Anyone flipping/rehabbing in the 500k to 3m dollar range?

Rehabbing & House Flipping
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Anyone flipping/rehabbing in the 500k to 3m dollar range?

Scott Hollister
Rental Property Investor · CT · Member since 2015 · 400 posts · 432 votes

Anyone flipping/rehabbing in the 500k to 3m dollar range?

Who is flipping/rehabbing single family or multi family homes in the 500k to 3 million-dollar range? 

Background: Rehabbing homes in CT for first time home buyers in the 180-215k range.

My questions:

  • Who are your end buyers and how do they typically finance? (Jumbo loans and beyond, high net worth individuals?)
  • How do you source your materials? (Assuming you can’t take local hardware trips for higher end materials) Are there any national chains that focus in higher end materials?
  • Does your labor rate for skilled workers increase dramatically? (For instance, I was shocked when networking at a 3m beach front property in RI, the price to finish hardwood floors is still the same cost as my CT rehabs, $2 sq ft.) I assumed there would be a price hike associated with higher end homes.
  • What type of capital are you going after? Private vs HM.

Thanks for the feedback as a I think out loud…

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Doug W.
Flipper/Rehabber · Alexandria, VA · Member since 2014 · 461 posts · 262 votes
9y

I am in Northern VA and flipping in a city and county that border DC. A starter home in the neighborhoods I am in starts at $350-$400 and that will get you between 900-1200 sqft of finished space. I'm in that range as well as the range selling between $500-$750 and soon to be doing one with an ARV of $1.2.

Like Russell mentioned earlier, I plan on spending about $50/sqft on countertops. I source tile from both Home Depot and Floor & Decor. I pay roughly $3/sqft to have hardwood floors refinished. The rest of my finish materials I source from places including Amazon, Build.com, and HD (toilets and tubs, mostly). Building materials come from local lumberyards which I find to be of much higher quality than the materials (and service) at HD or Lowes. I buy my cabinets (all wood boxes w/ dovetail drawers) from Next Day Cabinets although I have used Wolf cabinets previously via a GC who is a distributor for that line. 

I see some folks here flipping in the higher price range and installing crap finish materials and.... surprise surprise... their homes sit on the market when they try to sell. Often I see other poor quality work like bad drywall finishing and cheap paint used. 

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    9y

    A very typical flip in DC is to buy for $400k-$500k with exit prices between $650k-$850k.  Labor costs are more in DC than in the suburbs of DC, but I wouldnt say significantly. Labor maybe 10% higher.   As for materials, Id say Aristokraft cabinetry is sort of a good mid level cabinet you will see in kitchens in this price range.  Usually looking at a marble/quartz/granite countertops in the $50 a square foot range.  Flooring in the $4 a square foot range.  So really not super different from what we are seeing in the lower end flips.  Upgrade in some light fixtures, particuarly hanging lights over a dining room table goes a long way for not much more cost.  Moderate step up in prices, but not over the top. However the median price point in DC is about $525-$550k, and that includes condos....so something that is $700k isnt exactly a high end buyer.  We typically see two working white collar professionals at these price points buying in gentryfying nieghborhoods. 

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  • Joseph M.
    Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
    9y

    @Russell Brazil , what does rehab cost total  usually end up being on those homes being bought for $400-500k? 

    Sounds like DC median home prices are around the same as L.A 

    D.C has one of the highest median incomes in the country I read.

    0Reply
  • Manolo D.
    Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
    9y
    Scott Hollister Labor rate shouldn’t matter much, but they need more time and more attention to details, if your tradespeople are doing it already, then it doesn’t matter, it’s the amount of work that’s being counted, not the money a house sells for. You do need better quality contractors vs investor grade doing 100-200k exit price. As for materials, you don’t have a choice, you will have to upgrade your system if you want remote, this means specifications, model numbers when you order, if possible, detailed set of plans, the whole nine.
    1Reply
  • Doug W.
    Flipper/Rehabber · Alexandria, VA · Member since 2014 · 461 posts · 262 votes
    9y

    I am in Northern VA and flipping in a city and county that border DC. A starter home in the neighborhoods I am in starts at $350-$400 and that will get you between 900-1200 sqft of finished space. I'm in that range as well as the range selling between $500-$750 and soon to be doing one with an ARV of $1.2.

    Like Russell mentioned earlier, I plan on spending about $50/sqft on countertops. I source tile from both Home Depot and Floor & Decor. I pay roughly $3/sqft to have hardwood floors refinished. The rest of my finish materials I source from places including Amazon, Build.com, and HD (toilets and tubs, mostly). Building materials come from local lumberyards which I find to be of much higher quality than the materials (and service) at HD or Lowes. I buy my cabinets (all wood boxes w/ dovetail drawers) from Next Day Cabinets although I have used Wolf cabinets previously via a GC who is a distributor for that line. 

