Fix and Flip deal in leavenworth, KS

7 Replies

Hello,

Please allow me to introduce myself; my name is Moe and I am from Denver, CO area. I have been a landlord since 2005 and knock on wood so far so good and I have also done small flip deals before & a good friend of mine used to be a flipper back in the 90s so I have picked his brain as well. I have been reading and listening to bigger pockets for several months and have learned a lot of real estate in general and I thank all of you for that. This site is addictive to say the least.

Now let's talk about this deal I have in Leavenworth, KS. I need some advise. First I would like to find out what do you guys/ladies think about my deal? Please be honest & brutal if need to be. Also, I would like to find out why am I having a hard time trying to get a hard money lender to lend in Leavenworth, KS or just KS in general.

Sales Price $12,900 - I think I can get this house for 10,000

After reviewing comps and speaking to a real estate agent, ARV will be about $125K - $130K (this is after agent said if market stays good she can sell it for $135k-$140k)

Repairs & holding cost (hold for 6 months) - $65K

125k * 85% = $106,250 (I am taking 15% off the sales price for commissions & other unforeseen expenses. I know I maybe am too tight on that. Also that 15% includes what if I have to hold the property for additional month or if my repair estimate goes higher than I thought)

106,250 - $65K = $41,250 net profit

What am I missing, please help?

Also, I have spoken to 3 hard money lenders and they have said due to KS laws they have decided to stop lending in that area. One of which, said no lending in Leavenworth, KS but is willing to talk to me if I have a deal elsewhere in KS City area. Why not?? what is so difficult about KS area that hard money lender won't even do a deal below 65%?

Again, thank you so much for taking the time to read and most importantly taking the time to give me advise. I apologize in advance if I ended up breaking any posting rules. This is my time post here.

I suppose I should mention that house is gutted; does have good hardwood floor & HVAC unit. 2000 sq feet 4 bedrooms & 1 bath.

Moe-

looking at your deal, I have a couple of questions.  The first one is: the proximity to the project.  I don't live in the area but it looks like you are an 8 hour drive from Leavenworth?  How are you going to manage the day to day trial and tribulations of dealing with a contractor and dealing with all of the aesthetic decisions?  

And have you really crunched the numbers on the construction?  That will be the biggest expense by far. If you have to completely build out the kitchen and bathroom those costs can get overwhelming.  Especially the kitchen - its the most expensive room in the house.   Your fix up costs seem low? 

 According to my calculations the holding costs will be nominal.  But, the other critical number is the percentage your RE broker will expect for selling the house.  

Your numbers seem a little unrealistic.  I know I live in a crazy expensive market but building materials are pretty standard.  

Lets see some of your number crunching

Chet

@Moe Younas a few thoughts.

1) Lenders don't like to stray from what they know. If no HML are based where the house is then they don't want to deal with it. Ask around or advertise for a lender where the house is. Many HML are older people that don't have the internet marketing thing down.

2) Finding quality inexpensive help is challenging in smaller communities. Finding a guy that will make your project his priority is tough when he knows he will have to pass up work from his other repeat customers. Your project with get "fit in" between their other work. Time of 6 months is overly optimistic for the scope you are considering. Lenders know this.

3) Your lack experience. They don't want to go out of their comfort zone for a newbie. If you had a track record with them they might do it.

4) The project is relatively small with lots of risk. Most of the loan would be your fix-up costs. If you get part way through and die they would have to finish it and it would have untold brain damage for them. 

Moe,

I was born and raised in Leavenworth and currently live just south of there.  I am a newbie in the real estate world and looking to get my feet wet.  It's a good location with the military base, federal prison, and state prisons along with its proximity to the Kansas City area.

If you would be interested, I could oversee the day to day activities, make sure the project is moving forward and keep you updated. 

Let me know if this is someting you might be interested in or if there is anything I can help you with. 

Thanks

Dave

Originally posted by @Moe Younas :

Hello,

Also, I would like to find out why am I having a hard time trying to get a hard money lender to lend in Leavenworth, KS or just KS in general.

Also, I have spoken to 3 hard money lenders and they have said due to KS laws they have decided to stop lending in that area. One of which, said no lending in Leavenworth, KS but is willing to talk to me if I have a deal elsewhere in KS City area. Why not?? what is so difficult about KS area that hard money lender won't even do a deal below 65%?

It seems to me that the lender has already told you why you're having a hard time getting a HML. Rather than asking people on BP what the problem is, why not ask the HML that turned you down, what it is about Leavenworth and the laws they don't like? I'd be interested to hear what they say myself.

This post has been removed.

@Moe Younas welcome to the BP community. Make sure to check out all the blog posts as they are full of useful information. 

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