All Forum Posts by: Bill Hinshaw

That may be a nice little niche market you found. Is there a lot of competition for those properties from other rehabbers? I wouldn't think so, but you made it work in a big way. Congrats. You found a really smart way to get started in this business with little money.

Homestyler floor planner is online, free, and easy to figure out. Has some bugs and quirks, but I would still recommend for quickly playing around with potential layout changes.

I think you would still get some valuable experience by running this deal through a reputable hard money lender and seeing if they would fund it. It sounds like you need to start making those connections anyway, so you'll be able to act more quickly on the next deal.

The only thing wrong with a small projected profit (<15k, for example) is that it puts you a couple of major issues away from a loss. If you know your numbers and you're confident you know the full scope of repairs, and have someone else looking into it like this wholesaler seems willing do, it may not be a bad deal.

I don't know if you saw this post or not. The numbers on this deal are similar to yours, and maybe a little worse.

I would want to fully understand the title implications of a property bought at sheriff's sale in your state. Convince yourself that this property has a clean title.

Assuming the info is available to the public, I'd want to know what he paid for the property. Would just be nice to know. You might have some room to negotiate. 

The deal doesn't look bad at 159k ARV. It's starting to look thin at 149k. A lot will depend on if you use a full commission agent when you sell and what terms and fees you get on your financing. If you can only get 149k and have to pay 6% commission, you are down to 22k remaining to pay finance costs, closing, utilities, taxes, insurance and your profit. Can't have any major surprises with those numbers.

Days on market is another thing to check.

I'm not much help with your financing issue. You might post a request in the marketplace and see if you can find someone who will work with you. A good HML will also let you know if they think this deal has enough room to be successful. Good luck!

From your numbers, you flipped this house in less than a month and it looks like you are still somewhere between 15 - 25K in the black, depending on your carrying costs to this point. Unless I'm missing something, this seems like it can still be a great first flip. Congrats! 

Could you pay off your loan with a HELOC (or some other source) and reduce your carrying costs in case you have to hold this longer?

At 120k ARV, would your house make a decent rental? I think you are a long way from having to do that, but it is still a strategy you could go to if the house doesn't sell. You might even be able to get some of your money back out on the refinance. You have options. Way too soon to be discouraged.

For my first flip which is currently in progress, my purchase price + repairs is at 77% of ARV and my profit should be at 17% ARV. My return on my money should be 22%.

I'm not paying any interest. If I had a hard money loan, I'm pretty sure I'd be looking at a flop. However, with essentially zero money costs and a favorable market, I think we are going to come out ok. Maybe even a homerun if the market continues to go up in my area, but I'll be happy if we just hit the numbers above.

If someone was able to make 15% of ARV consistently on financed flips, I would think that is pretty dang good. That's 30k on a 200k ARV. If you only had 30k of your own money in that house, that's a 100% return on your money. I'd do that every day if I could.

This article about hard money also talks in depth about the 70% rule.

hard money and the 70% rule

From the article, the 70% rule assumes 10% of ARV for soft costs and 20% of ARV for profit. It stands to reason that if you can reduce your soft costs, you could probably go over the 70% rule a little bit. Key ways you could do that are using your own money, or private money at a good rate, or working as your own agent. All of those would greatly improve your soft costs. If you're using hard money and paying an agent, it's probably more important to try to stick with the 70% rule because your soft costs will be higher.

Another good article on 70% rule here.

I am interested in what the more knowledgeable posters will say. I am doing my first flip now and will have to deal with taxes this year.

I don't think buying a new property is considered an expense for tax purposes. It is an investment that can't be used to reduce your income. 

Also, I did not think flippers/rehabbers could use 1031 exchanges as Stephen mentioned above. 

1031-exchange-flipping-houses

@Jimmy Watson experienced this on his last flip and may have some inputs. 

On my first flip, I actually had the original seller want to see what I had done to his house and potentially make an offer. I refused because we were very early on in the rehab, and I didn't want to give up control of the rehab and work as someone else's contractor on my first flip. My realtor did promise him that he could see the house when it is completed, before it is listed. (We're still working on that house.)

I like the idea of requiring payment up front with no refund if they don't close. That's a lot of protection. If you do go down this path, what kind of mark up will you charge the buyer for the upgrades they request?

Would love to see pics of this house, especially the "crazy" design choices :).

I can't speak about the million dollar rehab. In my area, that is a much smaller market with tastes that I don't feel comfortable trying to predict. I have considered the differences between various markets in the Dallas area.

Generally speaking, I believe the margin for error is tighter on a 150k ARV home than it is on a 450k ARV home. You might only be expecting a 20k profit on the 150k house... in that case, your numbers better be rock solid with no big surprises. On the 450k home with 60k profit, it feels a like there is a little more room for mistakes.

My experience is the % discount from ARV generally compresses as the ARV gets lower.

The 450k home doesn't necessarily equate to a much larger rehab. The finishes will be better, of course, but the size of the house is not necessarily any larger. Foundation, roof, plumbing, electrical costs are not necessarily higher.

That is my opinion based on limited experience. I've done one of each and lots of market research for both. I would love to know if the more experienced flippers would agree.