All Forum Posts by: Andy Sabisch

First, yes you can use a HELOC to finance flips along with ready cash, credit cards, hard money loans and private money loans not to mention conventional financing depending on the condition of the property.

As far as your question on where to find cheap properties . . . . well if there was one source that was readily available, all of us would be using it and then the cheap properties would no longer be cheap . . .

Bottom line is cheap for one person may be overpriced for another.  Are you going to do most of the work yourself or contract it out - big difference in what it will cost you.   Same goes for the area.  We can buy houses all day long in one of our areas for under $100K and in many cases under $50K but try that in California and you might buy the mailbox at the curb for that.  The cost of the money you will need for the project is another factor as in many cases, it is the next biggest expense after the renovation itself - DO NOT FORGET TO FACTOR THAT IN!

As far as sources, you can get sleepers on MLS if you know what to look for.  Auction sites are another source that can get you a property that generates a good return (our last one returned $50K and again, when you are selling properties for under $150K, we welcome those returns but in other areas, one does not get out of bed for less than double that).  Be careful with wholesalers as the numbers they provide often have inflated ARVs and under-cost reno estimates.  Often REIG members have properties that they have for sale that may be what you are looking for.

Hope this answers your question . . . . if you can provide more details as to what you are looking for and your area, we can provide more specific information.

I am familiar with Wilmington - worked in the area.  It is a dynamic market but remember you have to buy right to make the money . . . you don't make it selling if you paid too much.  Are you in the area so you can oversee what is going on or are you going to have to find someone to manage from afar?  The price to flip without demo'ing and rebuilding would have to be well south of $100K to make sure you walk away from closing with money in your pocket and not everyone else's.

Looked to see what the houses look like in the area - really gone up in 15 years!  The price / ft2 and the lot size of what you are looking for are on par with what you are shooting for.  Have you done a flip before?

One thing that stood out is that there seem to be a fair number of properties with sizable price drops yet are still on the market.  Remember that as interest rates go up, the buyer pool shrinks.  Are the properties selling rentals or vacation homes?  If so, the demand for these is dropping faster than primary homes.

I would walk through the property you are looking at and try to get a better reno cost so you can speak from facts rather than generalities to the owner and see if you can convince her to come down.

Feel free to message me if you want to talk specifics and do not want the details posted . . . .

An awful lot of unknowns in your question . . . you are saying it has an ARV of $275/ft2 but what is that based on?  Similar sized houses, other houses regardless of size, etc.  For a 634 ft2 house, you are saying it will sell for about $175K.  With a reno as you have stated - New roof, windows, siding, HVAC, insulation, etc - you have a minimum of $50K assuming you do some work and contract the rest and that is not going high end.  With the quality trades booked, you have holding costs to consider and if you are using a HML, that can add up quickly.

Assuming you are correct with the ARV, 175K - $50K = 125K.  Then you have closing costs, realtor fees, carrying costs, utility costs, taxes, insurance . . . . assuming a 6 month close-reno-sell-close, you can tack on another $20K easily.  That takes you down to $105.  Don't forget your 10% to 15% contingency number so another $5k to $7.5K and we are at $100Kto $97.5K.  Now you need to figure what you need to make on a sale . . . . so let's say you are looking at making 20% on the deal . . . . $35K.  So your line in the sand should be in the range of $65K to $62.5K.

To demo and rebuild at today's prices, you will be lucky to break even with a $275K/ft2 ARV and 1,000ft2.

Sometimes there is no deal to be had if you want to make any money . . . . but your experience and location will dictate if that is possible.  As they say, every property has a price at which it makes sense to buy ... for some that might be $0.

You need to provide some more details to help us give you a good answer otherwise we are speaking in terms that can be spot on or totally off.  Saying Southeast NC covers a large area - from Fayetteville to Wilmington and everything in between and prices vary widely in that region.  Are you near the coast - that adds value?  We are not going to try and jump your deal but more specifics will help us give a better answer.

Quote from @Eliott Elias:

Never pay the contractor up front and make expectations as clear as possible in the beginning 

As Eliott said, you need to make sure your contract with the trades is very specific with details, milestones, inspection points, etc.  They are better at finding loop holes so you need to make sure you are covered and walk everything down BEFORE paying.  We recently had a contractor install gutters on a property and he called to say they were done.  My wife was at another property and ran over, looked at it and paid.  I came over later and walked the entire property and found he had only installed gutters on three sides and not the back . . . after 2 weeks of calling and getting promises, he blocked my number and we had to pay another company to finish the work.  

So be as specific as you can, have a timeline and require inspections.  If you are told they need money for supplies, that is often a red flag.  Tell them you can arrange to have them available at Lowe's or Home Depot.  And if they want cash up front . . . run!  I always say of you call a tradesman and are told they can be right over, keep calling as they are not working.  If they say they are booked out a ways, that is probably the one you want

A few questions and challenges there . . . we had the same issues when we lived and invested in the Detroit area.

1) As far as protection of remodeling material, you can get a security system designed for that application such as the Ring Jobsite Security System which has motion and camera capabilities with built in cellular notification.  The main issue is you need to secure the access which means solid doors, deadbolts and likely, security bars on the windows.  Many areas of Detroit were like that where you would have nightly break ins and even have supplies stolen from your truck as you started to take material inside.  That leads into the next point.

2) What is the clientele you are looking at serving?  Are you going after Section 8 tenants?  Will the area itself lend itself to the type of residents that keep the ones you do want from moving there? You can do a 1st class job in the remodel and find that you are going to have tenants that trash the units requiring continual remodeling on your part.  I know there are a lot of Section 8 landlords . . . and here in Jackson, MS you can make a boatload of cash doing so but we have opted to avoid that market for many reasons with damages being the primary one.  The fact that you said even the neighbors will come in and steal material raises a red flag to me for a long term hold property.  Sounds like you are buying the problem that the current owner has not been able to solve.

