All Forum Posts by: Andy Sabisch

Some of the techniques that one sees promoted may have worked very well a decade ago and I am sure that people are finding deals with Driving for Dollars, mailers and Bandit Signs but in many markets they are done to death and actually tick sellers / owners off more often than not. We have properties we are holding and have no mortgages . . and get called all the time to sell being an out of the area owner.  Then we get the regular mailers that also get frustrating.  They only thing I have used them for is to call and have them put me on their wholesale list as it saves me time trying to find deals.

Have you considered a VA doing the calling to see if you can get a lead that way?  To go the route you are saying, what budget will you set aside and how will you verify you are getting the action from the person you want or expect?

Be interested to see what others have to say but this seems like an investment with questionable results

What is the ARV on the property assuming you get the foundation repaired?  The quotes you received seem very high (at least from those where we had foundation repairs required) but your area and the size of the house may be the driving factor.  Unless you are getting the house for next to nothing, putting $100K into the foundation alone and then doing a full renovation (again, not sure of the size), the ARV needs to be pretty high to justify that type of effort.

As far as moving a house onto the property, are you looking at this because of the property itself; i.e., is it lake front, on a golf course, etc.?  It might be a better option to simply find a house that fits your flip criteria and go from there.  If the property is valuable, look at the demo costs and either build new or resell the lot.

As Robin said, in today's market you need to have at least two exit strategies.  If you are only looking at the ARV and need that to make the deal work, you may find yourself in the group of investors that learn an expensive lesson.  Always make sure the ARV is conservative - never take the word of a wholesaler, a non-investor fluent agent or simply looking at what sold in the past year since the market in March - April - May was the peak in most areas.  

There is still money to be made and deals are out there but be safe in your estimates so you have a cushion that gives you the escapes you have on the table

Quote from @Eliott Elias:

Deal first, find everything else later

For your first flip, not having financing available to pull the trigger will result in more lost deals than wins . . . and this is from our experience as well as a number of others that we have talked with over the years.  If you have a really good deal, the chance that you are the only one that saw it is slim to none and being able to lock a contract without financing when someone else has it ready is not a recipe for success.  Any On-Market property including auctions you need to show proof of funds to even submit the offer.  Before you say you need to find off-market properties, there are a lot of solid deals on-market that work if you see the potential.  Even off-market deals will require some proof and while you do not need commitments, you need to have established some relationship (calls, discussions, e-mails, etc.) with a lender so you are not in panic mode when a deal comes along.  We lost a pair of duplexes that were a 20% positive cash flow from day one for that very reason.  The seller needed a fast close and we had not thought that through before we met with her and lost it to another investor that could.

Deals are important but as I said initially, there are 3 legs to the stool and not having all three makes the formula not work

Flipping is really a three legged stool.  You need to find the property but you also need to have people that can do work you are not able or willing to do and then you need the financing.  Without any of the three you are dead in the water. 

When we started, we could find deals but by the time we lined up financing, another investor that had financing already got the deal. So without knowing where you are in terms of having the funds for a flip (savings, HELOC, PML, HML, bank, etc.), probably spend a little time getting that in order.

As far as contractors go, how much are you planning on doing yourself?  Do you need a GC one simply subs for certain tasks like electrical, plumbing, roofing, etc.  One thing that a lot of first time flippers expect is that they can find a property and then get a contractor to come right over for an estimate.  Too much work for the good ones to spend time giving free estimates hoping you even get the property.  You need to be able to get a ballpark number on your own to see if the deal is even worth pursuing.  Once you lock it down with a contract, you can get them to give you an estimate and use the inspection period if you need to. 

If there is a local REIG, join it and see who they recommend for contractors in the area.  You might see if one of the members will let you come through a property they are doing and see what estimates versus actual numbers look like.  We have done that with several people starting out and seeing how to do a walk thru and what costs are will help you make that offer without putting yourself at too much risk.