    I see some folks here flipping in the higher price range and installing crap finish materials and.... surprise surprise... their homes sit on the market when they try to sell. Often I see other poor quality work like bad drywall finishing and cheap paint used. 

    4Reply
  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    9y
    Originally posted by @Joseph M.:

    @Russell Brazil , what does rehab cost total  usually end up being on those homes being bought for $400-500k? 

    Sounds like DC median home prices are around the same as L.A 

    D.C has one of the highest median incomes in the country I read.

     Right around $100k depending on the condition. Range I've seen as low as $65k up to $115k. Location in the neighborhoods can often determine rehab budget as well as condition.  Closer a property is to a train station means less need to remove walls to create open floor plan, while further from a train station means making an open floor plan is a must.

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  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    9y

    My last flip sold for $565.  Stupid tidbit...guy who bought it was a four time Jeopardy champion.

    The finishes were not anything spectacular but mostly not from the box stores.  Cabinets and granite are less at local suppliers and so is trim at builders stores.  Did marble tile (from HD) in two showers...and a freestanding tub and tub filler were expensive from a local plumbing store.

    1Reply
  • Sal Morello
    Investor · Middletown, CT · Member since 2016 · 28 posts · 10 votes
    9y
    Scott, I built high end residential for over 5 years. Most of your supply's are going to come from a high quality lumber yard, not Home Depot. Companies like Rings End and Lyon and Billard can source a lot of products, and talking to your salesman and lead you many contacts. Stone, trims, appliances, etc you will need to reach out to specialty companies. I have a great salesman in the middletown/shoreline area that can find me anything, and if he can't, he can point me in the right direction.
    1Reply
  • Manolo D.
    Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
    9y
    In CA, anything below 1M it’s nothing special, anything above that needs some kind of designer look.
    1Reply
  • Account Closed
    Investor · West Los Angeles, CA · Member since 2014 · 230 posts · 239 votes
    9y

    @Scott Hollister

    I have 2 projects right now.  One pp $950k exit 2MM and one pp $2.65MM exit 4MM.  You will most likely need capital partners to flip at this level.  Another option is hml.  The buyers are getting jumbo loans and are semi-high net worth indiduals.  These houses are in nice neighborhoods with nice schools.  Nothing spectacular.  

    The finishes will most likely not come from a big box store.  Labor is about the same but time needs to be taken as sloppy work is not tolerated.  

    Hope that helps 

    3Reply
  • Joseph M.
    Flipper/Rehabber · Los Angeles, CA · Member since 2009 · 1k+ posts · 732 votes
    9y

    Hi @Account Closed , just wondering what rehab costs are on each project. I am guessing you are adding on square footage to the properties as well, rather than just renovating? Thanks

    0Reply
  • Account Closed
    Investor · West Los Angeles, CA · Member since 2014 · 230 posts · 239 votes
    9y

    @Joseph M.

    One we bulldozed the lot and are building a new house.  The other one we are gutting and renovating.  About $350k to $450k.

    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    9y

    just to tag on most coastal markets your flips are 350 and up.. sky is the limit.

    we do some In Charleston SC that are 450 to 750k.

    in Portland 400k to 2 mil  is common.. but our market over 1 mil is softening.

    I am starting a 2 mil spec in Charleston next month.. but its in the historic downtown south of broad area.. being a very unique area with VERY limited inventory for me I will risk it but usually I want to stick to just above the median.. I am conservative in that way..

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  • Elbert D.
    Real Estate Entrepreneur / Investor · Chicago, IL · Member since 2016 · 688 posts · 367 votes
    9y

    Chicago North side, and the northern suburbs have very good fix and flip areas that are easily 500k-2mil depending on the sqft and the area of course.  The trick is being able to find them because they go extremely fast. 

    Actually some houses in the west suburbs and south suburbs are 500k or more as well but those are huge SFHs that are close to 3,000-4,000 sqft. I would love to flip one of those houses to get the Experience of going through a very high end rehab. One where I wasn't wholesaling it but flipping it myself.

    I think one thing some new flippers don't pay attention to is the DOM(Days on market) on average a property sits in that area. A good metric is about 60 days or less and hopefully doing those type of rehabs everything is extremely high end including the landscaping and little details are perfect so that it is sold fast. 

    0Reply
  • Donielle Buie
    Cambridge, MA · Member since 2017 · 18 posts · 7 votes
    9y

    This is a really helpful thread.  Thanks for sharing. 

    I have a question for anyone who does flippling / is a developer.  If a buyer was interested in working with you on a specific house, would you do it?  Without going into all the details, we live in an incredibly expensive market (Cambridge, MA) and we have some housing money from a university where my husband works to help us buy.  

