All Forum Posts by: Andy Sabisch

Jack, You have posted this request several times and received several good suggestions to gain experience.  Have you contacted your local REIGs and attended a meeting or two?  Have you reached out to wholesalers in your area?  Have you defined what aspect of flipping you are bringing something to the table with . . . funds, experience, skills, etc.?  Helping a local investor find a deal and work through it to gain experience is what we have suggested . . . . starting with a passion is a plus, but you need to define what you are chasing and what you are bringing

LVP especially with the quality of what you can get anymore.  Durable, looks good, waterproof in most cases and the cost is reasonable.

If floors are hardwood and can be refinished we have done that on a few but it has to be worth doing as the cost is on par with LVP in many areas.

We used to do tile in bathrooms and even kitchens but feedback from realtors and other flippers is that this is no longer a must-do and not worth the effort

As you found out, any part of the equation being off can make things look totally different.  If the reno costs are more than expected or the ARV is less than expected, you can wind up barely breaking even or worse.

ARV - (Purchase Price + Reno Costs + Holding Costs +  Sales Costs) = Profit

Keep it simple and do not try to force numbers to make a deal look better than it should.  We tried that initially and found that the profit went the way of the dodo bird so to speak.  The calculators here are great to see where you are and if you are honest, you will be able to discount supposed deals and let someone else learn the lesson.  We have seen properties that on the surface look good but either the reno costs were too high or the ARV too low to make sense and passed.  Twice we have seen the property go up for sale partially rehabbed and the seller taking a loss just to get out of the deal . . . you do not want to be that person . . of course, you might be able to get a deal from one that found themselves drowning

Any area works for a flip if the numbers work.  A mentor of ours once said every property has a price that makes it a good deal .  . unfortunately for some, that number is $0.  That is an over simplification but in the flip business, you need to make sure the numbers work . . . never under estimate rehab costs or over estimate projected sales prices.  A project will always take longer than you expect and cost more than you budgeted so factor those in as worst case values to see if it still makes sense. 

In your example, you are looking at a property for $200K but then you need to add in closing costs (x2), carrying costs (utilities, insurance, interest, etc.), a 10% to 15% contingency on rehab costs . . . and then you say that some properties have sold for over $300K.  Are they similar to what you are looking at?  Were they rehabed?  If so, to what level of finish?  How close are they to the property you are looking at?  Have you seen the neighborhood?  Sometimes the house is great and the motorcycle gang clubhouse down the block or the vacant property next door will be a deal breaker when you try to sell. 

On a $200K property add $5K for closing costs, assume a 3-6 month rehab period (adding $2K / month) and then closing costs when you sell at $300K ($20K).  You are now at $230K to $235K without any reno costs.  Using the $50K value you cited, you are at around $280K with no surprises or additional carrying costs leaving you about $20K profit assuming you get the $300K sales price and you are not surprised with the need to add a new HVAC unit or something else costly . . . . and being a distance from where you live, you are going to need a GC to oversee the project. 

Not sure if the numbers you provided look like a good deal . . . . what is your experience level in doing flips in your area?

Be happy to look over your numbers and provide you feedback . . . . 

As Mike said, there are deals to be had in this market segment but there are pitfalls as well. We have bought REO and foreclosure properties but have stayed away for the past few years for the following:

1) You are not able to get in and look at the property before buying it.  We bought one 4 years ago that was vacant at closing but every wall had holes kicked in and the kitchen cabinets had been ripped off the walls.  Unexpected cost for sure.

2) We bought on 2 years ago that was listed as vacant . . . guess what, the original owner was still there and we had to go through the eviction process which added 2 months to the timeline and $1500 to the bottom line.

3) Depending on the type of sale, all liens may not be wiped out so you can find yourself with a check of your equity eaten up on the lien.

4) Payment in full will be required either on the day of the sale or within a few days.  Many lenders will not loan on a house that can't be inspected so you will need cash to buy (or access to a line you can draw against)

Do your homework and recognize the possible downsides before you buy - sometimes a good deal is not what it seems on the surface.

Comps and ARVs in many cases are SWAGs (scientific wild A&* guess).  The flow of a property, the exterior appeal of a property, what is next door or across the street to a property and yes, the finishes all factor into a comp.  Many of those that we have worked with over the years have reiterated the old saying "Something is only worth what someone is willing to pay you for it" and it holds true for real estate in spades.  I have seen properties that are done with high end finishes in top notch areas sit on the market for months taking price drop after price drop yet another property not too dissimilar sells almost immediately.  You only need one buyer but you need to find that one buyer.  As the market cools and interest rates stay elevated, buyers are starting to be more selective.

When we are flipping a property, we want to turn our funds.  If we invest in higher end finishes yet then have to hold it for say 3-4 months after we list it, the carrying costs and funds tied up are a negative to the business.

I would lean towards what the veterans are telling you and provide quality finishes, sell and move on to the next.  As you get more experience and become a veteran, you can determine if your proposed approach is one worth trying.

It depends on the pool of buyers you are looking to market to.  For first time buyers at a lower list price, the benefit is often negated by the cost of the staging.  We have sold our flips without staging but again, the pool we market to are often first time buyers that want a quality home and staging is not a factor in what they are looking for.  We ensure that we have quality photos taken and in a few cases, have used the virtual staging option for the online photos that can help people visualize what they can have when they move in.

Depends on the area and what buyers tend to gravitate to.  Some like bright varied colors, others a more subdued palette.  And flippers that are looking at the least expensive route spray everything the same color and use standard flooring throughout.  We avoid the cookie cutter approach and prefer to add some features and trim that stand out from the rest . . . not much of a price difference but feedback and speed of sale confirm our approach.

Social media is an affordable venue to reach potential sellers (and get names for buyers as well).  We prepared with a website that you can link to to provide more details . . . . check out Leadpropeller.com as they offer websites geared for what you are looking at doing for a reasonable monthly fee.

Your social media impact should be to 1) let sellers know what you can do for them and 2) encourage them to engage you through a website or some other form.  You are not going to convert them from the social media contact but they can followup to see what you offer.

Social media will save you money otherwise spent in advertising . . . . as far as what tends to work, look at GoogleAds, Facebook and yes, even Craigslist.

Good luck!