Am I about to lose thousands?

Question

I'm looking at buying my first fix and flip property and my wife is worried that I'm about to lose thousands :). It's a 3/2.1 property that I conservatively estimate will sell for 290.

The property I'm looking at is a short sale and having no experience with flipping other than what I've read and heard here, I'm wondering if anyone has advice for how to get a solid estimate for this first project. Should I get a general contractor to come with me when I tour the house? Are there certain things that you always watch out for? Any tips or advice will be very much appreciated.

Mindy Jensen · Answer

@Garrett Beecher, you make your money when you buy. See the house, get a feel for what it will cost you to rehab it, then run your numbers and stick to your guns. If your math says offer $120, but you can't get it for $120, walk away. Paying $130 for it doesn't change what it's worth on the other end. You won't make any money if you pay too much for it in the first place.

You might be competing with owner-occupants who can afford to pay more because they aren't trying to sell it for a profit in a few months. Don't get into a bidding war. This is how you lose money. Know your costs, and know when to walk away.

@Jay C. gave you some great advice - those flipping shows are scripted and only tell a portion of the story. YES, you can make money in flipping - I've done it several times. But YES, you can lose money in flipping, too. So be careful.

Jay C. · Answer

@Garrett Beecher

Well you asked about getting a solid estimate. Sorry to report but if its a house that needs a whole lot this is impossible. They can give you a best guess estimate but that it. As well if you cannot do alot of this work yourself you are at a HUGE disadvantage.  Those shows you watch with the hard working guy and the pretty wife. Those are scripted..its tv so don't reply on that nonsense as your teacher.  You are a newb...if you take this on you may make some money.....you may also lose money because too many variables are involved that you cannot control. In the end failure is the best teacher. Thing is can your pocketbook withstand it?

At the end of the day your just trying to make extra cash. I always point people to do what they know. If you can drop some overtime make it there. Its foolproof and has zero risk. Buying REI property has risk. Real risk just like Las Vegas and the stock market. The type of risk that may keep you and your wife awake at night. Better decide if its worth it when that flip is sitting on the market with no buyer and your savings and credit cards are getting whacked.  You also better factor in heavily if the chance of making some cash may cost you your marriage. Believe me it does happen.

Try to be aware sites like BP mint as many failures as they do success stories. The failures for the most part don't loop back around to tell the tale.  If your gung ho and want to do a deal start small. Not a big money deal like you mention. Try and partner with someone or be a helper to learn more. Good Luck

Robert Adams · Answer

make sure you have a solid plan and stick to it.

You will need to calculate for purchase price...buying closing costs....rehab costs...selling closing costs including commissions....and ownership costs [expenses while owning it].

I would figure high on all the costs and low on the new sales price. If you can do that and still make a profit you should be good.

You also need to learn about your market, the market trends, and factors that may make the market change within the time you plan to flip.

Best of luck.

Jay Hinrichs · Answer

@Garrett Beecher  not enough info to give an opinion.

Go to the Rare bird meeting when they do deal analysis night or if you want PM me with your rough numbers.. I can give you a down and dirty. Markets moving though on the west side  Intel is going crazy... I just did a little 3 and 1 rancher in Aloha... I thought I would exit at 219k  and we sold it in 4 hours first day at 238k... what was a pretty skinny deal to start with ended up being pretty nice after all... Now remember we are agents so we got 3% when we bought and only paid 2% bac when we sold.. ONe of the main reasons in these Uber competitive markets I feel that a RE license is paramount to making a decent profit.

Just the RE fees we saved added up to over 10k.. So in reality we are just buying our own listings  LOL... but we made more than 10k and it was a fun project..

Corey Melkonian · Answer

I agree with Michell 100%, I mostly do new construction and looking to get in rehab as well. Good luck and don't listen to any nay sayers!!!

Michell P. · Answer

Yep, probably.

You should ask a general contractor to go with you - and offer to pay him / her for his time so he'll show up and take you seriously.  But then for estimating your costs - are you doing this yourself or planning to hire out the work?

To estimate your cost to flip, you need to tally up how much in materials you'll need, and double that for the labor... and then take your estimated time, and double that b/c it always takes longer.  And then take your estimated labor + mats cost and double it because you're brand new and you forgot something probably big and expensive.

But don't take my word for it - I'm not an expert flipper :) That's just been my own experience.  Which reminds me, I forgot to order faucets & sinks >.<

Look for cracking walls, moldy smells, wavy roofs, and dirt pulling away from the foundation.  And get an inspection.

Goodluck!

Am I about to lose thousands?

Most Popular Reply