    However, we don't have the 300-400K in cash to do a gut renovation (and we can't get a construction loan for a personal residence), so we need to buy a place that has been renovated OR find a place that a developer would buy, we agree on the renovation/flip costs and then buy it from them at the agreed price.  Does that actually happen?  What would incentivize them to do that rather than just flip and put it on the open market?  Would we sign a contract with them as a "promise to buy"?   

    0Reply
  • Donielle Buie
    Cambridge, MA · Member since 2017 · 18 posts · 7 votes
    9y

    sorry, double post

    1Reply
  • Henry LiChi
    Developer · Long Beach, CA · Member since 2016 · 109 posts · 75 votes
    9y

    The spread for a full gut renovation is very project based.  Lots of factors can be considered that will give a huge range.  It all depends who you know (contractor, supplier, and designer), timeframe (rushed or is there some flexibility), and quality.  With contractors, it is very true that you get what you pay for.  Particularly in my region where every decent licensed contractor is booked up for jobs for months to a full year ahead, leaving less desirable contractors doing subpar jobs while inflating estimates.

    @Donielle Buie I would roughly ballpark $300-400k "Full" gut renovation to include a property that's at least 3,500 SF and would be of above mid range to high range quality.  Just a very rough figure based on mid to high end renovation cost per square foot, and based on my previous flips.  There are a few companies out there that flip to clients that already agreed on a price and this is what they specialize in.  Generally to do that, you would have to have a pretty good track record and quality that attracts such clients.  It allows the client to give some design input while the seller/flipper has less stress about worrying if the property will in fact sell for what the plan to list it for.  And yes there would be a signed contract that generally includes a healthy deposit and loss of it, if the contract is not completed due to backing out of the deal.

    0Reply
  • Donielle Buie
    Cambridge, MA · Member since 2017 · 18 posts · 7 votes
    9y

    Thanks @Henry LiChi !  That is really helpful to know.  I was wondering if there was a way to do this, so it might be a matter of finding the right developer.  We actually have a lot of time flexibility (nothing to sell and we have flexibility in our current living set-up) and are not in a rush so if we found the right property and right company/developer this could work.    Thanks!  Now, the hard part is finding and vetting them:)

    0Reply
  • Donielle Buie
    Cambridge, MA · Member since 2017 · 18 posts · 7 votes
    9y

    and, in Cambridge, finding 3500 sqft in our price range is probably impossible.  It will likely be more like 1800-2200 SF.

    0Reply
  • Henry LiChi
    Developer · Long Beach, CA · Member since 2016 · 109 posts · 75 votes
    9y

    @Donielle Buie

    I don't know the Massachusetts area, but I am sure there is a lot of flippers on here willing to work with you.  I would just doe your own due diligence on their track record.  What is making you choose this particular route instead of just finding a move-in ready property from the start?  Another scenario could be to buy a fixer property and find a design build company that would be willing to design it to your needs and have their own contractors that handle everything from start to finish.

    1Reply
  • Henry LiChi
    Developer · Long Beach, CA · Member since 2016 · 109 posts · 75 votes
    9y

    @Donielle Buie

    With a 1800-2200 SF house, you will most likely not spend 300-400k unless you want very high end material and in that case, you would still have extra to spurge on "unnecessary" luxuries.  Keep in mind a 300k full gut rehab on a 2200 SF house is $136 per sf remodel, that's pretty darn close to a complete rebuild (single level, standard quality type V construction build)

    1Reply
  • Donielle Buie
    Cambridge, MA · Member since 2017 · 18 posts · 7 votes
    9y

    @Henry LiChi The already renovated places in the town we are looking for get bid up 100K-200K over asking so it's hard to compete.  Even non-renovated places can go well over asking (like 50-100K) and the places that are complete gut opportunities are being bought by developers.    Prices in the parts of cambridge we are looking at are ~$600 -$700/ sq ft.

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  • Henry LiChi
    Developer · Long Beach, CA · Member since 2016 · 109 posts · 75 votes
    9y

    Sounds like the Bay Area.  Everything rehabbed to decent quality gets sold 10-20% over asking and within a week on the market.  I would find an agent to do the work for you.  A good agent should be able to find recently purchased distressed properties and contact the buyer to see if they are planning to flip it, then notify them that you would like to make a deal to buy it before it even hits the market.  You could do all this yourself, but it is time consuming.  Agents in these higher priced markets are willing to hustle cause they know with each sale, it's a five figure commission.

    1Reply
  • Donielle Buie
    Cambridge, MA · Member since 2017 · 18 posts · 7 votes
    9y

    Thank you for all the advice, @Henry LiChi .  I do have a great buyers agent who knows our market extremely well.  This isn't an option that we had thought of before so I'll share it with him since it seems possible.

    0Reply
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