In need of a mentor House Flipping

Orlando, FL · Member since 2015 · 26 posts · 3 votes

So I'm finally taking this a little more seriously and I've hooked up with a contractor and his wife who happens to be a real estate agent.

I have no experience. Period.

He has been in construction for 15 years, has read all the books, knows what to look for and figure out comps, how much it will cost to repair. etc. etc. etc. But he has never flipped houses before, but he's eager.

In this scenario, I will be the bank, he is the project manager. We're in the midst of creating a Joint Venture Agreement.

Being that we are both newbies, I am hoping I can find an experienced mentor that can hold my hand through this process. Although, we haven't nailed down a property, we are very close.

Thanks much.

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Thomas FranklinPro Member

Real Estate Investor · Miami, FL · Member since 2010 · 939 posts · 739 votes

10y

Carol Hensal Many Investors that flip homes use the 70% Rule that says 0.7 x ARV - Repairs = Your Maximum Allowable Offer (MAO). What hurts Investors that use this formula is it does not account for Holding Costs, Backend Selling Costs, etc. I use the following formula to determine my Maximum Allowable Offer (MAO). This formula is the Profit Margin Formula that accounts, for 99.99%, of everything. ARV – Desired Profit – Closing Costs to Buy – Repairs – 10% of Repairs – Holdings Costs – Concessions – Realtor Fees – Closing Costs to Sell = Your Offer (MAO or Maximum Allowable Offer). ARV: After repaired value or what you think it will sell for once repaired. Desired Profit: This should be taken off the top first. Most people run their numbers to determine what their profit should be. That is backwards, you should use your profit to determine what your offer should be. As a General Rule, my Desired Profit is $20,000 or 20% of ARV whichever is greater. To have an offer accepted, one may need to adjust their Desired Profit; however, it should not be below $20,000, or what one feels is acceptable. Closing Costs to Buy: What is it going to cost you to buy the property? If you are using hard money you need to budget for the points and fees as well as traditional third party closing fees. Repairs: The money it is going to take you to rehab the property plus an extra 10% of estimated repair costs to account for unexpected repairs. Holdings Costs: Here is where a lot of investors get tripped up. Start by determining an amount of time that you will hold the property, probably 4-6 months. Then add ALL costs related to holding the property (utility costs, insurance premiums, property taxes, loan payments, etc.). Concessions: Concessions are what you give back to the buyer at closing. It could be for closing costs, unfinished repairs or something else. I typically subtract 3%, of the ARV. Realtor Fees: What is the commission you are willing to pay your listing agent (unless you are the listing agent) and the buyer's agent. Utilize 6% of ARV. Closing Costs to Sell: Title fees and other closing costs. You can budget around 4% of the sale price to cover these. This is a conservative formula. If you come out ahead without Buyer Concessions, on budget, etc., this puts more money in your pocket, when you close at selling. If you find value, in my two posts, and feel I may be an asset, to your Flipping Endeavors, please feel free to reach out to me. I am a Rehabber as well as a Buy and Hold Investor.

