Rehabbers and flippers--speak up
Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes
I'm curious about a couple things in rehabbing and flipping.
1. What is the average purchase price of the flips or rehabs you're buying?
2. What is your average time from purchase to sale on homes?
3. Do funds available, limit the # of properties you purchase or are the properties getting harder to come by or both ?
4. What % of the properties are financed with borrowed funds?
5. If you had more funds available at EXORBITANT rates, would you purchase more properties?
6. On financed properties, are you paying interest, sharing a % of profits or both?
7. How many properties have you turned in last 18 months?
8. What has been your biggest concern or problem with your process?
I have some of my own thoughts and experiences, but wanted to look at a larger cross section
Thanks for any replies. Rich
1. What is the average purchase price of the flips or rehabs you're buying?
I'm looking to flip properties with a purchase and rehab cost of between $50k and $100k
2. What is your average time from purchase to sale on homes?
I've only completed 2 so far, working on the third. Not so great in this dept. First took 8mo, second 18mo. I have since changed locations to a larger city where properties actually sell.
3. Do funds available, limit the # of properties you purchase or are the properties getting harder to come by or both ?
I definitely run out of money before properties.
4. What % of the properties are financed with borrowed funds?
I have only financed the rehab costs on one property. 2 properties were paid for in cash, 2 rehabbed with cash. The third was bought with owner financing with a large % down.
5. If you had more funds available at EXORBITANT rates, would you purchase more properties?
Yes.
6. On financed properties, are you paying interest, sharing a % of profits or both?
I financed with a traditional HEL.
7. How many properties have you turned in last 18 months?
One.
8. What has been your biggest concern or problem with your process?
Financing has been tough, I have only been able to do one project at a time using my own money. Sales prices and rehab costs have gone as expected, but properties often took longer to sell than I expected in the small town. I'm hoping that moving to a larger city, and working with experienced Realtors will help move projects more quickly.
I'm sure you'll find much more experienced opinions Rich, but if you and Will are looking to fund rehabs, I'm definitely in!
Rich, my answers are below each of your questions:
1. What is the average purchase price of the flips or rehabs you're buying?
The average price is roughly $30,000 - $80,000. It all depends on the ARV. I will not pay more than 65% of ARV - rehab costs. With the MI market still in a tail spin, I buy very wisely.
2. What is your average time from purchase to sale on homes?
No more than 4-6 weeks. I price them aggresively and have the homes staged and professional photos taken so that my DOM are less than the competition. Due to the massive amount of inventory there's a lot of competition.
3. Do funds available, limit the # of properties you purchase or are the properties getting harder to come by or both ?
Funding does not necessarily have an influence on the number of deals I do. Contractor work load has more influence since I work with only a select nubmer of contractors and hate to deviate from who I know, trust, and like to do business with. Sometimes funding does become an issue, but I'm always able to work around it.
4. What % of the properties are financed with borrowed funds?
60%
5. If you had more funds available at EXORBITANT rates, would you purchase more properties?
Yes, if the deal still made sense.
6. On financed properties, are you paying interest, sharing a % of profits or both?
Interest. Never had to share profits with an equity partner.
7. How many properties have you turned in last 18 months?
Eight.
8. What has been your biggest concern or problem with your process?
Reducing holding time and carrying costs. As the market continues in a downward spiral holding costs are a daily cost, and equity continues to errode. I would do more rehabs but the numbers REALLY have to make sense.
1. What is the average purchase price of the flips or rehabs you're buying?
$30-70K, for the most part. Put in anywhere from $20-60K in rehab, and resell for anywhere from $90-140K.
2. What is your average time from purchase to sale on homes?
For my last dozen flips, I've averaged 106 days from purchase close until sale close (this included a couple wholesale deals, so the average for the rehabs is probably closer to 120 days).
3. Do funds available, limit the # of properties you purchase or are the properties getting harder to come by or both?
These days, I'm pretty much limited by the number of deals I can find. I'm very picky, so perhaps if I loosened my standards a bit, I'd be able to find more. But, these days, I'm only finding a couple deals per month.
4. What % of the properties are financed with borrowed funds?
I tend to pay cash for those I plan to turn quickly, and finance those I plan to do major rehab and hold for a couple months. On average, I finance about 50% of my deals and pay cash for the other 50%.
