doing. I'm reaching out to brokers trying to get access to someone's pocket listings, wholesaler or not.

I'm not opposed to paying for some direct marketing if I have to and funneling it to a real estate agent who can take the leads and give us first dibs on anything that comes through. Is that sort of setup a thing?

Thoughts?

Drew Sygit · Answer

@Jeff G. it's always easiest to NOT reinvent the wheel!

Pretty sure no matter where you invest, there will be many other flippers you'll be competing with for acquistions, maybe contractors and then selling.

So, just copy what other successful flippers are doing and then try to incrementally improve.Acquisitions will be the toughest challenge as you need to network to get access to the best deals.

Renovations you'll want to study what others are doing for materials, fit & finish to understand what the "market" is looking for.

Selling will be about finding the right balance of speed (DOM) vs cost. - I.E. hiring the cheapest agent vs the best agent.

Mistakes with any and all of these could wipe out any expected profits.

How are you going to address the acquistion challenge?

Thinking of flipping out of state with a friend, how do I do this by the numbers?

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