All Forum Posts by: Andy Sabisch

Your first flip (or two) will be the hardest as you have no track record to draw from and no one knows you from Adam.  We were in the same boat but once you have projects behind you, the lenders call you seeing if they can fund your next project.

I tell newcomers that they need to get the money lined up BEFORE making an offer because if it is a good deal, there will be others looking at it and have the funds ready to go.   If you can't pull the trigger when a deal comes up, waiting will result in you losing it more often than not.

There are HMLs that will give you a proof of funds letter in advance of a signed contract.  Banks and other lenders will give you a pre-approval letter if you have developed a relationship.  One lender we use knows us and when we see a deal that the numbers work, we call the banker we deal with and within 30 minutes we have the proof of funds letter that goes with the offer.  Without that, the offer - even at a higher price - can easily be passed up for one that has it. In your case, we would get the deal within a few hours of it hitting the market if it was a listed property while you are still calling lenders.

As far as builders, the good ones are booked out a ways and if they have not worked with you before, they will not be likely to run and look at jobs that they might not get if you do not get the offer accepted.  You need to be able to get a worst case ball park number and then make an offer - t is not like the TV shows where a builder / contractor goes to the property with the buyers and gives them a number.  

See if you can find a local flipper to do a walk through and validate your estimate.  Once you have the property locked down, then you can get a contractor to come as they know that you own the property and will be able to assign work

Hope this helps

I agree with Eric . . . I focus on what the numbers show and each deal can be different and the situation of the seller.  If you buy in a part of town that the demand is high and inventory has historically been low, I know I can exit quickly.  In other areas, that may not be the case and being prepared to carry holding costs plays a role.  With the interest rates changing as often as they do which is impacting the number of those that can buy, you can easily find yourself with a property that is declining in value or demand and carrying costs killing any profit.  As Eric said, have MULTIPLE exit strategies such as sell, STR or LTR and then sell.  The market is very fluid now and I know of a few investors locally that bought expecting a windfall and passed on close to list offers hoping for a bidding war that never came and have a property that has had multiple price drops and no buyers.

We have focused on houses that date back to knob and tube and start from scratch in terms of rewiring . . everything goes.  Your price for the entire job (from a licensed and insured electrician right) is a good turn key price.  We have gotten cheaper when we started but they were with Facebook or Craigslist electricians that proved the saying, You get what you pay for.  Electrical is one area you want someone that does it by the book in terms of permits, licensed and insurance.  Drywall, painting and the like can be done by anyone that can do the job but electrical, plumbing, roofing, gas line work needs to be done right especially on a flip.

With the upcoming interest rate hikes, the pool of buyers that could qualify for the mortgage will be shrinking so if you can, sell now even if your profit is not what you expected.  Otherwise be prepared to use it as a rental and see what happens to the interest rates.  If you used a HML, you might do the math and see what holding it will cost you which may make your decision an easy one.  Sometimes even a small loss to free up debt is worth it in the long run.  Next time consider a market adjustment when you run your numbers.  We have seen a lot of reductions which would not have been the case even 6 months ago . . . we have stepped away from flips and have picked up several buy and holds since March for that reason

Not from San Antonio but we have used the market shift to pick up a few more buy and hold properties rather than flips right now.  Deals are out there and rents are going up so the exit strategy for us has moved from flips to buy and holds

Here is what I have found with HMLs.  It is always best to start a relationship BEFORE you need the money when you come across a super deal.  There are others looking at deals and often grab it while you are still making calls and E-mailing HMLs to find $$$.

Contact several HMLs and see what programs they offer especially if you do not have any experience doing flips.  It will be very rare to find a HML that will loan you 100% of the purchase and flip on your first deal so you will need money to put skin in the game.  Once you have done a few, they will call you to see what they can do for you.

Your outline is correct.  Be sure you use the calculators on BP and see what the HML terms do to a deal.  You will be paying a premium on interest rates and points which can make a killer deal look bad in no time especially if your timeline is unrealistic and runs over (carrying costs will eat a deal).

If you can partner with another investor for your first flip or two you will see how the process works and where pitfalls lurk.  There are HMLs on this site that can at least tell you what they can do for your first flip.

Be sure to ask questions BEFORE you sign that contract - we are always happy to help

Welcome to the world of flipping . . . . hope you do well.  As far as doing it remotely in a town you have never been to that brings up a myriad of possible issues.  

Do you have someone that can be your boots on the ground that is not tied to the contractors that you will need?  Agents can fit the bill but ensure that they are investor friendly and can support what you are doing - assuming you will use them to sell at the end (with the associated cost).

Be sure you run your numbers (HML costs can add up quickly) since renovation and carrying costs can eat you alive. Having a solid contract in place is key but if you are remote, taking a contractor to court to recoup money is not an option you want to explore.  

Buy right and ensure you have the renovation costs figured with a 15% buffer to ensure you will see a positive payday at the end.  If all your contractors make money but you break even, was the juice worth the squeeze?

Post details on what you are looking for and others here will chime in with possible pitfalls that can save you money.  HMLs will also do their due diligence since they do not want to take on a losing project.

Again, good luck and we open for help from the BP family

HOAs are often more hassle to investors than they are worth and those that have HOA Police are the worst.  Before buying anything, be sure to find out of there is an HOA and then see what the restrictions are.  Keep in mind that the rules and restrictions can change if enough members approve it and you may be stuck with the consequences.  Some are lenient while other dictate paint colors and landscaping.  Once you are in you are bound by the rules present and future . . . . be forewarned

Great post . . . . you are right in that it comes down to numbers and as interest rates go up a percent both to buy and refinance, the deals that make sense require more pencil sharpening.  Forcing appreciation remains an option to drive towards positive cash flow but we prefer to find properties that are positive from day #1 . . . and with the shift in the market, they are out there but we are leaving money in the properties longer than usual.  

Be interested in seeing what others are seeing or doing

Quote from @Eliott Elias:

I have one in Killeen for 55k 

Back to my initial response to this post . . . . $55K is cheap but if you fix it up and it is worth $75K, is it worth the squeeze?  Cheap is a poor lead in to a flip question . . . . the question should have been "How can I find properties that support a "buy-&-flip" approach.  I live in the XXXX area and plan to (do most of the work myself / contract most of the work out / contract all of the work out).  I have $XXXX available from (a HELOC, LOC, HML, personal reserves) that I can put into the deal.  Ideally I would like to see a XX% return on this project.  What sources have you found that can help me find likely candidates for a flip approach?"

This type of question allows BP members to provide some specific details rather than generic info that may or may not apply to the initial poster . . . . .