5. If you had more funds available at EXORBITANT rates, would you purchase more properties?
For my financing, I won't pay more than 1.5% upfront and 7% interest only payments. I have a couple lenders who offer these terms (or better)...if you shop the small, local banks in your area, you should be able to find terms close to this.
Also, if you have a great deal, find an experienced partner with cash. I'll always partner with someone who brings me a great deal, and they'll ultimately make more than if they paid "exorbitant rates" to a lender (plus, I'll mentor them through the process). Do the math, and you'll see that partnering is a lower-risk, higher-reward solution than high-priced hard-money (at least in my experience and the numbers I see). The only time it's worth paying a high cost for capital is for high-potential risky deals, and then the lender is likely taking a bigger risk than the investor.
6. On financed properties, are you paying interest, sharing a % of profits or both?
1.25 points upfront. 6.75% interest only for 12 months. Financing 80% of the purchase + rehab costs. These are pretty typical terms for rehab/portfolio loans from local banks.
7. How many properties have you turned in last 18 months?
16
8. What has been your biggest concern or problem with your process?
Finding great deals that were worth my time to pursue.
Great cross section so far. Thanks.
Steve Sparks- did you try to reply? Your post is blank. Rich
it is within the quote Rich..sorry
Steve- forgive my senility!!!!! I'm close to qualifying for SS and I'm needing it, I guess. Rich
I figured this out when I realized you are on a 1st name basis with the Cracker Barrell employees. ; )
Pretty interesting. 44,000 members on BP. I think ALL 44,000 declare themselves to be flippers and rehabbers. Yet, only FOUR have replied to this questionnaire. I don't get it. This is your chance to share your general experiences in this business. Come on. Rich
1. What is the average purchase price of the flips or rehabs you're buying?
[b]Avg = 104k
Range 35k - 340k[/b]
2. What is your average time from purchase to sale on homes?
5 months
3. Do funds available, limit the # of properties you purchase or are the properties getting harder to come by or both ?
Yes, especially at the start.
4. What % of the properties are financed with borrowed funds?
about 75%
5. If you had more funds available at EXORBITANT rates, would you purchase more properties?
No, already have partners that would be willing to come in for a %, if necessary. In the past, probably.
6. On financed properties, are you paying interest, sharing a % of profits or both?
Interest + Points
7. How many properties have you turned in last 18 months?
about 25
8. What has been your biggest concern or problem with your process?
Varies by the day, changing market conditions? The "lumpy" nature of real estate?
1. What is the average purchase price of the flips or rehabs you're buying? $100k
2. What is your average time from purchase to sale on homes? 100 days
3. Do funds available, limit the # of properties you purchase or are the properties getting harder to come by or both ? harder to come by
4. What % of the properties are financed with borrowed funds? 100%
5. If you had more funds available at EXORBITANT rates, would you purchase more properties? would depend on what exorbitant was...
6. On financed properties, are you paying interest, sharing a % of profits or both? interest, no sharing
7. How many properties have you turned in last 18 months? 18+
8. What has been your biggest concern or problem with your process? interest only monthly payments on the note, just dont like doing it :-)
1. 60K
2.2-5 mos
3.definetly more competition on properties.funding ok at this stage
4.from loc not heloc though
5.possibly -depends on deal
6.interest only
7.2 done -got first house in july
8.need to turn them faster so I can do more deals
number 8 makes me sound alittle like an addict. lol
I appreciate those that replied to this thread and the other thread. I'll post in the morning the results and why I was curious. Any one interested, please post this evening. I get up VERY early. Rich
Rich, it's an eye opener! I won't spoil it. Makes sence and it's the current market!
Thanks, Bill
1. What is the average purchase price of the flips or rehabs you're buying?
1K to 5K
2. What is your average time from purchase to sale on homes? 2 years due to reclamation period.
3. Do funds available, limit the # of properties you purchase or are the properties getting harder to come by or both ? deals getting more numerous but funds are always low
4. What % of the properties are financed with borrowed funds?0.00
5. If you had more funds available at EXORBITANT rates, would you purchase more properties? Maybe, the distressed/abandoned properties I buy usually require significant fix-up so EXORBINANT rates might make the deals not worthwhile.
