Ann Arbor, MI · Member since 2016 · 40 posts · 2 votes
I was wondering if any veterans of the Single-Family residence flipping business have stats for the % of flips ending up losing money and maybe also days per flip. Do you keep detailed stats about each flip?
Over about 100 flips that I've completed myself (not new construction and not passive investments), we've lost money on 2 deals. The average hold time from purchase close to sale close is 137 days (it's 104 days for flips completed locally -- the long-distance flips take a good bit longer).
There is no way to tell that as such stats from each individual flipper are not kept and shared plus there is a large difference of success rates depending on each investor's skill levels.
I am about to take my third loss in my flipping career, however, I have zero losses on deals under $1M ARV. Compare that to a rookie who may have only flipped a couple and already suffered a loss and the average can be quite skewed.
Basically there is no answer to your question since it is so broad in nature and stats like that are just not shared across the board. Average DOM is traceable and your RE agent should be able to provide you such stats.
I have had a couple make money but I still consider them unsuccessful, because I would not do them again. Too much work for the return. I have heard on this forum though that many if not most first time flips fail.
I have had a couple make money but I still consider them unsuccessful, because I would not do them again. Too much work for the return. I have heard on this forum though that many if not most first time flips fail.
This is another good point however, I would point out that if and when first time flips fail, it is in large part due to the investor not purchasing correctly and not due as much to lack of experience performing the repairs.If purchased correctly, even a cave man can do it for profit!
Over about 100 flips that I've completed myself (not new construction and not passive investments), we've lost money on 2 deals. The average hold time from purchase close to sale close is 137 days (it's 104 days for flips completed locally -- the long-distance flips take a good bit longer).
I have had a couple make money but I still consider them unsuccessful, because I would not do them again. Too much work for the return. I have heard on this forum though that many if not most first time flips fail.
This is another good point however, I would point out that if and when first time flips fail, it is in large part due to the investor not purchasing correctly and not due as much to lack of experience performing the repairs.If purchased correctly, even a cave man can do it for profit!
Highly doubt that assertion. IMO, flips are difficult to come in under budget as estimating costs and time is VERY difficult to do day in and day out. Regardless of the purchase, getting out and keeping your shirt is not a given - - or everyone would be flipping.
I am about to take my third loss in my flipping career, however, I have zero losses on deals under $1M ARV. Compare that to a rookie who may have only flipped a couple and already suffered a loss and the average can be quite skewed.
Do you have any insight as to why high end properties don't work?
@J Scott I just started reading your book "The Book on Flipping Houses". Very good read so far. Did you start out Flipping locally? When did you decide to start longer distance flips? What is your purchase close to sale close goal for your flips (Extensive rehab i.e. gut most of the house?
Real Estate investing is not always just black or white. There are a lot of intangibles, that we don't always see.
Someone doing a first flip may have broken even on that one, but received an unparalleled education, that no high tuition college could have given them. Did they then actually lose?
They could have paid a guru 15K to mentor them and then made 10K on their first and only flip. Did they succeed?
To some people, a flip that 'only' has 10K profit is seen as a failure.
I have had a couple make money but I still consider them unsuccessful, because I would not do them again. Too much work for the return. I have heard on this forum though that many if not most first time flips fail.
This is another good point however, I would point out that if and when first time flips fail, it is in large part due to the investor not purchasing correctly and not due as much to lack of experience performing the repairs.If purchased correctly, even a cave man can do it for profit!
Highly doubt that assertion. IMO, flips are difficult to come in under budget as estimating costs and time is VERY difficult to do day in and day out. Regardless of the purchase, getting out and keeping your shirt is not a given - - or everyone would be flipping.
We are likely on the same page, just saying it in two different ways. Using my assertion, IF they did buy right, then they would have enough spread to cover the somewhat inevitable over budget and over hold times costs and as such, not lose, just perhaps not make as much.
I am about to take my third loss in my flipping career, however, I have zero losses on deals under $1M ARV. Compare that to a rookie who may have only flipped a couple and already suffered a loss and the average can be quite skewed.
