Difficult finding investment property in Des Moines, IA

19 Replies

My wife and I are attempting to find a flip in Des Moines, IA to build capital for a buy and hold. We have made a few offers but have been unable to reach terms on any properties. We've been looking for about 6 weeks but have yet to find a viable option. Most of the properties we have looked at would let us basically break even if we close at the asking price. Since the seller has only moved a few thousand dollars on their price it hasn't left much for us with conservative estimates. Am I under-valuing properties, not looking in the right places, or do I just need to be more patient. 

http://www.zillow.com/homes/for_sale/Des-Moines-IA...

Here was a recent one that we placed an offer on. ARV=145k, Rehab=35k, Closing Costs, Realtor Fees and Holding Fees=20k

We offered 80k and hoped to clear 10-15k. Does it seem like we are too far off on anything?

After I moved to Des Moines 1.5 years ago I began looking for properties to flip.  I spent months putting offers on houses but none were ever accepted.  I later learned that a lot of flippers in the area were only making 5k-10k per flip and I wasn't willing to do that.  Have you tried finding properties through a wholesaler?  

@Cody Kauzlarich are you open to foreclosures? There are probably 50+ SFH foreclosures out there right now. Some are much cheaper than the example your provided and would yield a much higher profit. One just sold in Valley Junction after being on the market for over a year for $45k! ARV was probably around $110. I would estimate $20-25k in repairs at most. I am doing one right now on Creston Ave, purchased for $31k, ARV $105k and we are a couple of weeks out from finishing and it looks like we are coming in around $15k for repairs, give or take $1,000 or so.

Also, try driving neighborhoods and send letters to the houses in terrible condition or vacancies. I am not a wholesaler but this works great for your own investing. We are discussing with the owner of a duplex right now because we sent a letter. We found this property because it was right next to the house we are flipping. The duplex just sat empty for the past 2 months with 0 activity. Apparently the original owner died and the family members now own it and don't know what to do with it.

@Jason Cooper I'm not familiar with any wholesalers in the Des Moines metro but would be open to that option. Yeah, 5-10k just isn't going to cut it for me for the amount of risk. Plus, I can easily make that in 6 weeks just working overtime with obviously no risk. 

@Jedd Braunwarth , I believe I know which one in Valley Junction, on Locust I think,I had it estimated at more than that but had also considered it. I hope the one on Creston works out for you. I have been taking down addresses of properties when we're around town to compile a list of contacts. Maybe have to start going that route sooner than I expected to.

@Cody Kauzlarich That is the one! I should have mentioned that my estimates use the guys that I have on my team for rehab/repairs. They are good but also VERY cheap. Mostly working for cash. I wouldn't use them for a very high end home but their quality is fantastic for anything under $200k. I only hire out plumbing, electrical, etc. to top notch companies. I would assume that your estimates involve an actual GC and legit companies? Which has many pros in itself over what I do.

@jedd braunwarth, actually I would do the majority of the rehab myself. But same, hire out plumbing, electrical, and HVAC. My dad is a contractor and has a construction company in Centerville, so I've got strong construction background as well as a great resource if I get in over my head on any one area. As difficult as ts been to find a property I'm happy taking a few extra weeks of rehab to save labor costs instead of rushing to finish a property to just sit around looking for another. 

hi cody. it has been years since i have been to the demoines area. i am now in buffalo new york area. here is what i have found. vacant houses are like deer, where there is one, there is another. when you go to look at these houses that you are putting offers in, do you look around the entire neighborhood? where there is one, there is another. drive the entire neighborhood. i have found that tax foreclosures work the best for me. does your area have a municipal building with a treasurer and or an assessor? go into that building, ask to speak to either one of them or the code enforcement officer. ask if they have a list of the vacant houses in the area. ask if they repossess houses for back property taxes and what they do to get rid of them if they take possession. these, i have found, are the best deals

I am definitely a newbie but if you could get your rehab budget down to $25K, then the deal would be better.  I know nothing of rehab budgets in Des Moines.

Oops, just say your construction experience so I am sure the 35K is in line.

I think your $35k repair estimate seems high considering you're doing everything yourself.

I think your $80K offer is WAY too high. See if they'll take $63K

I've looked off and on at flipping MLS foreclosures in the area for several years. I have yet to find one that I'm comfortable with after running the numbers. I completely understand what you mean by the 5-10k profit, that's all I ever come out with when running numbers too. Seems like a lot of the guys flipping have their own crew or are doing their own work, full time work basically, which I can't compete with. I've had more success finding houses for rentals.

@Jason Lewis they turned down 80k so I'm assuming 63 is out of the question, but I am curious how you came up with that number?

@Tyson S. I agree. There are good deals to be had but more appropriate, it seems, for either rentals or owner occupant. Not enough meat on the bone after you factor in realtor fees, closing costs, and holding expenses. If it were your full time job and you were able to rehab maybe one a month then around 7k doesn't seem as bad. 

@Cody Kauzlarich If they turned down $80k, then this deal is dead in the water. Just give the seller your number and if he/she hasn't sold that property in a month or two, they might call you back and be more open to your offers. And to answer your question about how I got the $63k number, I just use "the formula". 

ARV × 70% LTV - Repair costs = your top offer

As for finding your deals, have you ever considered working with wholesalers? Most of what they bring you are non-MLS properties. I work with them all the time!

The deal is dead. I was just using this as a recent example of how it seems like properties are just on the brink of being a deal worth the risk, but not quite. 

My current model is purchasing, basic rehab, and renting. One rented, one ready to rent this week, three more ready end of May, and two end of June is the current outlook. Flipped one in January but that was a sweet deal and an easy one. Hoping to average about 2 a month, give it a year and see how this model works.

When rehabbing to rent you can get by not putting in quite as much $$, have a house with newer mechanicals/utilities(3 of them I've had to do wiring, plumbing, hvac, some windows, one roof, etc), so in theory that'll reduce ongoing maintenance costs.

My current dilemma is whether to hire someone in house to help property manage, or outsource to a property management company.

Does anyone know of any wholesalers in the Des Moines area?

I am marketing and will hopefully have some deals coming through shortly. What area are you looking for? 

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