Making offers to flip in a hot market

Rehabbing & House Flipping
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Making offers to flip in a hot market

Phillip Vaughan
Investor · Cathedral City, CA · Member since 2017 · 76 posts · 25 votes

Hello,

My wife and I have recently wanted to try flipping as a way to gain capital to purchase rentals. However, we have hit a road block and we could use some advice/input from those with experience. 

The biggest problem is that we live in Southern California. The difference between the cost of distressed properties to market ready properties is too small. We started looking at properties that needed a lot of work but after getting rehab cost estimates, we realized we would have to make offers close to 70K-100K less than the asking price! My agent feels that will never happen and I think she is right. So now we are looking at properties that just need a little updating, maybe new kitchen cabinets, flooring, paint. The amount we have to offer is not as low from the  listing price as the other properties, but still low.

So what is the trick here? I would love to hear from other flippers in SoCal, or other markets like it. I know people are flipping in my area. Do I need to wait to save up more cash to purchase at auctions? Do I need to get a real estate license? Or do I need to convince my agent to make a lot of lowball offers and play the numbers game? I have heard Brandon Turner mention several times on the webinars that making low offers is a numbers game and you have to make a lot of them to get that one accepted. But are the offers I would have to make too low? Real estate agents seem to think that is unethical or even a waste of time. Are they right?

So what am I missing here?

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  • Larry Turowski
    Flipper/Rehabber · Rochester, NY · Member since 2014 · 1k+ posts · 1k+ votes
    9y

    @Phillip Vaughan First, it is hard to find flips anywhere.  It takes massive action in the way of lots of looking and searching, lots of offers, lots of networking, lots of direct advertising.  So don't expect it to be easy.  You say you "recently" decided to try flipping so I'm guessing you haven't had time to do a lot yet.  Stick to it.

    Secondly, it is tough to find deals on the MLS. Everybody knows about them and they are very competitive. That doesn't mean that you won't find deals there. But you need a lot of "at bats" to get a hit.

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  • Andrew Johnson
    Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
    9y

    @Phillip Vaughan I think one key difference is that if you're like Brandon then you are either a realtor or have someone on your team that is a realtor.  If you're an external realtor then you know it's not a one-time thing.  So if you're *that* realtor you know that you might have to do 100 offers to get 5 properties (just to make up numbers) you're happy to because it's 5 commissions at the end of the day.  You can afford to spend the time also because it's 5 this month, 5 next month, you know he won't get hung up on financing, etc.  Consequently, a realtor can devote their time to a strategy.  

    Now, in your case, how are you going to convince an agent or broker they should write 50 offers or 100 offers?  Are you pre-qualified?  Are they cash offers?  It might sound odd but if I'm a realtor I have to make sure that I'm not going through with 50 offers to get 2 accepted and then find out you're going to ask for seller financing.  I doubt that's the case with you because you want to flip but I think you get the point.  They don't want to waste their time.  

    And, let's face it, you're probably in one of the most competitive markets that there is here in Southern California.  You're not facing off and bidding against investors, you're bidding against owner-occupants.  Some portion of which are willing to put in sweat-equity.  And since you've migrated to properties that "just need a little updating" you're REALLY competing with those owner-occupants that spend way too much time watching HGTV :-)

    But what's really missing from your post is scale.  Are you reaching these conclusions after looking at 20 properties or 2,000.  I know you're not a wholesaler but you'll read "nothing is happening" from wholesalers than send "dozens" of yellow letters.  Then you'll read a success story from one that sends 3,000 a week.    

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  • Phillip Vaughan
    OP
    Investor · Cathedral City, CA · Member since 2017 · 76 posts · 25 votes
    9y

    Thank you for the responses. To be truthful, I have not looked at many properties at this point. I am just trying to determine if this is a game I can play or if not having all cash makes this a waste of my time. I was hoping to keep to the MLS for my first flip so that I can have my "hand held" on the first try.

    So what I get out of the responses is that I need to keep at it, and it may take longer than normal for me compared to those who are already in the game, especially in this market.

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