Can you get a good deal on a home that has been flipped?

Question

Hey guys, I’m trying to understand the mind set of the “flipper” and how this could be a opportunity to buy if they are willing to discount. Here’s the general info I have gathered from MLS, and local tax information.

Home is listed for 600k,

3bd, 2ba, 1640 sqft

Home built in late 80s.

This home was done by a flipper, and they bought it at the height of market price at 500k in July . Not sure how much money they put in but looks like flooring, cabinets and painting.. they had this listed at 650K in September. It’s been sitting on the market close to 100 days now and they only have dropped about 7% in price or about 50k.

If your looking to buy this one and done home, in this market and where time is money for flippers, what type of offer do you think you can make on this?

Would one make a low ball offer? Or why would they not price drop to be competitive in the area where the size of the home medium prices are around 550k.

any good insight would be great to hear. And I know this is a place we’re we have flippers and investors so, this is a cut throat business we are all in and some make it and some don’t, some eat each other up and others win..

thanks

Basit Siddiqi · Answer

Flippers have holding costs and may be under stress like any other.
Flippers do not normally rent out the house before it is sold so they have no positive cash-flow until it is sold.
Some monthly costs that they incur are hard money interest, property taxes, insurance, utilities, etc.
They also have risks of squatters coming in and ruining their renovations.

As a result, if you see properties on the market long enough, you may be able to get a deal.

best of luck

Scott E. · Answer

To answer the question in your subject line, yes you definitely can get a good deal on a home that has been flipped (especially one that has been on the market 100 days and has dropped the price by $50k).

If this investor used hard money on the deal, their loan is likely to be coming due either in January or April (6-9 months after origination).

As you get closer to that balloon, they will become more and more motivated to dump that property at cost, or even for a loss.

With all of that being said, ignore all of the noise I just wrote about. Underwrite the deal as you would any other deal. If you buy it, how much capital would you need to put down, what would your payment be, and what would it cash flow? How is the location? How is the quality of the remodel? Make an offer based on your underwriting, NOT based on what they paid for the deal.

Alex Larcheveque · Answer

I agree with @Bob Okenwa, there's a lot of missing information. However, if it's been sitting on the market for 100 days as an updated home, it's probably priced too high or the flip quality was poor and inspectors are noticing.

If you want me to go over the property with you, send me a DM on Bigger Pockets and we can take a look at it together. I'm a real estate agent in the I.E., and used to live in Riverside for 5 years, so I definitely know the area!

Bob Okenwa · Answer

@Juan Zamora

There is not enough information in your post to say exactly what kind of offer one should make. Not all markets are correcting at the same rate or with the same velocity.

Did they pay cash or hard money?

What does the local sub-market look like?

How many other projects do they have?

What are the closed comps looking like?

What is the ADOM of the comps?

What do the active comps look like?

What do pending comps look like?

Can you get a good deal on a home that has been flipped?

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