Is this good advice I got at house flipping seminar?
FL · Member since 2016 · 912 posts · 107 votes
Is this good advice I got at house flipping seminar?
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China, ME · Member since 2014 · 3k+ posts · 4k+ votes
7y@Patrick Philip That's an awfully broad brush your gurus are painting with.
Older than 1970? I'd love to hear their reasoning. My town was settled in 1620. There are plenty of solid houses here that are VERY old. People buy them, sell them, renovate them and rent them. Every day. If they has said before 1978, I could at least guess that they're trying to avoid lead paint.
Of those homes, I'd guess that 80% of them have some sort of wood exterior.
Small houses? It depends on the local market. Plenty of small houses around here make great summer rentals, as we're an oceanfront community. If you're in a market where older folks are downsizing, smaller (sub-1,500 sq ft) homes are exactly what buyers are looking for.
4/2, 3/2 as minimums? Again, that varies greatly by the local market. Downsizers won't want 4 or possibly even 3 beds. Many first time buyers won't be able to afford them - but both are likely to snap up a 2/2 or a 2/1.
Needing renovation? That's how fix & flippers make their living. Not to mention those that fix & rent. If you can buy a home needing renovation at the right price, why not?
Lots of homes are sold around here without a master suite and without garages.
I think your gurus are missing the mark as generalities often do. I hope you didn't spend too much on them!
26 Replies
- Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes7y
Was the seminar put in by someone who has successfully flipped dozens/hundreds of houses in that particular area? If so, perhaps that's advice based on his experience and perhaps you should heed it.
But, if it was advice from someone who isn't intimately familiar with your market, then you should do your own research.
And, even if he is familiar with your area, it's probably unrealistic advice at this point in the market cycle. Everyone is trying to buy the "easy" houses to flip -- if you want to get deals, sometimes you have to go after the tougher ones. For example, buy that 3/2 and turn it into a 4/2. Or buy that house without a garage and build one.
- China, ME · Member since 2014 · 3k+ posts · 4k+ votes7y
@Patrick Philip That's an awfully broad brush your gurus are painting with.
Older than 1970? I'd love to hear their reasoning. My town was settled in 1620. There are plenty of solid houses here that are VERY old. People buy them, sell them, renovate them and rent them. Every day. If they has said before 1978, I could at least guess that they're trying to avoid lead paint.
Of those homes, I'd guess that 80% of them have some sort of wood exterior.
Small houses? It depends on the local market. Plenty of small houses around here make great summer rentals, as we're an oceanfront community. If you're in a market where older folks are downsizing, smaller (sub-1,500 sq ft) homes are exactly what buyers are looking for.
4/2, 3/2 as minimums? Again, that varies greatly by the local market. Downsizers won't want 4 or possibly even 3 beds. Many first time buyers won't be able to afford them - but both are likely to snap up a 2/2 or a 2/1.
Needing renovation? That's how fix & flippers make their living. Not to mention those that fix & rent. If you can buy a home needing renovation at the right price, why not?
Lots of homes are sold around here without a master suite and without garages.
I think your gurus are missing the mark as generalities often do. I hope you didn't spend too much on them!
- FL · Member since 2016 · 912 posts · 107 votes7y
Originally posted by @Charlie MacPherson:
@Patrick Philip That's an awfully broad brush your gurus are painting with.
Older than 1970? I'd love to hear their reasoning. My town was settled in 1620. There are plenty of solid houses here that are VERY old. People buy them, sell them, renovate them and rent them. Every day. If they has said before 1978, I could at least guess that they're trying to avoid lead paint.
Of those homes, I'd guess that 80% of them have some sort of wood exterior.
Small houses? It depends on the local market. Plenty of small houses around here make great summer rentals, as we're an oceanfront community. If you're in a market where older folks are downsizing, smaller (sub-1,500 sq ft) homes are exactly what buyers are looking for.
4/2, 3/2 as minimums? Again, that varies greatly by the local market. Downsizers won't want 4 or possibly even 3 beds. Many first time buyers won't be able to afford them - but both are likely to snap up a 2/2 or a 2/1.
Needing renovation? That's how fix & flippers make their living. Not to mention those that fix & rent. If you can buy a home needing renovation at the right price, why not?
Lots of homes are sold around here without a master suite and without garages.
I think your gurus are missing the mark as generalities often do. I hope you didn't spend too much on them!
