I have been actively on the house search for just over 2 months now. We've made 10 offers on flip properties, but have been beat out by higher bidders each time. One good thing: my wife and I are being very conservative and are sticking to our Max Allowable Offer 'guns'. We back out if we believe the profit is too tight.
BUT our main linchpin for determining our offer is the fabled COST OF REPAIR ESTIMATE. I am not a contractor and don't have construction experience. We have walked through a couple of the properties with a contractor, but the prices he's dishing out are so dang expensive for (what we believed to be) low cost improvements. I'm afraid that we are oozing FIRST TIME INVESTOR and will be taken advantage of on the cost front with contractors. And this is taking me out of the game because my max offer is so low
I am about to engage in creating a comprehensive 'cost of repair estimating' worksheet for virtually any rehab item for a house. I will be spending countless hours in research and 'excel time' to do this. I just want a much more systematic and AUTOmatic way to quickly assess repair costs on a property given square footage, # of bed/bathrooms, size of kitchen, size of yard, area of roofing, etc.
My question to anyone out there: is there any tool available that will do this quickly and accurately (within +/-10%)? I am growing weary of spending upwards of 1 hr per property I'm analyzing, while maintaining a W-2 job, new marriage, and having fun with my awesome 5-month old baby boy (pic attached!)
Any help would be greatly appreciated for this desperate investor on a mission!!!
BiggerPockets sells a book on the topic. If you purchase from BP, it comes with the spreadsheets...
I'm honored by the reply! I'm nearly finished with your book, "The Book on Flipping Houses", and am loving it. I'm just not finding that it provides a cut and dry way for a quick estimate on a rehab (even without seeing the house). I think you had mentioned that it is something that will mainly come with time and going through with contractors on property analyses. I've only had about 4 houses to do that on (all offers were rejected), and I'm looking to bypass the time taken by a contractor and my being taken advantage of from a cost standpoint.
Is the e-book that (didn't get the package deal) more detailed on rehab costs?
I'll be getting my hands dirty soon, as my first flip offer was accepted TONIGHT! Wish me luck on my SOW and budget work :) We close on 12/1. Very excited to begin the journey after reading from the experts like yourself
If you plan on flipping it would be good to get yourself a style theme. Then you could price it out by the type of style of the house and know what it cost to achieve that style mix and match to help your estimate.
Thanks Derrick! My realtor has also suggested that. I'll need to do some shopping at Home Depot with my wife to get that covered!
@John Williamson you could also invest some money with an interior design/Architect to help you put something together.
You need to get feedback on what your lost bid homes sold for, your bids may not be realistic.
I appreciate the suggestion. If I'm hearing you correctly, you're suggesting that I contract their services to map out a 'cookie-cutter' rehab (given no unforseen structural issues). I like it. I might see if my contractor might be able to assist with something like that first, however (lower cost I'd presume).
That's a great suggestion for following up. I admit, in my scurry of the 9-5 and analyzing all these deals, I'm neglecting the follow up on these properties and what they sold for. Even more interesting would be 3-4 months down the road and seeing what they 'flipped' for! My initial target for profit (on paper) was $50K. After my first 5 failed offers, I learned that 50 may be too aggressive and have lowered my target to a $25K profit/flip (going for more volume of deals).
Have either of you found a successful avenue for generating leads in this Portland market?
Yes, depending on your contractor and what he does on a regular bases.
kitchen design, cabinets backsplash counter tops, flooring what materials you would use and then when you look at a place you know what you need to do so then you can plug and play with your estimate of rehab.
Your perceived problem is that you can't get a contractor to quote you a cost that you think you should be quoted. This is pretty difficult in a hot construction labor market when you already own the property as they have enough demand to quote you whatever they feel like, and you might need to find that one that really needs the work for some reason or has the extra bandwidth to give you a reasonable price regardless of market conditions. Doing so pre-offer however is even harder and basically requires an established relationship with one you trust to give you a good price.
