First potential flip! Could use some advice.

Rehabbing & House Flipping
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First potential flip! Could use some advice.

Brian H.
Carolina · Member since 2017 · 519 posts · 222 votes

Hey everyone!

Hope you all are having a nice, productive summer! I've been insanely busy running the kitchen here at the restaurant, which makes it hard to really focus on the REI bit.

My realtor and I have stumbled across a nice potential flip near by.

It is a foreclosure listed for 54,500. Tax value is 149,000. Homes that are in good/great condition in that area ususally sell anywhere from 10% to 20% above tax value and she feels quite comfortable estimating at least a 150k sale price based on comps. Anything more would just be icing on the cake!

She has a lot of experience with investors and is even very familiar with the BRRRR process, which is pretty great.

This would just be a flip though, to build up my initial capital to move forward more quickly with other REI endevors. I'm interested in buy and hold/BRRRR, but want to have more capital to keep doing some flips as well.

My question for all of you is if you have any really good tips when it comes to flips. Things you wish you had known or asked the first time around? 

Obviously, being my first flip, I am excited and am thinking of all the things I can do to make this house "pop". But, I realize it is not all necessary. Plus, this house isn't for me, so I need to remember that I am not putting together my dream home. 

I don't want to throw money at things that will have no effect on value and be completely unnecessary. Though, at the same time, I realize there are some things I can do that will not have an actual effect on value but could have an effect on the buyer psychologically so that they are more willing to pay closer to asking price. Things like nicer landscaping perhaps? Certain paints? Putting in a cute kitchen island? Little stuff. What types of flooring do you recommend in SFH flips? I figure it is different than the "laminate everywhere" I seem to see with buy and holds? Stainless kitchen appliances? What types of counter tops? It's not in a "high end" area but it has potential to be pretty nice. Defintely lot a C or D area.

But really just curious what advice you can lend on this? I just have a hard time, in my head, discerning what is necessary to bring the home up to market value (and to make it stick out to buyers) and what is just a waste of time and money.

I really appreciate it! Hope everyone has had a great weekend!

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Brian Pulaski
Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
9y

@Brian H. this is one of the harder aspects, and I am wrestling with it now. On even my cheapest flip I have done granite and stainless appliances. Something I always thought I would do, no matter the flip. However if those two items cost $3500 and can do white appliances and laminate for $1800, what is the "pay back"? True you won't get $1700 more for the house (let's assume), but is there enough appeal that the house sells faster? That's the reason I have done it... the assumption that the houses sell fast by having that little more. Sure I didn't save $1700 in holding costs, but it's nice having your money back quick.

However as I crunch numbers in my new area, I am looking and seeing a lot of cheap cabinets, laminate tops, cheaper flooring etc. and they sell quick. In my eyes, I could possibly be tossing that $1700 out a window if the house sells day 1 with the cheaper products.

It is a challenging, albeit fun balancing act!

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  • Johnnie Fair
    San Antonio, TX · Member since 2013 · 17 posts · 0 votes
    9y

    Look at what everyone else has in the neighborhood and set your budget from there. Don’t put granite in a neighborhood that doesn’t have granite. It won’t increase the value at all. If the homes in the are top out at 150k putting granite in there will only help it sell faster you won’t reap any additional money from it.  Of course that goes out the window with gentrification. I can also tell you that it’s easy to over do it on your first one. Hope that helps 

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  • Brian H.
    OP
    Carolina · Member since 2017 · 519 posts · 222 votes
    9y

    Thanks @Johnnie Fair.  That is my main concern, over doing it... Luckily, my realtor is very seasoned when it comes to working with investors, so I think she will be able to lend some help there as well. Thanks for responding!

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  • Brian Pulaski
    Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
    9y

    @Brian H. this is one of the harder aspects, and I am wrestling with it now. On even my cheapest flip I have done granite and stainless appliances. Something I always thought I would do, no matter the flip. However if those two items cost $3500 and can do white appliances and laminate for $1800, what is the "pay back"? True you won't get $1700 more for the house (let's assume), but is there enough appeal that the house sells faster? That's the reason I have done it... the assumption that the houses sell fast by having that little more. Sure I didn't save $1700 in holding costs, but it's nice having your money back quick.

    However as I crunch numbers in my new area, I am looking and seeing a lot of cheap cabinets, laminate tops, cheaper flooring etc. and they sell quick. In my eyes, I could possibly be tossing that $1700 out a window if the house sells day 1 with the cheaper products.

    It is a challenging, albeit fun balancing act!

    1Reply
  • Brian H.
    OP
    Carolina · Member since 2017 · 519 posts · 222 votes
    9y

    Thanks @Brian Pulaski. People keep saying tocheck out houses in the neighborhood.  Are all of you actually asking people to go into their homes to see what sorts of cabinets, countertops, etc, they have inside?

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  • Brian Pulaski
    Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
    9y

    @Brian H. no, I would check out comparable homes that are for sale or have sold in the area. It gives you an idea of what the market expects.

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  • Darryl PutnamPro Member
    Investor · Mountain View, CA · Member since 2016 · 40 posts · 25 votes
    9y

    @Brian H. First thing may go with out mentioning but read J. Scotts book. Second on your first flip limit your scope. Your are not dealing with a hight ARV so keep your project simple. Run the numbers over and over. In the end clean and neat rules the day and can be most profitable.

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  • Kerry Boyle
    Lender · Bethesda MD · Member since 2017 · 283 posts · 123 votes
    9y

    You can use a hard money lender to vet that the property is profitable and the repairs are all things that will increase your margin. All lenders comfortable with lending in your area will have a huge presence in reviewing the repair bid, ensuring you aren't paying too much and that the repairs are purposeful.

    Using a HML will also leverage your money, reducing your risk and allowing you to keep your money close to your chest in the event the repairs are more considerable than initially estimated.

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