Is flipping a good idea right now?

12 Replies

I have this house that I am in the process of closing on in Lafayette Louisiana market. I want to flip it. This would be my second house I’m flipping. I’m new to this world of flipping and I need some help. I got this house under contract for $163,000. After repair value is most likely $230,000 but could get all the way up to $255,000 according to the comps. I will have a total of $195,000 with realtor fees and repairs. This will take about 3 months to get the house back on market. I feel like this is a bad time to do a deal that is this thin. I’m worried about the market dropping or it sitting long because of all the COVID changes that are about to happen at the end of this month. This house has 2305 Square feet with 3 beds and 2 baths. What do y’all think?

I'm not sure about your market, but in Raleigh where I'm at there's so much more demand than supply for housing, so even with the uncertainty of everything, houses are flying off the market within days or hours. Even with fairly thin margins, taking on a flip is not a bad idea because it's very likely going to sell quickly once it's ready to go on the market. It really depends on your area. What are the days on market for your comps? If they are low right now, it's likely they won't change a lot in 3 months. 

@Marcus Trahan I would also check with some agents about rehabbed properties time on market.  In Cincinnati, we are like Raleigh, far more demand than supply.  But there are houses that sit.  Cincinnati as a whole is 25 days on market for May, 2020.  But we just completed a flip, that closed June 30, and it had 9 offers in 12 hours, so clearly your market days on market are simply averages for the market.  It really comes down to the neighborhood you are in, and how well designed and executed the rehab is.

Originally posted by @Marcus Trahan :

I have this house that I am in the process of closing on in Lafayette Louisiana market. I want to flip it. This would be my second house I’m flipping. I’m new to this world of flipping and I need some help. I got this house under contract for $163,000. After repair value is most likely $230,000 but could get all the way up to $255,000 according to the comps. I will have a total of $195,000 with realtor fees and repairs. This will take about 3 months to get the house back on market. I feel like this is a bad time to do a deal that is this thin. I’m worried about the market dropping or it sitting long because of all the COVID changes that are about to happen at the end of this month. This house has 2305 Square feet with 3 beds and 2 baths. What do y’all think?

This is a great time to be flipping as inventory levels are at all time lows. You may even be able to sell the house as is. Have you run that by the realtors in the area? Covid has not affected buyer demand as rates have been so low. I would just make sure your market is solid and is in need of sellers.

 

@Marcus Trahan

Depends on area but many places have demand outstripping supply right now. I work in San Antonio, TX and flippers are doing pretty well at the moment.

Even when Covid took off in March, flips were still selling with ease, but the investors got hesitant that market conditions would change. So as a result, in April, May, and even early June, there was a big shortage of rehabbed houses on the market since people weren't flipping as much. Now we have absolutely taken off again. I have 8 investor customers currently knocking out their rehab projects. Not a bad time to flip in my opinion.

@Marcus Trahan this is a great topic and question. Regardless of the market, there can always be wise and profitable real estate investments.  I know this isn't a profound statement, but I would encourage you to not make a decision based on the the market, but based on your business plan tied to the asset.  

Given the times, it may be wise to stress test your deal with lower ARV's (use the $230k vs the $255k ARV,) a longer hold time (6mos vs 3mos,) and additional hold or construction costs. In the end, if your deal is profitable with conservative assumptions, then you should be insulated from any market influences. Hoping this works out as a profitable deal for you!