So in answer to your question, try to get some contractors lined up that will work with you as a flipper but do not expect them to come look at every property you are thinking about putting in an offer on.  Spend more time getting your financing in order.  We willing to come here and put up a property and ask for input on what we see that might be a deal breaker . . .

Good luck and hope  this helps

So you sell for $500,000 less sales costs (say 8%) gives you $460,000

You borrowed $350,000 so you are making $110,000

Interest and loan fees are $24,500 leaving you with $85,500

The rehab number does not have a contingency called out so there would be at least another $5,000 leaving a net of $80,000,

For a 6 month project (assuming the timeline works), you are investing $35K to generate $80K and make $45K so yes, the numbers would work.

I would always try to find an agent that is investor savvy and understands the local market.  We buy in two main areas and have two distinct agents we use - they will both tell you they know their area but not the other and we respect that.  As far as their area, they are killers for us.

As you are finding, all agents are NOT created equally and in fact the ones that will serve you well are invaluable team members. They know the market, they know the lenders, they can work through hurdles without you staying up late and will get you the sale at the best price . . . since you said you have a HML, the carrying costs add up quickly and you want to move the property FAST to minimize costs and maximize profits.

You need to find an agent in the local area and interview multiple ones before selecting one. Avoid signing a 6 month or longer listing contract . . . they only want the listing not the work. If you have not gotten feedback reports from the 10 showings, the agent is not looking out for your best interest . . . in fact if she is the HML, she makes more the longer it is on the market.

As others have said, switch agents but dont jump from the frying pan into the fire.

Quote from @Lisa Wright:

But are you covering a wood floor?  I'm seeing that a lot lately.  I don't think any of the floating floors compare to the real thing.  And I'm always suspicious about what is being covered up. 

We would always opt to refinish where possible and the properties we did around Detroit came out great (even if patching was required) as we had a guy that did amazing work.  However, there are times when the flooring has been cut and patched with plywood or is to far gone to save which requires it to be covered.

Quote from @Ryan Normand:

The vast majority of LVPs are under $4/sf, so you have a lot of options with that budget.

I really like Lifeproof from Home Depot. Out of the LVP brands I've personally installed, that one has been my favorite. It's very thick and has a solid click lock system. Wear layer is really good too. Right now it's about $3.50/sf.

My flooring guy recommends Republic brand for LVP. I don't have any experience with it personally, but I think it's in the same price range as Lifeproof.

Duralux Performance from Floor and Decor is also pretty good. I just did an entire house with it. It's a little thinner than Lifeproof and doesn't have the best scratch resistance, but overall it's a solid product for ~$2.70/sf.

Traffic Master from Home Depot is a good value, but once you get down to the $2.00/sf price point you definitely start to see a reduction in quality. It's super thin, doesn't look very realistic, and the click lock system doesn't feel as secure as Lifeproof and Duralux. It's good if you're just trying to diy a small area on the cheap, but if you're having it professionally installed throughout an entire house, I'd spend the extra $1.00-1.50/sf and get something nicer.

DIsagree with your comment about Trafficmaster Allure . . . it uses a glue strip that locks the floor and is fully waterproof.  It covers imperfections in teh floor without prep.  And we have used it in more than a dozen houses and even teh agents showing it have said it looked high quality.  There are options out there but we have used this for years including in two commercial properties and it has held up with no wear issues

 Dan, As I said and you echoed, you need to be sure of the numbers.  With the interest rates being where they are and another rate hike coming, the carrying costs can eat up a lot of profit in short order.  There was no mention of a contingency to cover unexpected issues in the original post.  I never try to cut corners in coming up with the reno budget.  If I calculate $8,800 for a task, I put down $10K and move on.  I have know flippers that tried to make a deal work and found themselves underwater before getting to the finish line. 

Be careful of where the numbers are coming from and always verify that they are correct or in the ballpark. Most - not all - wholesalers will paint a brighter picture than what you find when you get into the project with optimistic ARVs and underpriced reno costs