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Elijah Hager
  • Hinton, WV
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Contemplating Out-of-State for first flip due to expensive local market

Elijah Hager
  • Hinton, WV
Posted
Hey folks, looking for some honest input from people who’ve been in my shoes.   I’m based in the Seattle area, work in tech, and make decent money — but I’ve been wanting to go deeper into real estate, specifically fix and flips, with the long-term goal of eventually leaving my corporate job and working fully for myself. Right now I own my primary residence and I’m in the middle of a live-in flip, DIYing most of the work myself, so I’m not starting from zero.   The obvious move is to stay local, but Seattle gives me pause. Entry points here are brutal and labor and materials costs are just as punishing. The idea of my first real flip being a half-million dollar learning experience feels like a rough way to learn the business.   That’s got me seriously considering starting out of state in a market where the median is half of Seattle or less. Smaller dollar amounts, more inventory in the price range that actually makes sense for flips, and what feels like a more forgiving environment to make rookie mistakes without them being catastrophic.   What I’m wrestling with:   • Is the remote management challenge actually harder than the financial risk of starting in an expensive market? • For those who started out of state — do you wish you had stayed local, or are you glad you went remote? • Any markets you’d point a Seattle-based beginner toward right now?   I know out of state adds complexity — finding trustworthy contractors, not being able to walk the property anytime, managing remotely. I’m not naive about that. But I’d rather solve a logistics problem than overextend myself financially on deal one.   Appreciate any real talk from people who’ve done this. What would you do in my position?

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Dan H.
#5 Real Estate News & Current Events Contributor
  • Investor
  • Poway, CA
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Dan H.
#5 Real Estate News & Current Events Contributor
  • Investor
  • Poway, CA
Replied

I am often the contrarian and I am the contrarian in this thread.

How many flipping shows do You see in cheap RE markets? There is a reason there are none and it is because, to word it kindly, the added value is not impressive in the cheap markets.

last year I added a half bathroom out of existing space in a unit that had an ARV over $2k PSF. That half bathroom added ~$50k of value per the comps (mission beach, 3 units from the ocean). How much value would be added by adding a half bathroom out of existing space in a cheap RE markets? My total value added was over $100k above my costs. Adding $100k above costs is near impossible in cheap markets.

You want to flip in markets where you can add significant value.   If average psf is $200, how much value can you add?   

Let's run a scenario that looks like good percentages. Median psf $200, 1000' little 3/2 that you purchase at 70% of median. Purchase $140k. Achieve the common goal of $2 added for every $1 spent on value add. Spend $40k on the rehab to add $80k. In for $180k on ARV of $220k, $40k spread. Then subtract holding costs and selling costs. you are maybe looking at $20k profit (if your lucky) depending on speed of flip and sale. Seems like a lot of work/risk for $20k

I believe everything I wrote but want to add the RE market is perhaps the most challenging ever. It is not trivial to do a successful flip in any market. Clearly the highest reward for effort/risk is not in the cheap RE markets.

Good luck

  • Dan H.
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