Finding Homes to Flip

6 Replies

Hello BP'ers,

We currently have 6 rental properties that we have purchased over the past couple of years. Back in the spring, we decided to try our hand at flip/flip since we had experience fixing up rentals.

Mailing #1: 2500ish or so properties. 200+ calls. Most of the calls were from what I call "beaters" -- <1000sq ft homes in the bottom end neighborhoods with values less than $30K. Not our target; and I do not want to get involved in these kinds of homes since I have no experience with them nor the clientele. No leads that were worth even viewing in person.

Mailing #2: 1800ish or so properties - with a much better targeting. (No beaters.) We got about 20 calls. We ended up purchasing a home at 70% ARV minus $10K. Not the best deal; but a deal. Repairs were estimated at $37K but we ended up with $50K due to unexpected air conditioner issues plus a few misc things. Learned a lot. At this point, the ARV minus real estate commission is only about $10K away from what we put into the home. So, we are refinancing into a traditional mortgage and using it as a rental. Disappointing. But, the net amount invested is significantly less than what we would have paid on MLS and the property will cash flow nicely, once rented.

Mailing #3: 10 weeks after #1 and #2. Mailed to same group except that "beaters" were taken off of #1. There were around 2300 addresses. No responses except for standard threats of lawsuits, etc., for sending the mailings. :-)

Mailing #4: New group in larger geographic area. 4600 addresses. Targeted to seniors with 50%+ equity. 20 calls. Out of them, 19 were the standard lawsuit threats. One was serious. I went to her home on Friday. It was nice and only needed $5K of repairs. She was willing to sell it for 80% of market to get it out of her hair quickly and painlessly. She was well aware of market value. Obviously, this is a no-go for a flip and we do not want more rentals at this point.

So... About $12K has been spent and the only thing we got out of it was one nice rental at a do-able purchase/fix/rent price.

In the DFW area, my understanding is that the average flip nets around $30K - $40K. So, $12K is a huge percentage of that. And we have not even gotten a flip yet.

Obviously, things are not as easy as the gurus claim. And we never expected them to be. (We never went to any guru seminars past the initial freebees.) But... We are having second thoughts about trying this and are torn about where to proceed.

Ideas?

Jim

@James H. How are you narrowing down your lists? Mailing is an expensive, crowded, and decreasingly effective medium. The people that I work with that do this the best have small, extremely targeted lists, and mail the list numerous times and much more frequently. 

Always 3 or 4 bedrooms. City size lot (i.e., no rural chunks). SFR. 50%+ equity so that there can be flexibility with price. The last mailing (#4) was targeted at seniors.

Have you contacted an investment brokerage in your area?  They should be able to find you something viable without having the out of pocket expense.

Oh yeah.  The offerings, in general are 80% ARV plus repairs.  Definitely better than MLS retail for someone looking for rental properties.  But, there's no way to make that work for a flip.

Originally posted by @Daniel Kurkowski :

Have you contacted an investment brokerage in your area?  They should be able to find you something viable without having the out of pocket expense.

In either case, the ROI from mailings (or alternative marketing) should be more than investment brokerages and wholesalers.


Originally posted by @Daniel Kurkowski :

Have you contacted an investment brokerage in your area?  They should be able to find you something viable without having the out of pocket expense.

Originally posted by @James H. :
In either case, the ROI from mailings (or alternative marketing) should be more than investment brokerages and wholesalers.


Originally posted by @Daniel Kurkowski:

Have you contacted an investment brokerage in your area?  They should be able to find you something viable without having the out of pocket expense.

 What data has led you to this conclusion?  You'd be surprised what a successful investment brokerage has access to.  We buy many millions of dollars of real estate at my company and because of that are offered many deals no one else even sees.  I have seen agents consistently source 20+ deals a year for a client and only charge a regular commission.

I would say that what you are doing isn't working on its own and that you have a free opportunity to increase the deals you are exposed to.  What is your perceived downside?