I'm a real estate broker in Tucson, Az and I've been trying to buy my first flip home for the last 6 months or so and I keep getting outbid. I have studied flip books and repair costs etc, so I think my repair estimates are fairly close, but I'm having trouble getting a deal accepted. So far I've only used the MLS to find deals which I know might not be the best source but that's what I'm the most familiar with. From everything I've read, I've been told to try and at least make $10,000 on every flip and that is my goal right now. My top purchase price before fixed up is $100,000. Maybe my repair costs are too high? I don't want to bring in contractors until my offer is accepted. Any advice would be greatly appreciated as far as a strategy to getting an accepted offer. Thanks
I've had similar issues and it is something you should get used to. There are many people who overpay for flip properties, but that does not mean you should. There are a lot of new people entering the business who don't fully understand the numbers and tend to overpay. There are also some established people who are so hungry for a deal in a hot market that they will overpay, as they already have the crews in place and have to pay them regardless if they are working or not.
The MLS is not a great place to find flips in a hot market, too many people fighting over too few properties. If it is your only source to find properties, make sure you have the first offer in and that it is cash. I've also found that having no contingencies makes the offer more appealing as well. Eventually you'll hit pay dirt on a property that you can make money on.
Stick to your numbers. The last thing you want is to pay to much or go over on your rehab budget. You will get one soon enough. Good luck.
Thanks Tom, Christopher, and Cesar for your replies. I appreciate the advice.
And by the way, all of my offers are cash offers right now. At some point I might use hard money if I need to. I think you guys are right. Many people do seem to overpay on these homes(unless they have super cheap labor rates or if they do the work themselves). In addition I'm going to tap into some other areas to find these homes.
You are most likely competing against people buying the home for themselves .
bid more, or move on
Do your due diligence, if the numbers don't work then walk away. Put your best bid forwards and do it often. You'll get a deal eventually.
Keep at it!
An option is, to pay a contractor (assuming you could find someone who knows how to) or estimator to give you an accurate / detailed estimate, separating materials and labor per trade, to verify your rehab costs. This should cost you around $300/estimate. At least 3 times should give you enough ball park to move on with your estimating skills. You need to spend a little for a proper education or to jumpstart that part of your education, for sure it will be more than $1,000 if you make a mistake on your offer. Do not tweak the numbers just to make it work.
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