finding the right fix and flip deal

7 Replies

I am new to BP, but really like what I see so far. So a really quick introduction of myself. I am currently in real estate school, and plan to begin a career in real estate as an agent next year. All parties I have talked to regarding starting out in real estate sales have advised to have as little as three months living expenses saved, and some have said as much as a year. Long story short, my wife and I have not been able to save more than a couple hundred here and there since we were married, and in our current livelihood we don't foresee thousands of dollars going into the bank over this next year with our first baby coming and all.

So getting on to my question. I have a lot of handy skills and have remodeled several houses, and also helped flip a house several years ago. Our goal is to fix & flip a house this year, and maybe continue doing fix & flips for extra income as we find deals, for the immediate purpose of gaining the living expenses for several months that we will need as we get started in real estate. 

We already have potentially $70k invested in whatever deal we find. Which I feel is a good starting amount for our first flip. The issue is living where we do in southwest Colorado, not much is out there for under $150k. I have even been keeping my eye out on the Phoenix market where houses are cheaper and there are more foreclosures. The issue I am finding in Phoenix is that even the properties that are listed in the $30-$50k range that need $10-$15k to get them sell-able, don't have a high enough upside to make it worth the risk. Comps in the specific areas of the houses I'm finding are only selling for $20-$25k more than the places I'm finding, and once I pay off my investors and interest and closing fees and renovation costs, most of these properties would only net me $10k, and that's if everything went right. I guess my question is am I miscalculating something? Do I need to be more willing to just take the risk? Or is there somewhere else I should be looking other than just zillow and realtor.com? I just see a property that could be in my range, but then when I do market research and see that it likely won't sell for more than $80k, it scares me away. What do you guys think? Should I be going about this differently?

Welcome Tyler,

For one, I would drop Zillow. I only ever use it as a quick glance but it's not an investor tool by any stretch. It's way too inaccurate. You really should be using the MLS to do your comps.

So you are not happy with a $65k investment that returns $10k within four months? I say four months because you should have a $10k-$15k rehab done in less than a month. That's a 15% return on the deal, or 45% annually.

That's the definition of an honest single to me.

However, it all depends on if you comped it right, because if you presented the deal to me with the words "zillow comps", all you would hear from me is a click.

Ok, so another newb question then. I am not a licensed realtor yet, so is there a way for me to access the mls other than having a realtor do it for me on each and every property I find? Or since I am out of state would the best thing be for me to quit trying to find a deal on my own and have a local realtor look for me?

@Tyler Treadway  

To my knowledge only licensed realtors can access the MLS. I am not familiar with Phoenix but each area could have "public" MLS access which does not include all available information that is for agents only. For example, in Denver and northern Colorado there are two (2) MLS's. The public versions are www.recolorado.com and www.coloprop.com.

I understand your dilemma...my wife is a realtor and she set up an automatic search so I get new listings that meet our criteria nightly.  I can't imagine asking a realtor every time I  find a potential property.

Good Luck!

You might want to look at doing a house hack, buy a SFR or Duplex and fix it up, move and rent it. Rinse and repeat.

For rentals like a duplex you might do better with the sale if you have tenants in them when you go to sell.

If the property really needs a lot of work look into getting a 203k loan since you can get a 203k on a house that you are going to live in even if it is not habitable at the time of purchase.

Interesting ideas. We have considered doing a live-in and flip sort of a deal. Our housing is paid for by our current employer, so we are considering it as an option next year. It would not, however be an instant money-maker that we are specifically looking for right now, but is something we are strongly considering. 

Another question along the same lines. What are the drawbacks to considering purchasing an investment property out of state?

@Tyler Treadway from my experience you do not have to have a license to get MLS access but you must get that access via a licensed agent. Here the MLSs offer agents the right to add an unlicensed assistant to their account at no charge. Others can be added for a nominal monthly fee.

Bottom line is if you know the right people you can get access. You might also be able to buy access as well.

In the event of a live-in, fix and then flip, if we were to get an FHA backed 203k loan for the property, how long would we need to live in the house before we were legally allowed to sell it? After doing a little research it looks like you are required to occupy the home (complete the rehab) within 6 months of acquiring the loan. Does anyone know if this is correct, and how long after that before you're allowed to re-sell it?

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