I have rehabbed 2 houses. Both are still on the market. I have heard lots of feedback about buyers not liking the neighborhood and about wanting a master bedroom. 1 buyer didn't like the wood framing.
So there is definitely some truth to what I was told, but maybe that would limit me to not finding as many deals.
- Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes7y@Patrick Philip theres nothing wrong with the houses. No offense meant, but the problem is you. Either you didnt do the proper research to know the neighborhoods and the price points they support. Or you over renovated based on the price. The properties that arent selling are priced to high. A properly priced and marketed house shouldnt sit, unsold, for more than a few weeks to a month.
- China, ME · Member since 2014 · 3k+ posts · 4k+ votes7y
@Patrick Philip A buyer "didn't like the wood framing"???
That sounds like something we call a "smokescreen objection". Often used by buyers when they are feeling under pressure, they throw up an insurmountable objection to take the heat off.
The way a capable salesperson handles a smokescreen objection is to smile, nod and to ignore it. If it comes up again, it might be genuine.
I don't know the Florida market, but I can tell you with certainty that here in Massachusetts, the vast, overwhelming majority of homes are built with wood framing.
- FL · Member since 2016 · 912 posts · 107 votes7y
Originally posted by @Charlie MacPherson:
@Patrick Philip A buyer "didn't like the wood framing"???
That sounds like something we call a "smokescreen objection". Often used by buyers when they are feeling under pressure, they throw up an insurmountable objection to take the heat off.
The way a capable salesperson handles a smokescreen objection is to smile, nod and to ignore it. If it comes up again, it might be genuine.
I don't know the Florida market, but I can tell you with certainty that here in Massachusetts, the vast, overwhelming majority of homes are built with wood framing.
They wanted a block house. You can't see why someone wouldn't want a house made from T1-11 siding when there's plenty of block houses for sale? Especially in Florida where we have termites?
- FL · Member since 2016 · 912 posts · 107 votes7y
Originally posted by @Jason D.:
@Patrick Philip theres nothing wrong with the houses. No offense meant, but the problem is you. Either you didnt do the proper research to know the neighborhoods and the price points they support. Or you over renovated based on the price. The properties that arent selling are priced to high. A properly priced and marketed house shouldnt sit, unsold, for more than a few weeks to a month.That's what I said. The neighborhoods are bad. Not much I can do about that now except to not do it next time.
I had them both appraised and both are listed at a few thousand below appraised value.
- China, ME · Member since 2014 · 3k+ posts · 4k+ votes7y
@Patrick Philip We have termites here too, as well as powder post beetles, carpenter ants and a few other wood destroying insects. I guess architecture is different 1,500 miles away!
We see the occasional block foundation but I don't think I've ever seen an entire home made from cement block.
I know one "feature" of block foundations around here is that building codes won't allow a 2nd story to be added to a single story with a block foundation.
That could have something to do with what I see here as it's pretty hard to find a ranch. The majority of our homes are capes, colonials, splits, raised ranches or multi-levels.
- Realtor · PInellas County Largo, FL · Member since 2016 · 902 posts · 810 votes7y
Originally posted by @Patrick Philip:
Originally posted by @Charlie MacPherson:
@Patrick Philip That's an awfully broad brush your gurus are painting with.
Older than 1970? I'd love to hear their reasoning. My town was settled in 1620. There are plenty of solid houses here that are VERY old. People buy them, sell them, renovate them and rent them. Every day. If they has said before 1978, I could at least guess that they're trying to avoid lead paint.
Of those homes, I'd guess that 80% of them have some sort of wood exterior.
Small houses? It depends on the local market. Plenty of small houses around here make great summer rentals, as we're an oceanfront community. If you're in a market where older folks are downsizing, smaller (sub-1,500 sq ft) homes are exactly what buyers are looking for.
4/2, 3/2 as minimums? Again, that varies greatly by the local market. Downsizers won't want 4 or possibly even 3 beds. Many first time buyers won't be able to afford them - but both are likely to snap up a 2/2 or a 2/1.
Needing renovation? That's how fix & flippers make their living. Not to mention those that fix & rent. If you can buy a home needing renovation at the right price, why not?
Lots of homes are sold around here without a master suite and without garages.
I think your gurus are missing the mark as generalities often do. I hope you didn't spend too much on them!
I have rehabbed 2 houses. Both are still on the market. I have heard lots of feedback about buyers not liking the neighborhood and about wanting a master bedroom. 1 buyer didn't like the wood framing.
So there is definitely some truth to what I was told, but maybe that would limit me to not finding as many deals.