6. On financed properties, are you paying interest, sharing a % of profits or both? none financed
7. How many properties have you turned in last 18 months? 1
8. What has been your biggest concern or problem with your process?
Lack of available funds. I have chosen the slow road to avoid overexending myself in any way. And it aggrivates me that my nestegg is not large enough to handle all the deals that I do see.
Rich,
I see that I'm a little late to the party! Nevertheless, I wanted to participate. :D
1. What is the average purchase price of the flips or rehabs you're buying?
Average purchase price between 65-170K
2. What is your average time from purchase to sale on homes?
75-96 days from start to finish - I market in the RealEstateBook, Welcome Homes Magazine, stage the homes and hold broker opens prior to listing.
3. Do funds available, limit the # of properties you purchase or are the properties getting harder to come by or both ?
Both, properties in my area tend to be selling closer to 80% of FMV. IMO this may improve some once the first-time buyer tax credit expires. Also, funds available have limited the amount of properties I'm able to purchase. I'm only able to purchase one at a time currently.
4. What % of the properties are financed with borrowed funds?
100% of the properties are financed with borrowed funds. However, I've had to cover all rehab costs.
5. If you had more funds available at EXORBITANT rates, would you purchase more properties?
Yes, if it would allow me to leverage my time and have more projects going at the same time.
6. On financed properties, are you paying interest, sharing a % of profits or both?
Paying interest - I would entertain sharing profits to eliminate monthly interest payments.
7. How many properties have you turned in last 18 months?
6, currently finishing up 1.
8. What has been your biggest concern or problem with your process?
My biggest problem has been finding reliable, consistent funding, as well as tying up funds in rehab costs.
1. What is the average purchase price of the flips or rehabs you're buying?
On flips were typically looking for 60% FMV which range in price from 33K -$40k on general rehabs that were planning on holding for some time were looking more at 70%-75% FMV which range in price from 40K-60K Both have current market ARV range from 80K â€" 100K
2. What is your average time from purchase to sale on homes?
Not so good so far!! On some properties that we wanted to flip we had it ready in 120 days ( the house was gutted and everything was brand new) but do to a bad appraisal (from Bank of America) we currently still own this property. So to kind of answer your questions we wrap up our rehabs in between 90-120 days. With additional 14 days to have property leased or sold on land contract
3. Do funds available, limit the # of properties you purchase or are the properties getting harder to come by or both ?
Were currently using a HM and refi out after rehab is complete typically 90-120 days we can lend up to 4 properties at a time but it is getting harder to show reserves at banks to get approvals.
Has far has properties I feel that the MLS right now is worthless any good deal that comes across the price is driven up with multiple offers making that good deal not so good anymore. Were focusing on non-listed properties which are a little harder to come by but it’s also a numbers game!!
4. What % of the properties are financed with borrowed funds?
Currently every property has been purchased by HM then refinanced. So 100%
5. If you had more funds available at EXORBITANT rates, would you purchase more properties?
Would all depend on the terms, not so much the rates
6. On financed properties, are you paying interest, sharing a % of profits or both?
Paying interest on notes. Percentage profits after PITI is 47%
7. How many properties have you turned in last 18 months?
One property flipped , Two rented, One wholesaled
8. What has been your biggest concern or problem with your process?
Working out all the flaws and developing a proven system. Making a lot of errors that should not be made if there were well planned out in the first place. Need to slow down and focus on my business strategy
I want to thank the 10 people that replied to this questionnaire. I thought we had more rehab/flippers on here than that, so this survey isn't as big as I would've liked it to be.
Disclaimers-
A. Will and I are not doing these loans.
B. I had ideas how these would come out beforehand and a couple results surprised me.
C. I'm not soliciting loans, just doing research at present.
Here it is
1. The AVERAGE price is 80K combining all results, with MOSt of flippers averaging 100K for their own individual flips. I threw out 1 reply of 1-2K per house due to the way it would sckew (sp) the results.
This is where I thought it would be. A little higher than my experiences in TX (avg 55K but mine were foreclosure sales). It seems the successful flippers are not going above that 100K range.
