I am a relatively new investor. Started in multifamily buy and holds in 2014. Decided this year to do my first flip. I found a deal that I want to put an offer on, but how do I structure the offer? For me I would be offering all cash and 7-14 day close, but how do I protect myself in the offer? Do I put inspections or any other contingencies? What is the typical structure of a flip offer in the minneapolis market? Any insight would help. Thanks.
Congrats for taking actionable steps. My first question was do you have all your components in place; i.e. your contractor, your ARV, Rehab budget, materials? Are you flipping in your personal name or in your entity? How much ernest money are you putting up. What is your timeline/exit plan?
Writing an offer is pretty straight forward, especially all cash. But if your not familiar with writing offers I would most definitely consult with a licensed agent (good idea to have agent friends).
But purely looking at what you put, not being experienced in flipping, I would make the offer subject to interior inspection (7day) inspection period, 15-30 day close. IMHO no matter how good you are or experienced you are, you still want to leave a route to use to get out of a deal. Inspection periods are one of the best ways to create delay, if you are concerned about getting out the deal if things go south.
Bottom line if you aren't experienced enough to know all the ins and outs put an inspection contingency in there. 99% of offers will have it. Have your contractors go through and give you a thorough bid. If it doesn't work with your numbers you can bounce. An all cash offer continent on insepction is still a super strong offer.
It's also a good idea to check/ask for the TISH report. This will tell you what you must repair for city code compliance if you're purchasing in the city of Minneapolis, and will help guide your renovation costs. If the house is condemned/on the vacant building list, you must bring it up to current code, which can be much more expensive (for example, you might have to put a larger egress window in each bedroom).
Thanks everyone, great advice. I will go ahead and throw an inspection contingency in the offer. I knew they were common in retail buys, just wasn't sure about flipping.
On MLS deals in the twin cities I lost 3 cash offers in the last 2 weeks due to multiple bidders. In one case there were 35 other bidders buying with cash or hard money.
Adding an inspection contingency probably hurts your offer unless you are bidding higher than everyone else. If you feel confident there are not too many hidden issues remove the inspection contingency. Maybe just add 10% contingency in your rehab budget instead for surprises like a broken HVAC or old wiring.