First Flip and scared to death

22 Replies

Well, have been looking for rental properties but now came across a home for $85,000 cash and market analysis shows should get around 155-165K so may be a good profit. Roof needs replaced, wood rot on Fascia-, needs new flooring in some rooms and lots of cosmetic items. AC is newer. Not sure what I’m doing but going for it, wish me luck!

@Eddie Quirk

Admire your drive and super moxie. Sadly, moxie hires no reliable roofers whose work you know you can rely on. Experience does that. You're about to get some experience.

@Eddie Quirk So if it was in GOOD condition, you would stand to make $75,000 gross profit.  ($160,000 sell price - $85,000 acquisition price).

However, you have all sorts of expenses - and I'll just guess at your costs below.  Things may be different in FL, but these numbers are about right here in MA.

Roof $10,000.  $65,000 left

Floors $5,000.  $60,000 left.

Wood rot $5,000.  $55,000 left.

Cosmetics $10,000.  $45,000 left.

Surprises. $20,000.  $25,000 left. 

Closing costs. $4,000.  $19,000 left.

Carry costs (loan, taxes, insurance).  $5,000.  $14,000 left.

Re-marketing costs.  $6,000.  $8,000 left.

If you decide to update the electrical, plumbing, kitchen or baths, you're in the red.

This deal makes sense for a handyman / contractor who wants to owner-occupy and wants a deal where he can do most of the work himself.  There's nowhere near enough meat on the bone to flip for a profit.

I think you'll need more than luck, but good luck!

Originally posted by @Charlie MacPherson :

@Eddie Quirk So if it was in GOOD condition, you would stand to make $75,000 gross profit.  ($160,000 sell price - $85,000 acquisition price).

However, you have all sorts of expenses - and I'll just guess at your costs below.  Things may be different in FL, but these numbers are about right here in MA.

Roof $10,000.  $65,000 left

Floors $5,000.  $60,000 left.

Wood rot $5,000.  $55,000 left.

Cosmetics $10,000.  $45,000 left.

Surprises. $20,000.  $25,000 left. 

Closing costs. $4,000.  $19,000 left.

Carry costs (loan, taxes, insurance).  $5,000.  $14,000 left.

Re-marketing costs.  $6,000.  $8,000 left.

If you decide to update the electrical, plumbing, kitchen or baths, you're in the red.

This deal makes sense for a handyman / contractor who wants to owner-occupy and wants a deal where he can do most of the work himself.  There's nowhere near enough meat on the bone to flip for a profit.

I think you'll need more than luck, but good luck!

 Maybe MA has higher prices, but $5k for fascia wood rot? $10k cosmetics? $20k surprises? Methinks you're pricing in the worst case scenario (which is not a bad thing in itself). 

To add, we have bought and sold houses for years and my wife as a realtor has many trusted contacts for roofing, electrical, etc. I used to be a home inspector so during our inspection period which starts today I will check everything out and go from there. Will get a full home inspection, termite etc. I will do a lot of stuff myself, painting, cleaning, tearing out old carpet, etc. just won’t be able to do roof, etc. I was hoping for some positive quotes but meh guess not. Unless something comes back super bad on inspections I think we have a lot of wiggle room. Around this area painting the house is about $1000, roof maybe $5000 etc. I will also replace faucets and such myself and some of the plumbing. It’s owner occupied, it’s not like it’s some bank owned sitting around for a decade or anything. Any good comments is much appreciated. Will see what happens but have to start somewhere. Why not here?

Originally posted by @Eddie Quirk :

To add, we have bought and sold houses for years and my wife as a realtor has many trusted contacts for roofing, electrical, etc. I used to be a home inspector so during our inspection period which starts today I will check everything out and go from there. Will get a full home inspection, termite etc. I will do a lot of stuff myself, painting, cleaning, tearing out old carpet, etc. just won’t be able to do roof, etc. I was hoping for some positive quotes but meh guess not. Unless something comes back super bad on inspections I think we have a lot of wiggle room. Around this area painting the house is about $1000, roof maybe $5000 etc. I will also replace faucets and such myself and some of the plumbing. It’s owner occupied, it’s not like it’s some bank owned sitting around for a decade or anything. Any good comments is much appreciated. Will see what happens but have to start somewhere. Why not here?

 this added detail sure helps. triple check your arv. that and the repairs are key to your success. 

