Where are the most flippable locations north of the river?

Question

I've learned a hell of a lot in the last month thanks to BP, I'm ready to buy right now. Have my financing lined up but my REA is falling short. Where would you tell a newb to look for a starting to moderate level SFH deal (I'm talking neighborhoods, intersections, etc)? I have half access to the MLS and it really appears that most everything looks priced pretty close to the area, even if the property is in distress.

Thanks for any advice you may give.

Alex G. · Answer

It's unclear what you mean under "moderate level SFH deal". Are you talking about moderate discounts, a rehab moderate in complexity, or areas in Austin that are moderately priced? Usually the older the house the more work you'll have to do to it to modernize it, the more capital and time it takes to complete.

The hot beds of rehabs north of the river are in 78721, 78723, 78702.  Of these three - '02 is closest to DT and darn pricey.  '21 is the cheapest, as houses are smaller and simpler in general. In '23 houses are a little younger than in the other two. '23 is notorious for bad slabs that could add signficantly to the rehab costs. In '21 and '02 most houses are on pier & beam foundations that are cheaper to fix.  In all three you'll find mostly fairly extensive rehabs as houses are old by Austin standards, built in 20-60s. Houses that are modernized are moving fast in those areas.

The more affordable area on north side that is hot now and ripe for remodeling is in 78758 east of  The Domain. Quail Creek has large inventory of older homes (60-80s construction) that present an opportunity for flips. Some pockets along Lamar, both north and south of Braker have plenty of older homes and fixers.  One of the oldest areas on that side of town is between Lamar and IH35 north of Braker with a pool of potential inventory for flips.

The Lamplight Village (north of Parmer Ln between Metric and Mopac) is another pocket of houses built in 70s that could be candidates. It's still quite affordable too.

I think the reality of today's market in Austin is -- you're not likely to find anything in MLS that will work for a rehab in terms of price. Sellers represented by realtors are well informed about where the market is and are holding our for their prices whether reasonable or not. Moreover, every property that smells like a rehab candidate gets at least a dozen offers from investors.

Even most wholesalers price their properties at a level where the profits are already squeezed out and it's going to be hard to justify paying their prices.

Bottom line, in this market you'll likely have to find your own deals. And you'll take them wherever in town they'll come to you.

Good luck!

Alex G. · Answer

@Brendon C.  Once in a while everything works: direct mail, MLS, wholesalers, pre-foreclosure lists, driving for dollars. The more you do it the higher the chances you'll get something out of it.

To follow up on @Kris Wong ideas. I'm not a big DM marketer. You have to commit some money to do it consistently. Over last 4 years I must have mailed 10,000+ pieces to various lists, both non-owner occupied and owner occupied. I bought 1 house, flipped it and netted $55K. The best rate of response on mail came some 3-4 years ago. I still have a few owners from those 3+ years old mailings that I'm following up with. More recent mailings bombed.  The rate of response is damp, the quality of callers is poor, the level of expectations price-wise is super high. Some people are asking more than market prices you can easily find in MLS.

I've done really well with pre-foreclosure lists in the past, though not in the last 12-15 months.

I bought I property from a wholesaler that turned into a really good deal. It's a huge rehab that's been dragging for over 9 months now, but I'll probably net around $250K.

Some local wholesalers have a lot of inventory on a monthly basis. I just signed up with NetWorth Realty yesterday and they sent me 6 properies in the last 24 hours. They claim to have about 15-25 a month here in the Austin metro. A few of them are tear-downs for builders, the rest are fixers. By my standards (admittedly high) the few rehab deals I got so far didn't have any real juice in them. But I'll defer the judgment until after I will have received and reviewed at least 50+ leads from them.

With any wholesaler you have to be really careful when you look at their rehab estimates and ARV they include with their listings. Often the ARV they show is THE absolute highest sale in the area with top level finish out design. At the same time rehab estimates you get are priced on a rental property level at 30-50% less than what it might cost to complete the work. And lots of other work items that go into making your rehab a success aren't even on their list. But that's something you'll learn with experience.

That said,  Jarrod above may be onto something here. For most of us there is a lot of waste on holding costs due to vacancy (interest, taxes, insurance, utilities, lawn, etc) in any rehab project that we have to plug into a spreadsheet to figure out what we can pay. If you buy a fixer, move in, fix it while you live there and sell a year later you can eliminate all that waste. Then, perhaps, some of the inventory from wholesalers may make more sense.

Jarrod Weaver · Answer

You've answered your own question. The markets you are looking in DON'T WORK financially, so you need to look into markets that you haven't yet considered. My first recommendation is that flipping is one of the most dangerous REI strategies you can attempt. If you buy the house discounted, live in it while you make the improvements and sell 366+ days later (since you will likely have an FHA mortgage), then it might work out. If you are going to attempt it otherwise, you better have a pile of money, honest construction crews in your pocket and the ability to get it turned in no more than 60 days. Otherwise, taxes and interest will eat your entire profit potential. From you post I realize this isn't where you are at right now.

My first deal was a live-in flip on a 986SF 2/2 condo that my wife and I purchased as a HUD repo. We paid $41,110 and sold it for $86,000 a year later. I'm sharing this to encourage you to look down market. There's a high potential for profit and less danger if you do. This isn't something you are going to find in ATX, so prepare yourself to look well outside the metro.

Kris Wong · Answer

Directly to motivated sellers. Direct mail marketing, driving for dollars, and bandit signs are a few of the most popular marketing strategies. You'll find them discussed in detail on BP.

Aaron Gordy · Answer

Brendon C.

Alex is right on. The best deals are found off market. On the other hand I find deals all the time on the mls but the margins are tighter, sometimes. I do deals on the mls all the time and I see opportunities there but it requires a ton of research time. One needs to be ready at all times though. Get your financial ducks lined up first.

Kris Wong · Answer

I actually haven't started marketing yet, though I have done a lot of the work to get setup. I've had some success finding an occasional buy and hold deal in the MLS, but patience is key. It may take 6 months or more to find something that makes sense, and you're going to have an even harder time with single-family.

I can tell you I've heard that marketing is also very competitive in Austin. That's what happens when the market has been screaming upward for so long.

Brendon K. · Answer

@Kris Wong have you actually had success in any of those? What kind of results did you get?

Brendon K. · Answer

With my current down payment, the mortgage wouldn't make sense.

Ray Lai · Answer

@Brendon C.

Have you considered house-hacking your first place? You are in a super competitive market and starting out. Difficult to find a deal as a newbie, direct mail and internet marketing works, but those take time to build up. With interest rates still near record lows, you can get a 30 year fixed and house hack where your tenants pay more than your PITI.

Brendon K. · Answer

Where do you guys go if not the MLS? Just craigslist?

Where are the most flippable locations north of the river?

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