2.This one did surprise me, and gives other flippers some comparisons to go by. The avg was 3 and 1/2 months total time. That is great!! The far ends were 5 weeks avg or 12 months avg, ALL the other replies were almost exactly the same, 3 1/2 months. If you're taking longer than this, you might need to change some things in your business. I also wonder if this avg will get longer or shorter in the near future. Supply and demand.
3.Do funds or properties keep you from doing more deals. This one also surprised me. It came out slightly higher on lack of properties. When I was doing this a couple years ago, you"d ALWAYS run out of $$$$ first. I see this as a definite sign that the market is tightening up pretty much everywhere at present. Banks are going to have to loosen up and release more of their REOs for this to change in my opinion, unless their is another flood of foreclosures.
4. This reply seems to show the flipper has used some of his own funds on his deals. Three borrowed 90-100 % of the funds used.
5. By a 2 to 1 margin, these flippers WOULD pay Exorbitant rates in order to do more deals.
6. This also surprised me. Not a SINGLE respondent was sharing % of profits. Every one would prefer to pay interest only, even if it caused them to do fewer deals. I'm not sure if this allows them to grow their profits as quickly as they could. It also might mean their money source doesn't want to OWN RE, they just want to loan on it!
7. Good cross section here, with the # of deals completed in 18 mos ranging from 1-25 deals completed. It would've been interesting to see the profit % on those with the lower # of flips, compared to those doing 9-25 in the 18 mos. period. There were several replies that were from newer flippers and congrats to them for getting their feet wet. Keep it going.
8. This one covered the entire spectrum. Only 2 felt the lack of properties available was the problem. This is surprising. Slightly more were concerned about lack of money, I found an interesting response from MARK. His avg turnover time from purchase to sale was 5 weeks. Yet , his biggest complaint or problem was the carrying costs!! I laughed out loud when I read that. I compare that to complaining about Cindy Crawfords' MOLE!!
I went into this exercise with some preconceived notions about the current rehab/flip arena based on my experiences just 2 years ago. I was surprised at some of the differences as I've pointed out. I'm not surprised at the avg priced rehab. I would consider these the bread and butter price range. We had no replies from the higher median areas like NY or CAL, etc. That would've raised the #'s incorrectly. Maybe they aren't as successful in finding properties, or turning them quickly, or making the 50% return on their money...OBTW, if a flipper uses all borrowed funds, what is his rate of return on the flip?
I AM surprised at the short turnover time. That seems to say that their are still lots of interested capable buyers out there, but maybe the inventory is shrinking. Those that think unlimited rehabs/flips will go on forever, might need to consider these replies. Everybody and their brother wants to be considered a "rehabber/flipper". This might lead to more competition, but maybe there aren't as many really doing this, based on the limited replies from the 44K BP members. It will probably be like realtors.10% of realtors garner 90% of the commissions and the other 90% of the realtors share the 10% scraps left over.
I do expect previously non-respondents to come out of the woodwork NOW and explain why this survey is tilted or wrong. As I said, very limited cross section, and it would've been better with more, but I still find it interesting. Again, thanks to the respondents for laying their info out on the table. Thank you. Rich
great thread rich.
i certainly hope that more flippers/rehabbers weigh in. i'm also a bit shocked that more haven't already!
Thanks Josh. I just said the same thing in my recap of thread #2. We have so many supposed flippers on here, we could really get some trends and info that would help many. Oh well, I tried. Rich
rich..calculated averages on expense returns for your research..10 flips:
Average cost (including purchase rehab and ALL carrying costs) $47,862
Average Net (remember that agent is an expense) sale $70,446
Hope this helps
Steve
BTW I did not calculate the value of my time in expenses..I guess that is a subject for another day ; )
The statistical information is interesting, Rich. Thank you for taking your time to summarize it for us. I have to say, I too am surprised by the lack of response.
Regarding #6....
I'm not currently sharing profits because I haven't found a source yet that is interested in sharing profits with me. I would prefer a money partner, but I haven't hit the jackpot with that yet! :mrgreen:
Thanks for the follow up comments from posters and Steve, thanks for the #. I had you at 40K, so fairly close.Rich