Eddie, don’t let the negative comments get to you. I’ve experienced the same on here. I’ve learned there’s only one way to get into this business and that’s to just jump in. I’m getting ready to take the plunge myself.

It looks like you’ve taken that first step. No going back now. Just be smart and don’t overdo it.

Im no seasoned flipper, but having spent quite some time in construction, I also feel some of Charlie’s estimates to be pretty high. Although, it doesn’t hurt to work in some cushion.

Good luck! With your and your wife’s backgrounds, I’m sure you’ll be fine.

You should do fine as long as you don't overimprove, and as long as it's not in terrible shape.  Make sure to visit your competition that's on the market right now to figure out how much to put into this place.

Originally posted by @Victor S. :
Originally posted by @Charlie MacPherson:

@Eddie Quirk So if it was in GOOD condition, you would stand to make $75,000 gross profit.  ($160,000 sell price - $85,000 acquisition price).

However, you have all sorts of expenses - and I'll just guess at your costs below.  Things may be different in FL, but these numbers are about right here in MA.

Roof $10,000.  $65,000 left

Floors $5,000.  $60,000 left.

Wood rot $5,000.  $55,000 left.

Cosmetics $10,000.  $45,000 left.

Surprises. $20,000.  $25,000 left. 

Closing costs. $4,000.  $19,000 left.

Carry costs (loan, taxes, insurance).  $5,000.  $14,000 left.

Re-marketing costs.  $6,000.  $8,000 left.

If you decide to update the electrical, plumbing, kitchen or baths, you're in the red.

This deal makes sense for a handyman / contractor who wants to owner-occupy and wants a deal where he can do most of the work himself.  There's nowhere near enough meat on the bone to flip for a profit.

I think you'll need more than luck, but good luck!

 Maybe MA has higher prices, but $5k for fascia wood rot? $10k cosmetics? $20k surprises? Methinks you're pricing in the worst case scenario (which is not a bad thing in itself). 

 Yes - of course I’m estimating worst case. I don’t think it’s wise to assume that you’ll catch a lot of lucky breaks.

You might, and that would be great news, but if you can survive worst case, it’s a lot more likely to be a good deal.

Hi Eddie,  I checked out your profile and looks like you have some experience in maintenance and your wife in real estate.  Between the two of you you should have a reliable roofing contractor to evaluate the roof on a full gut or just a re-shingling.  I assume you probably already know because of your work.  Don't let the posts scare you, I think you mentioned you want to hold and rent, good luck and let me know if you have any questions along the way on D&C side of things.  Cynthia Murphy, CKBR

@Eddie Quirk

Please the rest of us for being so blunt. Your lack of background suggested to us that were a total noob trying to go into the flipping business. Obviously now we know that you have had your feet wet in the real estate for some time. So please on behalf of my blunt colleagues and I, we apologize for our comments. However, please next time give us a quick background so we don't think you are out of your game.  

@Eddie Quirk

In which case, get busy on the photos, man. Show us everything, but most importantly the roof.

@Brian Adzadi exactly explained what I thought, too.

This forum gets at least twenty new investors per month posting about "jumping into" their first flip with no real estate experience, absolutely no background in residential construction, but the sure and certain belief that neither are needed to pull off residential flips successfully. These investors think they're magically going to raise and lead an army of compliant and reliable contractors to certain victory and Y-U-G-E profits. The flip is often located somewhere between six hundred and two thousand miles away from where they live, and they have more faith in their cell phone's power to set things right from afar than a revival preacher has in Jesus.