Your real problem is that you are making offers using investor math but all you have access to is consumer systems.
Let me explain:
Home source: MLS/Market priced homes
Construction: Retail GC/Market priced materials labor
Sale: Full serve brokerage/Market priced commission
Home source: Off-market, distressed properties from direct mail, wholesale, relationships
Construction: Relationships, GC in-house, bulk material discounts
Sale: Negotiated cost brokerage or sales in house
Investor math is usually only possible if you use investor systems, or as many as possible. Outside of that your profit suffers and your MAO math is laughable, especially in a hot market both real estate wise as well as construction labor demand wise.
Not to discourage you, but initially you're looking at much smaller profits for the sake of learning how to access these investor systems, or try to hack them as soon as possible. Usually that involves relationship building.
I would walk a property with you if you want some construction numbers. I only work with investors (Retail clients aren't worth the headache) as a general contractor.
Let me know.
@John Williamson I have found it difficult to simply find a plug and play way to come up with renovation costs. I have a large spread sheet and every house I am interested in I work the numbers up and down as needed and it spit some out my highest offer. It sounds like you realize wanting $50k profit will never land you a deal on the MLS. You might get that type of profit after you rehab, if you save and aren't able to list higher than anticipated. That happened to me a few times!
With that said, being concerned with spending an hour on running numbers on a house... I spend a few hours on any house I am interested in. Even houses I never make an offer on. You need an ARV, you need to determine what it needs and what those things cost, etc. Unless you have others doing this for you it is part of the game (until you can hire others to do it).
I am in a new area and have made a bunch of offers as well. Someone always outbids me. I won't risk losing money to land a property. I would rather wait another week/month/3 months to find a good deal, than over pay, spend 2-4 months rehabbing to break even or lose money!
Please read @Kuba F. response to you. I wish i could upvote it 10x. It's the real answer to your question in this thread.
Investor math only works with investors systems. You can't get the math to work when you are paying consumer (which means full price) when you need investor systems to get you lower costs to make deals happen - this is especially true in your red hot market.
If you want help with DM to get your leads flowing, I can hook you up with a DM game plan, checklist of things to look at prior to starting a campaign to increase your odds of success, and scripts on how to talk to distressed sellers.
Looking on MLS for deals in a hot market is a low-probability bet.
@Kuba F. - Thank you for those sounds words of wisdom. I will certainly make a strong attempt to 'hack' the investor systems, although I'm having a tough go of it with trying to maintain tolerable performance in my W-2 job. The investor systems all require more knowledge and relationship, all which comes with time. I'll get there soon though, I have my mind set on it
@Daniel S McNabb - I appreciate the offer! I don't have any properties currently, but will certainly give you a call once one gets in my crosshairs.
@Brian Pulaski - Thanks for the encouraging words on the time taken for analyzing deals. I just see posts and/or webinars by @Brandon Turner that say "Analyze a deal in 5 min or less". I SOOOOOOOO want to be that fast and efficient, but theres just so many changing variables! I am with you on finding a good deal rather than spending too much on a bad deal. That's why I just recently terminated a contract on a SFH that would've cost at least $70K in rehab
@Ray Lai - I'd love some assistance in a DM plan! I have no experience with that, and would like to have a good system by which I can regularly hit/mail the 'right demographic' at the 'right time'. All things that an experienced investor might have under their belt
One thing to realize , the others beating you out on these properties to flip are Contractors . They can pay a bit more since they do their own work .
I just see posts and/or webinars by @Brandon Turner that say "Analyze a deal in 5 min or less". I SOOOOOOOO want to be that fast and efficient, but theres just so many changing variables!
I hear you there. I've seen a few webinars where Brandon uses the BiggerPockets tools to analyze properties, and he always just plugs in a ballpark repair cost from experience. I'm guessing he goes back later (when he's actually putting together an offer) and nails down those repairs some more. Or maybe he just does the same types of repairs over and over and already has that information down.
