All Forum Posts by: Jason Eyerly

Fortunately, you're in a city with a strong investor presence.

I recommend you reach out to one of the many local real estate investor associations (google "Charleston REIA") for solid contractor recommendations.

I'll bet someone good would do it for a couple hundred bucks.

I'll just say this about using anyone's calculator: You need to understand the assumptions behind it. The MAO formula (max_allowable_offer = 70% of ARV - Repairs) has been around far longer than BiggerPockets.

In order to make a profit on a fix-and-flip, you've got to know your rehab costs, but you ALSO have to account for:

- Financing costs, including origination and interest payments (unless you're paying cash)

- Holding costs, including property taxes, insurance, utilities

- Selling costs, including real estate commissions, buyer concessions, closings costs

If you were to pay $78K, put $70K in to rehab, and then spend another $15-20K on financing, holding, and selling costs, you will NOT be seeing $25K profit.

Anyone saying different should be required to show you their math!

Nice work! Not there, but I work with an institutional investor that is buying in Hilton Head, Folly Beach, and Camden, SC on a non-exclusive basis. Let's connect for future reference.

First off, most times it is no.  Most projects are not a yes, they are a no.  So your gut telling you this project will put you in financial ruin is spot on.

You are also right to question the process. I'm not sure what the books on "how to do this" say. One of the very key factors, whether you are flipping or BRRRRing, is your purchase needs to be under market, and as far under market as you can find. That usually means cash purchase in a secondary market where you can find 30% - 50% discounts. Starting a project way ahead of the game is essential. That's what will allow for the wiggle room you'll need at the exit. Can you find a good on market property to flip/BRRRR, sure, but if you see it so do thousands of others. You'll be put in so many best and final situations and not win the house and the person who does win probably overpaid and will never be able to flip it, they'll have to refi and leave their money in for a few years and see an exit down the road. The exit at the 6 month point is a loss, but the exit at the 6 year point is a win. That's why flipping is tough. You need the advantage buys, and you need to run the subs. Your the GC, so you need to know the order of operations of the rehab and build a labor list. Buying under market and cutting out the GC will put your project costs under 70%, sometimes under 60%. I saw a project last year, that one of my experts in a market I work in found, that had a 48% project cost to ARV.

Every Tom, Dick, and Harry wannabe investor is reading the books/podcasts, getting fired up and hoping they come across a project with a 75% project cost to ARV. They're hoping that when they plug the numbers into their little spreadsheet/calculator, the project cost is spit out at 75% so they can say yes. If it came out at 77.5%, they'd probably go back and reduce some costs they think they are high on to get to 75% so they can say yes.

I know that 75% is an industry benchmark, but you can and will lose on those projects.  And the wins will not be phenomenal.  You won't get out for the number you think, and the project will run longer and cost more than you thought.

To do flip right, you need to be 65% or less project cost. Margins just shrink up too quick. Markets go stale and fluctuate all the time in inventory and appreciation/depreciation. You can't flip at the 75% project cost and be a consistent winner. I know this from being a consultant on 40+ REI deals in the last 2.5 yrs.

Now, the BRRRR has an x factor that flipping does not. That is the time/value appreciative relationship that RE historically always has had. You can recover from a BRRRR, a flip can kill you unless you know what the hell you are doing.

What you are missing is not technique but rather speed of execution. Nowadays the market requires a level of efficiency that was not the norm only a few years ago 

If fixing sad houses and flipping them is what you are looking for, doing a live in flip may be perfect.  You get owner occupant financing, there is no rush to finish the job, can do some of the work yourself to learn if desired but not required, can sell tax free after two years (or refinance), and then repeat.  I was clueless when I first started and did two live in flips to gain experience and my seed capital.

 What are you stressed about? You listed all the things you know and have going for you, but for your stresses you just said that you feel stressed and doom and gloom and that was it. You didn't say what gave you that feeling. So maybe lay that out a bit more for us. 

But more generically, everyone is scared for every deal, especially for their first. So you are going to have to take the leap at some point. I think you are on the right track with a BRRRR and/or house hack. I got started with a house hack, and it makes the leap so much easier because you are buying a house to live in, and then the renters just save you a bunch of money and make it easier. To me, house hacking is the gateway way drug of the real estate world. It eases you in, and allows you to prove to yourself in a relatively safe way, that you can be a landlord.

Finally, if it helps, show us your potential deals and let us give you feedback on if it makes sense. 

Flipping is super risky. Start with a turnkey home or something that only needs minor cosmetic work and do a STR (because that is what you seem interested in). Running a successful STR is a lot of work in itself. It will get you started and work in smaller steps.