Good luck in whatever decision you make but getting the property secured would have to be the first priority after you are sure the neighborhood is one you feel comfortable in investing in.

Kurt makes an excellent point . . . the market is very dynamic currently with interest rates and inflation rocking the buyer's boat.  With a change of even 50 basis points (0.5%), the pool of buyers can shrink considerably which will drive down the ARV and as a result, your profits.

The old adage "You make money in real estate when you buy not when you sell" is especially true at this point in time.  The 70% rule may still work in some areas but for most, you need to use a scalpel rather than an axe to work the numbers to see if a deal makes sense.

Kurt's comments about the costs associated with HMLs is another trap many fall into.  The calculator tool here on BP is great but you need to make sure you have ALL the numbers to put in . . . if you are not sure, ask and research.  One HML may have the rate you want but then you find out there are 3-5 points that are paid by you at closing.  Surprises at that point are never good.  I would rather over estimate costs to run scenarios than under estimate and have sticker shock at closing and an account with less starting off than projected.

We are here to help you run numbers and give feedback on HMLs we have used . . . .

Make sure of your numbers and do not under estimate expecting to find deals . . . if you do, great it means more in your pocket but expect to pay retail and shop later. DO not short change yourself on the holding costs in the new market where multiple first day offers are not the norm in many areas. This can kill you if you are using a HML - holding costs can add up very fast.

Use the calculators on BP - I have found them to be a great asset in developing a deal to see if it makes sense.

Rehab costs . . . make sure you have trades lined up because the good ones are booked and the ones that aren't are that way for a reason . . . a three week wait will cost you on holding costs . . . .

Check on required permits BEFORE you start - some areas you need one for everything and others are more lenient.  You will want to make sure if they are required that you have them either directly or through your trades as backfitting after getting red tagged will again, hit you with holding costs.

Hope this gives you a few things to consider

That will pretty much have to be how you cover it . . . . some HMLs may allow you to bump up the amount you are borrowing but in general, you borrow what you say you will need and any overages or upgrades come out of your pocket

Quote from @David M.:

Quote from @Becca F.:

@Ricardo Hidalgo

I appreciate the advice. My property manager who is managing my out-of-state rental (Indiana) owns duplexes and an apartment building. He's been a good mentor so far.  I know a few experienced realtors in the San Francisco Bay Area although properties are expensive here. I know two realtors in the Indianapolis area - I think the Midwest is a really good rental market since it's landlord friendly and home prices are much lower than California. As far as realtors, would they charge me a fee for finding and analyzing deals especially if they're spending a considerable amount of time helping me?

 @Becca F.

I don't want to hi-jack this thread.... but, to answer your question real estate agents are compensated via commission on the sales that actually close.  I'm not sure nowadays that you will really find an agent that will sit there an analyze deals for you.  That is, and nowadays, should be up to you.  The information is all out there and/or they can send the mls listings automatically according to your criteria.  So, YOU are going to have do the work, unless the market really crashes hard and agents are desperate for closings.  If you want to hire somebody to run numbers, that's up to you.

Unless you find that one in a thousand agent that is investor savvy, you will be far better doing the analysis yourself and using the agent to open doors and get you in to see the properties.  Even closings can be done by simply dropping off the contract with a title company.  If you find an agent that knows investing, hang on as they are rare.  We have two and they deserve everything they earn on a sale or purchase.  There are some great tools here that will help you analyze properties . . . practice on a dozen homes and see what you can pick up using them . . . they become second nature in short order and you can tweak them for your situation and area.

Quote from @Lashonda Spell:

Quote from @Andy Sabisch:

They range from $5,000 to $25,000+ and many of the people that sign up do not have the money to invest let alone pay for the training. There are some basic rules and tools that will help ensure you are making smart deals and most are available right here on BP. Ask questions and you will get FREE help. Join a local REIG and you will FREE help for your area. Pay for a course that is a one size fits all and you will find that many of the "tips" do not work in your area and now you have yet another bill that needs tending.Once you find a niche, focus on that and master it . . . a lot of these gurus preach do it all to generate money and you find yourself being a jack of all and master of none . . making expensive mistakes and draining reserves. Many preach wholesaling to get started and generate cash but for every success story they tout, your have 100 that made zero. I have called a number of the bandit signs to see who's behind the curtain and in only one case did the person know what he was doing (although his ARV numbers were inflated and reno costs under estimated . . . for those that wanted to flip and did not do due diligence, they would lose big time). The other bandit sign owners seemed shocked that someone called and froze when asking them questions. Investing is not a sprint . . .it is a marathon and learning takes time. These claimed "instant success courses" are just that . . . for the one selling the course. One perspective but one that has come from personal experiences and talking to a number of others that did in fact go that route and regretted it.

 Hello Andy,

Do you think any of the students of these guru courses actually achieve 'instant success'? Asking from a speculative guru student. Also, if you are a serious introvert; any advice on successful real estate networking?

Lashonda, Anyone that claims instant success or touts one or two lucky students is hustling you.  If it was really that easy they would be doing it rather than teaching it.  I have spent way more than I should have for "education" that really was simply repackaging what is out there and adding a sales pitch (be happy to discuss off forum).  The only advantage one could say on using these gurus is that one feels like they have to make it work after what they spent but getting someone that can keep you motivated can accomplish the same thing for free.  As far as being an introvert, well that is me for the most part but running numbers and making deals work does not require an outgoing personality.  I would be happy to talk to you and give you some tips based on my experiences as well as others that went the guru route - often with dismal results other than piling on more debt.  Bigger Pockets is by far the best deal out there in terms of what you get for what you pay.