When I analyze deals, I ballpark it first to see if I'm even in the right universe, then start getting better numbers if it makes the cut. That way, I spend the advertised 5 minutes on 90% of the properties I look at, then I do a deep dive on the rest.
@John Williamson at 25k estimated profit those are either way low end houses or your willing to settle for lower than 15% returns due to a “hot” market. I think that’s a mistake that a lot of Ma and Pa, new flippers make as they conflate a “hot” market with a “safe” market. At some point you are going to get caught in the wrong part of the cycle with your pants down and your name isn’t Harvey Weinstein.
In this market I think your best bet for good returns are high end flips like @Jay Hinrichs does. Of course you have to know what your doing in this segment as well. I don’t see profitable flips mid-market right now unless you have lots of experience and are willing to settle for smaller returns for the same or greater risk. You might want to look for a value-add play: corner lot rezoning, basement apartment, duplex conversion etc
@Steve B. actually we are not doing any flips the last 12 months only new construction.
as stated above you pretty much need to be wearing your belt and pounding nails to really make the rehab flips work.. plus you should have your own real estate license or wife with one like I do .. so you only pay 2.5% sales total that is huge in this market.
@Ray Lai the issue with this market is there simply is not that much distressed real estate.. one would need a formidable war chest to really make direct mail work here. the Few I know that do it spend 5 to 15k a month on DM to get their deals.. so there are tons who spend 2k one time never land a deal and move on.. the only making money at this game is those selling the DM services..
the bigger wholesaler flippers in this market I know buy at court house steps with cash.. and those guys are hurting for deals and are doing new construction now as well..
I listened to Bruce Norris in Oakland in Oct. and he is even doing new construction now.
I can do 40 new builds ( which I am doing in Portland this year) by finding exactly 2 pieces of property LOL.. not 40 deals.. you know how much you would have to spend on DM to land 40 deals in Portland well you can buy a new fully loaded Tesla and maybe two of them..
I see DM working in markets like the mid west were there are ton's of opportunity.. I just don't see it very much on the west coast.. Not that some don't do well with it.. but you have to really understand the expenses and be prepared to execute.. ( which most simply are not.)
For free I know I could find 4 deals a year on auction.com no problem. for instance.
Any way... rehab flipping in PDX is simply very tough right now and with all the money chasing a few deals I don't see that getting any easier soon.
for the OP I would suggest you look at out lying areas.. less competition and still brisk resale.
little rural acreages can be good too.. usually some pretty beat up old farm houses etc.
but careful on the well and septics.
Around my area it’s about $22.00 a SQFT for your basic SFR to rehab all the basics.
Windows, flooring, paint exterior and interior, kitchen, bathrooms, cabinets, switches and plugs, appliances etc etc on the common things. Then I will add the big stuff on top of that $22.00 a square foot that’s out of the normal. Such as AC/HVAC units, roof, garage door, yard work, septic, foundation issues, new panel etc etc. each market is different but if you don’t have anyone locked in you have used and trust on price in your area then get a really safe margin of profit and use this scale to help your offer. This is just a suggestion for you, every market is different for repair costs but I would imagine this would be somewhat close to your market since I’m in Southern California where things just tend to be more expensive than other parts of the country.
Thanks everyone for the responses!
@Steve B. - Great suggestions. I feel that I have a good team that will be able to find some deals. In fact, I just found a pre-forclosure home on the Historical Society in Tualatin that may be a shot for good returns on a flip or even a cash-flowing property. I like @Jay Hinrichs suggestion of looking in outlying areas, as well. I have limited my geographic region due to needing to stay within a 15 min. drive of my W-2 job in Tualatin. Its a catch-22: W-2 Job provides the consistent cash flow, yet restrains my ability to properly get into the REI business. I don't have the cash reserves to get into development (I think), and feel that a good SFH rehab would be a great intro to the business.
Above all, I feel that as long as I'm thinking positively and surround myself with good people with sound advice (through BP, of course) I will get into this business.
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