Having Trouble Finding Flips - Tampa

9 Replies

Hello all! 

My father and I have recently decided to go into the flipping business. He is a 30+ year property insurance claims adjuster and I am a soon-to-be marketing graduate and real estate junkie.

I have convinced him to sell one of his fully paid-off properties in South Tampa that he's had as a buy-and-hold for years. The problem? It's a 2/1 and $350k bungalow that only rents for $1300 a month and has incredibly high taxes and insurance because it is a block from the bay. While it is an easy rental (rented in 1 day) and easy to sell (people knock on the door and try to buy it even when it's not on the market), it's just not ideal for cashflow and I'd like us to use the cash to start flipping. Because the property is already paid off, it will be pure profit. (Do you think this is enough to start?)

Between his ability to easily go into a home and appraise what the damage will cost to fix and MY eye for detail, staging, and layout + the energy to do the things (like put floors in and tile) that he is less-than-excited about, I think we'll make a great team.

My only problem is that I'm struggling to find deals. I find 1 to 2 every month that I feel confident will pass the 70% rule and though we've yet to attempt to purchase any, about half get up-bid past my bottom-line number and in the past three or four months there have only been about 3-4 I would have absolutely jumped on.

I tend to steer clear of foreclosures and look more for short sales and REOs so we can inspect. I also look for 3/2 minimum in North Tampa, family friendly neighborhoods like Northdale, Lutz, and Land O' Lakes.

I guess my big question is: Is anyone in the Tampa area (or in other areas) having these problems? And if you aren't, do you have any recommendations for finding deals? I don't network as much as I should (shy as a button) but surely there must be other ways, right? Most agents are not very helpful, not because they don't want to help but rather because I think they are having problems finding these deals too.

Thanks in advance for your help.  It is appreciated more than you know.

Tampa is a huge flip market. You have too much competition with deep pockets and tons of experience. My advise would be to look in a less populated area where not as many investors are all competing for the same distressed houses. Also, the $1300.00 monthly rent for the house you are referring to seems low. Especially if you are able to rent it in a day. I would think you should be able to get a minimum of $1700.00 a month if not more.

I agree, I think we probably could rent it for more. I am just now helping with his investments, but I would have probably rented for $1600-1700 originally as well. The property taxes are $6k a year because though it's in a historic area and even without other costs (like insurance, security, and upkeep), it'd only produce:

20,400 (1700x12months) - 6,000 = 14,400 a year or just over a 4% ROI minimum without factoring in all the other costs, so we've got to get rid of it :( So kind of a bummer even though it's a great market and in a sought-after location.

I think you're right about there being a lot of other flippers around here though. It's very hard to compete when you're the new kid on the block. I'll try looking into other areas that maybe aren't as flipper-heavy. 

Thanks for your reply!

Kristen,

I wouldn't be so fast to sell the bungalow.  I'm assuming your father has taken depreciation on the house over the coarse that its been rented.  (disclaimer: I'm not a tax strategist or accountant, seek the advice of a certified accountant)  He could be looking at a huge tax hit if he sells.  Even if he pays 15% in capital gains taxes that would be over $50K in taxes that he's losing.  Not to mention 5-6% for realtor commissions ($15K-$20K) and potential closing costs (3-5%, or $9K-15K).  All in your $350K could be more like $250K. 

 A better solution if you need the capital to fund your flip business could be to take an equity line against the rental and use those funds.  The rents you collect could easily pay the payment on the equity line while you're using the capital, and you still have that sweet piece of real estate that will continue to appreciate.

Still need help in Tampa?

The biggest problem for flippers in the Tampa Bay market right now is at the lower end (under $100K) of the market.  Every out of work or under employed guy/gal in the building trades fancy themselves as the next success, and are willing to pay a few dollars more to win a property.  They figure they can cut costs by doing the labor themselves.

The current sweet spot seems to be a property that can be purchased in the $100-200K range, needs quite a bit of work ($50-80K) and can be resold in the $225-420K range.  This also cuts out a lot of the "bottom-feeders" who just don't have the funding to see that kind of project all the way through...

Originally posted by @Peter Lee :

The biggest problem for flippers in the Tampa Bay market right now is at the lower end (under $100K) of the market.  Every out of work or under employed guy/gal in the building trades fancy themselves as the next success, and are willing to pay a few dollars more to win a property.  They figure they can cut costs by doing the labor themselves.

The current sweet spot seems to be a property that can be purchased in the $100-200K range, needs quite a bit of work ($50-80K) and can be resold in the $225-420K range.  This also cuts out a lot of the "bottom-feeders" who just don't have the funding to see that kind of project all the way through...

i've noticed this as well. I don't even look at properties under 100k unless brought to me by another wholesaler who wants to JV on it. for my own personal properties and properties i shop to my list, it's houses that were initially purchased above 150k

edit: just realized this is a 10 month old thread that was revived lol

Everything everyone is saying here seems to be true, but if you are a bottom feeder, what would you suggest the best way to get past the 100k mark is. By that I mean, I got 70k, but I am facing stark competition, with smaller profit margins. Is there a way to get additional capital without killing myself, or perhaps another strategy would be to find someone exactly like me and team up?

Hi @William Howley I have a deal that I own on a lake in Lutz that is perfect for a flip. I would be open to owner financing to you. You could also look for a partner to JV on a deal with you. Let me know if you would be interested.

Sure shoot me an email to williamhowley at gmail.com with as much info as possible, im a numbers guy. Ill take a look

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