They beat their chest for two days with self-congratulatory posts boasting about how their flip's certain to be a triumph of the will, usually because of their prior life experience, upbringing, or general mastery of the art of manliness. Then they disappear.

How many ft2? How many beds? How many baths?

What's the flooring like, what are your plans for it?

Whattaya mean A/C is newer? Tell us about the furnace, too.

Let's get your plan in shape.

Originally posted by @Brian Adzadi :

@Eddie Quirk

Please the rest of us for being so blunt. Your lack of background suggested to us that were a total noob trying to go into the flipping business. Obviously now we know that you have had your feet wet in the real estate for some time. So please on behalf of my blunt colleagues and I, we apologize for our comments. However, please next time give us a quick background so we don't think you are out of your game.  

 This is a really good 👉. 

@Eddie Quirk when I bought my first house I had zero experience in every area, and the place had to be gutted completely. The only thing going for me was the motivation, and the fact I’ve always been handy and a quick learner. I have a W2 job that pays decent, I could afford the mortgage. So I didn’t care about sleeping on plywood, taking cold showers, and eating sliced meat sandwiches. I didn’t have a kitchen for maybe 5 months? @Charlie MacPherson was right, the costs added up way more than I anticipated. I had to do most of the work myself, and I got it done. But there were times I was so tired physically and mentally I HAD to have my friends in certain trades do some work, and they gave me huge breaks on prices. What I learned: - had to pay more than I calculated (WAY MORE) - took a lot more work than I expected - had to compromise in certain areas - went overboard on renovation - etc. But most importantly I learned that it was possible, and hard work does pay off. And the experience I’ve gained is invaluable. Good luck you got this!

Did you draft a scope of work?  How many SQFT is it?  Did you place room for error?  If you are flipping at the top of the market and the property is between 1000-1500 SQFT, retail construction in our area would be anywhere from 35k on the very low end to 60k pending where it is located.  Saving slightly used items will only lessen the end price.

Sorry I didn’t give more info. This is still my first flip and I’m nervous about it and excited at the same time. I look at my nervousness as a good thing because I am a generally disciplined person and feel like if I’m not as comfortable I will be less likely to make mistakes but that’s just me.

The house is 1280 sqft. 2 Bed 2 Bath. Was told the roof is 24 years old. I did a permit search and did not find anything but it is definitely old. Roofs get about 15 years or so around here. I want to do a more thorough look at the decking and such when we do inspections next week to see if we need a whole roof or just shingles. I plan on buying my own shingles and having a roofer install to save on some money. It’s masonry built with Stucco except the tables are wood. The fascias are all rotted out pretty bad but haven’t looked close at the gables yet, may just redo those as stucco or vinyl siding, not sure yet. I will probably hire out for that work as I have minimal exp with siding and none with stucco but can learn.

The AC handler was replaced last year and the condensing unit motor as well. My biggest concern here is the trunk duct in the attic being rotted out but will asses during inspection time. Here we have heat pumps so I will check it out and such next week.

I will do all the bathroom plumbing new fixtures and cabinet/door handles myself.

Thinking about laminate flooring, I will pull old carpet up myself, tile in kitchen and bathrooms still good. I also do not have any exp laying flooring but a friend of mine that flips houses has a good floor guy he uses so I will get some quotes.

House needs painting inside and out. Not sure if I will do that or not yet, I will get quotes some reputable painters I know and assess it.

The house is owner occupied which is a plus. So I didn’t get to inspect everything, but during inspection period will go over it with a fine toothed comb.

We are rough estimated $20,000 in repairs but will redo that figure after next weeks inspection.

Like I said this is my first one so I’m sure I’m leaving something out or forgetting something but will do the best I can.

More soon, thanks

since people here like the RE rules. we'll take your 155k arv times 70% and minus your est. repairs. looks like your pp *should* be around $88k, so, if your repairs quote is close enough, you should be in good shape.