Michigan Flip Property

[Dan Mitkovski]

Im looking to do my first flip. I want to do a live in flip. I was wondering if it is smarter to try and do a cash offer or conventional loan. Can you offer two different options for the seller? Cash offer being significantly lower then the loan offer? Is now a good time to be trying this out? So far I've found 2 bank owned properties on the MLS im interested in but i think they are listed a bit high. Any advice would be great! Thanks!

[Evan Polaski]

@Dan Mitkovski going back to your original questions: is now a bad time to get into it? I don't think so. Prices are high, construction materials are up, but I still see opportunities for flips. That being said, the cosmetic upgrade listings, at least in Cincinnati, OH, are selling at retail pricing with multiple offers, many being cash or very low LTV with cash to pay for appraisal shortfalls. What I mean is: like the house you looked at, house will be listed for $150k with $20k of upgrades needed and be worth $170k when all is said and done. That leaves no profit for you.

Most flips and flippers I know are having to do much more extensive rehabs to create value: additions, complete guts, moving walls, adding bathrooms, etc. For me, as a flipper, who only really looks on the MLS, it is hard to find deals that make sense right now, but admittedly I am not looking very hard.

Regarding the cash vs financed offer: as noted, you can submit two offers. But I would not expect a seller to take a discount in this market, even with cash. In fact, as an investor, your offer should not differ in price, because your ARV, and all in costs are going to be identical (somewhat) whether you pay cash or mortgage it (I am clearly ignoring interest and loan closing costs on mortgage, but also ignoring your cost of capital for cash). What I mean is the house is worth $85k to you either way. Cash is a stronger offer, so you might get a seller that will take a slight discount for cash and quick close, but if you numbers work at $150 financed, they should work for $150 cash, and vice versa.