All Forum Posts by: Andy Sabisch

The best recommendation to anyone flipping especially in today's market is to over estimate the timeline especially when dealing with hard money which can kill you especially if you run out of time.  Remember a rehab on TV takes 60 minutes but even with a team, minutes turn into months and your profit can go out the window in no time.  Over estimate the timeline and you will avoid sticker shock or desperation when the note is coming due and it is not even on the market yet.

Speaking from when we started, finding how to scale financing without doing 20%+ on each property

We have used these for rentals but it seems that they are not available at the terms we are getting everywhere.  We are relocating and would love to find a source for these loans in our new area.  As long as the numbers provide a positive cash flow I would never walk away from one.

As Peter said, the older the house the bigger the surprises.  We have opened walls and found wiring down with lamp cord, wiring that was simply twisted with no box or wire nuts or tape inside walls, joists that were cut almost all the way through by plumbers running piping (fairly common even today), wiring with nails through it along with burn marks (ever wonder why old homes catch fire?), plumbing that looks like a 3 year old did it (sloping away from the stack) . . . but newer homes are not always better.  We had a property that had a new gas hot water heater installed 6 months before we bought it . . . great right?  Well we thought so until we walked out to our truck and I happened to look up at the roof and note that there was no vent through the roof for the gas vent.  Looked up in the attic and the installer had simply run the vent into the attic - along with the CO that went up and back in.  Some you can see in advance but once you open walls, the sky is the limit as what might turn up.

Personally we do not entertain a verbal offer . . . if the buyer is serious, submit a written offer.  We see verbal's as fishing and when we are selling a property, we are not interested in playing back and forth especially on a low ball offer.  We price the property to sell and usually get multiple offers.  On the flip side, we do not submit a shotgun load of low offers on the hope one gets accepted.  We do not have the time and the agents do not have the time.  Even touching base with the seller, we do not have the time to go back and forth only to have the deal go south at the last minute.  We let wholesalers do the "many offers" work and when they find a deal that works for us, I have no problem paying the finders fee as it allows us to focus on the important things like flipping or renovating the property.  Different skill sets for different parts of the machine and we focus on finding deals that typically require at most a counter from the seller or a deal from the wholesaler that we can trust.

Great to hear your first deal went well but you need to temper the excitement of that deal with the reality that all do not necessarily go the same way. Unexpected issues invariably arise which is why underestimate the ARV and overestimate the reno costs is a rule you can't deviate from. You make your money on the buy so make sure you are getting into the right deal and not trying to force fit a deal because it looks like a winner. Be careful about investing remotely without a crew you can draw from. If you need to find a trades person remotely, you need to be sure that you are getting the A team and not the ones that can't find work. I always say that if you call someone and they can come right over (and you have never used them before), keep calling . . . the one you want is the one that is booked.

Be careful about taking on partners / investors with one under your belt - if something goes south, your reputation and their money (along with your equity) will follow suit.

Join a local REIG to find investors that may be interested in partnering and see if there are deals offered.  Our REIG has deals offered at the start of every meeting.

Equity accumulation is a great goal but as you have seen here, there are a number of deals that can wipe out the profit of multiple deals in one shot. 

 Drago, You are right but unfortunately many new investors see the TV shows that make flips look easy and then listen to the myriad of Facebook gurus that swear you will be rich in no time with no risk and find reality to be totally different.  We have picked up flips half done where the investor ran out of money due to unexpected issues, permit delays and carrying costs . . . and they swear they are done with real estate.  If someone has little or no experience in flips and a lender offers 100%, I would be very wary about using that lender as they are not doing either party a service and failure is often the end result.  Financing is a tool . . used responsibly it can allow for faster scaling but used as a way to get into the business with no $$ out of pocket and not sure of what lies ahead (as any deal will have) is asking for problems and costly ones at that.

We have yet to sell to another investor.  We market to retail buyers but base our finishes on the market and are not shooting for a smaller pool of top-dollar buyers.  Knock on wood, but all of our flips have gone under contract within 2 weeks. We know what numbers will work for us on the back end and price them accordingly.  Over improving has never been our intent but neither is going cheap.  Quality sells in any market as long as you have bought right, stayed on timeline and not over improved.  

For a first time flip, I would be very careful about that type of loan - timelines will be busted and carrying costs can eat up any profits.  If you find a lender that is willing to do a 100% flip loan with no experience, I would see that as a red flag since you have no skin in the  game and the lender would be crazy to lend money with that condition.

 Drago, the issue is the question asked about your first flip . . . have seen too many first time flips go in the ditch and having the higher interest rate and points can kill a first timer.  There have been times when I weighed options and if the deal makes sense at the higher rates, then I would go with it.  Most lenders see a first time flip risky and offering 100% financing would require skin of some sort in the game.