@Jason D. is right -- a properly priced house will sell quickly. I often see people over-pricing based on the current appreciation and 'solds' as comps. I have, in anticipation of a market shift, started to advise pricing based solely on active competition -- that is what the buyers are seeing after all. We can't always look at what the appraiser is looking at. And if the market does shift or even slow into a balanced market, the sold comps will be overpriced compared to the current market.
For your current inventory, try to look at the supply/demand (how many comps sell per month) and make sure that you are one of them. In other words, if 2 will sell this month and 8 are active, make sure that you are priced better and show better than at least 6 of the competition. And if your holding costs are worrying, be the best priced house and ensure that you sell quickly. if you 'lose' $5,000 off of your estimated ARV, but sell tomorrow and close in 30 days vs sitting and waiting for 90 days for a contract, what's the delta? Usually speed wins, especially when we're looking at a market that has rising interest rates and more buyers that are waiting.
As far as the advice about the types of houses to choose and sell, that will most definitely depend on your area and goals. I would check to see the median and average sales prices and house types in your area, and then check that against your goals and go from there. If the wood frame houses tend to sit for twice as long and for less, I might stay away. You can have your Realtor run some searches for you if you don't have access to that information.
- Realtor · PInellas County Largo, FL · Member since 2016 · 902 posts · 810 votes7y
We do have an issue with most buyers in my area wanting a block home as opposed to wood frame. You are 100% correct that you shouldn't let that sit without discovering why. Most people assume that block homes are safer in a hurricane, when that isn't necessarily the case -- and wood frame homes sell every day, often comparably priced to block homes depending on the neighborhood. And we're not as bad with old homes as MA, yet I consider an 80s house to be practically new construction, let alone 90s block homes built after Hurricane Andrew codes went into effect. Stick houses definitely sell, and quickly, if they're priced right.
- Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes7y@Patrick Philip you can buy in bad neighborhoods, you just have to price accordingly. I understand the block vs. frame house preference, but wood frame houses sell every day. I always prefer a block house in Florida but I just bought a wood frame house because the price was right and I know what I can sell/rent it for. You just have to know the markets....
- FL · Member since 2016 · 912 posts · 107 votes7y
Originally posted by @Jason D.:
@Patrick Philip you can buy in bad neighborhoods, you just have to price accordingly. I understand the block vs. frame house preference, but wood frame houses sell every day. I always prefer a block house in Florida but I just bought a wood frame house because the price was right and I know what I can sell/rent it for. You just have to know the markets....Then why are they so slow to sell even when listed below appraised value?
I paid $450 for an appraisal, and have had the number confirmed through 2 realtors.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Charlie MacPherson:
@Patrick Philip We have termites here too, as well as powder post beetles, carpenter ants and a few other wood destroying insects. I guess architecture is different 1,500 miles away!
We see the occasional block foundation but I don't think I've ever seen an entire home made from cement block.
I know one "feature" of block foundations around here is that building codes won't allow a 2nd story to be added to a single story with a block foundation.
That could have something to do with what I see here as it's pretty hard to find a ranch. The majority of our homes are capes, colonials, splits, raised ranches or multi-levels.
full block houses in FLA are standard .. really the only place I see those built like that.. other than purpose built rentals..
- Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes7y@Patrick Philip because appraised value is only useful to banks. It has nothing to do with selling price. I have a property that appraised for a refi at $165k and I know it would only sell for $145k - $150k tops. If a property doesnt sell, its ALWAYS because its priced to high. Think of it this way, if you listed it for $1, would it sell? Of course! So if it would sell for $1 but not for what you're asking, its priced to high.
- FL · Member since 2016 · 912 posts · 107 votes7y
Originally posted by @Jason D.:
@Patrick Philip because appraised value is only useful to banks. It has nothing to do with selling price. I have a property that appraised for a refi at $165k and I know it would only sell for $145k - $150k tops. If a property doesnt sell, its ALWAYS because its priced to high. Think of it this way, if you listed it for $1, would it sell? Of course! So if it would sell for $1 but not for what you're asking, its priced to high.So appraisals are useless. But realtor price opinions are useful? Because I had the numbers backed up by realtors. 1 of them was under contract and the buyers got cold feet and never went in to get their final loan approval. I had it off the market for a month because of that.
I'm not sure how to know if I'm just being impatient. ADOM is definitely more than a few weeks according to all statistics I've seen.