Do you have any insight as to why high end properties don't work?
I never stated high end properties don't work, in fact, I made $1M on just one flip. What I did say is that I had (to date) never lost on a flip under $1M. To add to that, doing $1M+ comes with higher profits but it also comes with higher risks and as such, an investor has more potential for loss and for gain.
I was asking about a "failure" in a more literal numbers way. I could see a breakeven flip or one even at a small loss not a failure because of all knowledge gained from the entire process.
How many veterans out there flipped before and during the housing meltdown?
Are you serious? Some people pay 15k to get mentored? Are there flipping coaches out there?
I have only done 2 and did very well on 1 (good return on effort) and okay on the other (too little profit for the effort.) I have bid on many others, but was unwilling to pay more than I thought they were worth. I learned a lot on both. J Scott's books are invaluable. You make money when you buy, but don't receive it until you sell.
The Flip market is getting tough. The really good deals post the crash are gone. Fannie mae and the other mortgage owners are getting to the bottom of their stock of non performing assets. The economy is getting better, jobs growth, and the mortgage rates are still historically low. Worst of all it is on TV. They never lose money, nor have carrying costs overruns, unforeseen zoning etc. This has also led to a lot of people getting into the biz who should not. With that said, there are always deals. It may take more time and require more patience.
@J Scott I just started reading your book "The Book on Flipping Houses". Very good read so far. Did you start out Flipping locally? When did you decide to start longer distance flips? What is your purchase close to sale close goal for your flips (Extensive rehab i.e. gut most of the house?
Thank you for the kind words...
I flipped my first 60+ properties locally before trying the long-distance thing. Long distance rehabbing is difficult, stressful and time-consuming, but if you're willing to put up with the hassle, it can be done. My best recommendation for long-distance flipping is to build a local team (in the market where the houses are) that you can trust -- you'll still have to oversee the team and deal with bigger issues as they come up, but at least you have some day-to-day accountability for what's going on with the projects. Having a local project manager is invaluable.
We typically target 120 days purchase to resale -- this includes about 4-8 weeks for the rehab (depending on the level of rehab required), 2-3 weeks to get a contract, and then 3-5 weeks to get to the closing table. We were able to hit about 100 days on average for several years until we started doing much larger rehabs (additions, etc) and rehabbing in places where permits/inspections took longer. The past couple years, our time-on-market has increased a little bit as well with all the competition.
Over about 100 flips that I've completed myself (not new construction and not passive investments), we've lost money on 2 deals. The average hold time from purchase close to sale close is 137 days (it's 104 days for flips completed locally -- the long-distance flips take a good bit longer).
These are great numbers and do not surprise me since J is a seasoned veteran. I would not bother posting my average hold times since I have not held an average acquisition or rehab business. I have flipped about half the quantity of J but have flipped multi million dollar projects where rehabs have been as much as $850k and exit values as much as $3.8M. On the lower end, my smallest rehab was $12k and I also broke my record of shortest hold time with that one at 64 days. In total to date (not counting new construction, land development, or holds) I have sold my flips for a combined total value of $23.4M since 2009 with another $4M to be added with ongoing current projects not yet sold.
My regular flip projects probably average around $60k on the rehab and 4 months total hold times these days with exit values ranging from $500k-$800k. Had I stuck with these the entire time, I would have had a much higher quantity of projects sold like J, but then I would not have had the degree of success and failure that makes me the investor I am today.
Bottom line, experience is vital and you ONLY get that when you go out there and do it!
I've written a lot about how you need to keep control over your deals to ensure they close...and to ensure they close quickly...
I originally posted this on BiggerPockets, but can't find it here...so I'll link to the post on my website (if the mods remove it, I'll try to find the original here):
There are some really great tips in this list. I especially like the 48 hour time line for the appraisal being ordered post inspection contingency and the written permission to contact the mortgage broker.
Great read with the 10 rules to improve your sales closing success! Have you noticed any difficulties with your process with the new lending regulations?