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Account Closed
Wholesaler/Real Estate Agent · Providence, RI · Member since 2014 · 75 posts · 19 votes
10y
Hey Carol, awesome progress!!
If you're looking for a house flipping mentor, sure, you could find one on BP but better yet go to one of your local real estate investors meeting. You'll definitely be in the presence of a few (if not more) established house flippers in your area!! Hope this helps.
-Claire
1 Reply
Carol Hensal
OP
Orlando, FL · Member since 2015 · 26 posts · 3 votes
10y
Real Estate Investors Meetings?
0 Reply
Gary Harris
Rehabber · Westwood, NJ · Member since 2015 · 388 posts · 136 votes
10y
Hi Carol,
Please review my bio and reach out to me as I believe I can help you through your journey flipping.
Gary
1 Reply
Chinmay J.
Investor · Northern, VA · Member since 2016 · 1k+ posts · 904 votes
10y
@Carol Hensal - If you want a really good resource on flipping properties read the book on flipping houses by J Scott. He has successfully flipped over 50 houses and has detailed the same in his blog www.123flip.com He is also one of the mods on this forum. Also listen to Podcast # 10, again from none other than J Scott.
Also as suggested by @Account Closed, you should attend REIA (Real Estate Investor Association) meetings. These are local networking meetings. Search on the forums for the same. Educate yourself thoroughly before you take any step, as its very easy to lose thousands of dollars if you do it the wrong way.
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Thomas FranklinPro Member
Real Estate Investor · Miami, FL · Member since 2010 · 939 posts · 739 votes
10y
Carol Hensal Since you are interested in fix and flips, I propose the following action plan. The first step would find an Investor Friendly Realtor assuming you do not have access, to the MLS. I would suggest that you interview several Realtors and ask them the following questions, to ascertain if they are truly Investor Friendly, or if they are throwing you a sales pitch. 1. How many investors do you currently work with and how many investors have you worked with, in the past? 2. How many transactions have you closed, with investors? 3. Do you currently own any Investment Properties? If so, what type do you own? 4. Are you a member of any REIAs? The next step would be to work with the Realtor and determine the hot markets, in your County, with the greatest number of sales over the last 90 to 120 days. Personally, I would prefer 90 days because markets are always changing. This list would contain the zip code and corresponding name of the municipality, and a breakdown of the number of SFRs. This will be your Farming Area. From this data, you can utilize a website bestplaces.net that will give you a breakdown of the percentage of homes that sold, in various price ranges, for a given zip code. This will identify the retail price ranges, in which you can list the rehabbed property and the price ranges, of distressed homes, you should target. You can use the Realtor to help you find deals and also use Wholesalers. If you acquire a property, from a Wholesaler, once the property is rehabbed and ready for the Retail Market, allow the Realtor that provided you the zip codes, to list the property for sale. This creates a WIN-WIN Situation and gives the Realtor incentive, to work harder on your behalf.
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Thomas FranklinPro Member
Real Estate Investor · Miami, FL · Member since 2010 · 939 posts · 739 votes
10y
Carol Hensal Many Investors that flip homes use the 70% Rule that says 0.7 x ARV - Repairs = Your Maximum Allowable Offer (MAO). What hurts Investors that use this formula is it does not account for Holding Costs, Backend Selling Costs, etc. I use the following formula to determine my Maximum Allowable Offer (MAO). This formula is the Profit Margin Formula that accounts, for 99.99%, of everything. ARV – Desired Profit – Closing Costs to Buy – Repairs – 10% of Repairs – Holdings Costs – Concessions – Realtor Fees – Closing Costs to Sell = Your Offer (MAO or Maximum Allowable Offer). ARV: After repaired value or what you think it will sell for once repaired. Desired Profit: This should be taken off the top first. Most people run their numbers to determine what their profit should be. That is backwards, you should use your profit to determine what your offer should be. As a General Rule, my Desired Profit is $20,000 or 20% of ARV whichever is greater. To have an offer accepted, one may need to adjust their Desired Profit; however, it should not be below $20,000, or what one feels is acceptable. Closing Costs to Buy: What is it going to cost you to buy the property? If you are using hard money you need to budget for the points and fees as well as traditional third party closing fees. Repairs: The money it is going to take you to rehab the property plus an extra 10% of estimated repair costs to account for unexpected repairs. Holdings Costs: Here is where a lot of investors get tripped up. Start by determining an amount of time that you will hold the property, probably 4-6 months. Then add ALL costs related to holding the property (utility costs, insurance premiums, property taxes, loan payments, etc.). Concessions: Concessions are what you give back to the buyer at closing. It could be for closing costs, unfinished repairs or something else. I typically subtract 3%, of the ARV. Realtor Fees: What is the commission you are willing to pay your listing agent (unless you are the listing agent) and the buyer's agent. Utilize 6% of ARV. Closing Costs to Sell: Title fees and other closing costs. You can budget around 4% of the sale price to cover these. This is a conservative formula. If you come out ahead without Buyer Concessions, on budget, etc., this puts more money in your pocket, when you close at selling. If you find value, in my two posts, and feel I may be an asset, to your Flipping Endeavors, please feel free to reach out to me. I am a Rehabber as well as a Buy and Hold Investor.
6 Reply
Carol Hensal
OP
Orlando, FL · Member since 2015 · 26 posts · 3 votes
10y
great advice ...thanks everyone
0 Reply
Josh C.Pro Member
Property Manager · Indianapolis, IN · Member since 2010 · 1k+ posts · 1k+ votes
8y
Seems like a good deal if he'll do it at cost and not take a cut for project managing. If he's actually swinging a hammer he should be paid. Just double check comps and rehab. But this is similar do what I do with people. Good luck!
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