- Rental Property Investor · Corvallis, OR · Member since 2018 · 840 posts · 1k+ votes7y
@Patrick Philip That advice would have costs me thousands of dollars ! Get your money back
- Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes7y@Patrick Philip appraisals arent necessarily useless but, as you have seen, they are not indicative of sales price. BPO is just that, an opinion. The market doesnt care about those things, so you need to find out what the market says you property is worth. What are the average days on market in that neighborhood? If the average DOM is 30 days for a $150k property, and your listed at $150k and at 14 days, I'd say you're being a little impatient. On the other hand if you're at 45 days at $160k, I think you need to rethink your strategy.
- FL · Member since 2016 · 912 posts · 107 votes7y
Originally posted by @Jason D.:
@Patrick Philip appraisals arent necessarily useless but, as you have seen, they are not indicative of sales price. BPO is just that, an opinion. The market doesnt care about those things, so you need to find out what the market says you property is worth. What are the average days on market in that neighborhood? If the average DOM is 30 days for a $150k property, and your listed at $150k and at 14 days, I'd say you're being a little impatient. On the other hand if you're at 45 days at $160k, I think you need to rethink your strategy.What is the best place to find these statistics? Especially specific to a zip code?
I would think that a realtors opinion would be more valuable than mine. At least at this point.
- Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes7y@Patrick Philip I use my realtor, he is exceptional about knowing the market in my target areas, and I'm fairly new in my local market. You can also do some of the research yourself through realtor.com, Zillow, etc....
- Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes7y
As far as the original post, that criteria sounds very specific. I imagine you and every other flipper will be going after the exact same "perfect flip" 4/2, little rehab needed, newer than 1970s house that has enough equity to make money...
I have never bought a house newer than early 1970s. My goal is 1950-1970s houses. They are in the era where original owners let them go to shambles, but the structure is usually good and the rest serviceable. I have looked at older houses and newer ones, but tend to like the 50s-70s. There are some issues to look for (aluminum wire, lead, asbestos in some materials) but for the most part they have been good buys.
The block construction... can't help you there. We don't have that up north.
As far as "your rehabs not selling", post up the address/listing and we will give advice. 95% of the time it is price and lowering it will get it sold.
- Flipper · Fort Myers, FL · Member since 2017 · 182 posts · 98 votes7y
I have flipped over 20 houses myself. House before 1970 have cast iron drain and wood frame house are more accessible to termine and foundation problem. These are big ticket items you don’t wanna mess with as a newbie. However. Size of the houses depends on the neighborhood. For me all size of house has their market. In my area. 2/1 3/1 3/2 are more popular than bigger house. Well don’t wanna keep wood frame house as an rental due to the higher risk for the fire termine and foundation.
- Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes7y
Originally posted by @Patrick Philip:
So appraisals are useless. But realtor price opinions are useful? Because I had the numbers backed up by realtors. 1 of them was under contract and the buyers got cold feet and never went in to get their final loan approval. I had it off the market for a month because of that.
When trying to determine your ARV, there are two numbers that are important:
1. The appraised value;
2. The price that a buyer will pay.
You need to know both of these, and the ARV will be the lower of the two.
You seemed to know the appraised value, but you don't seem to know what a buyer is willing to pay. And don't say that you talked a realtor. Clearly, if the houses aren't selling at the price the realtor told you, the realtor isn't good enough at his/her job.
That said, I've been following your posts for about two years now, and the one common theme is that you're constantly looking for black and white answers to things that don't have black and white answers. In the past couple posts, you seem to want to argue that you're doing everything right but that your houses aren't selling. Unfortunately, that means you're not doing everything right.
Clearly your price is too high given the product you're trying to sell. Perhaps the location is worse than the comps you used to determine ARV. Perhaps the quality of work is subpar and buyers are noticing that. Perhaps values have dropped in your neighborhoods since you started renovating. Perhaps your agent isn't very good. Perhaps a million other things. But, long story short, your properties aren't priced correctly given their location and/or condition.
Instead of arguing about that, take control. How many buyers have walked through your houses and not put in offers. Has your agent called every one of the buyers agents to get feedback, ask about price, etc? What has she been told?
- Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes7y
I agree with @J Scott feedback is essential when buyers view your house. Find out what is keeping them from buying. If it is something that can be addressed, address it. If not, reduce price to overcome it. I'm not sure if FL has the same slow down as up north, but house sales do slow this time of year. I've sold houses during the holidays... it's doable, but not optimal.
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