All Forum Posts by: Mel Park
Mel Park has started 28 posts and replied 91 times.
Post: Can you eyeball a listing and estimate costs?
- Posts 92
- Votes 51
Appreciate the replies. IN a nutshell: I"m not one who watches HGTV and thinks "oh this is fun, I'll be rich". I've done ok in my previous business life for 20+ years, sold my company and have been retired the last few years (I'm 48 now...). Own a few townhomes - steady rent. I have a real estate relationship in Atlanta (I live in Philly - long story) and my realtor is my property manager - all is well. In 2022 we made perhaps 15 offers - got close on one - but that was it.
In a rarity for me I'm starting to get antsy. I do not have a buyer's agent here in PA. I don't have a "team" ie contractor because, well, I can't see some GC wanting to meet me for a social coffee visit when I have no project to speak of.
I'm almost to the point where - screw it, I' want to buy something - and then - well, I'll have money vested in it and it'll be time to figure out how to get it done. Yes, its rash - hence I've not done it as everything in my business past was massaged, planned out, to a fault.
On a unit like that my inexperienced self tells me that the 50-60k is right on....and I'd assume new roof, new HVAC is needed (I drove by it). So I'd say 100k in rehab. Plus - 15k in holding costs over a 6 month period. I feel the house sells for $395k so after 24k in commissions and 15k holding costs..........390k-39k = 351k. -15k profit = 336k. -100k rehab. I'd have to buy it for $236,000.
$15k profit is light. But my holding costs contains $5000 in profit because that's me, "charging myself" interest on that money being tied up so in reality I'd be making $20,000.
I'm wondering on listings like this do I just email the listing agent, say I'm an investor, and I'd offer $236k with sole contingency being foundation of house?
Starting to think I need to do this 50 times with homes of making 1 transaction.
Then if I own the house - I'd learn, maybe a bit the hard way - how to line up the right GC. But if the $100k budget is realistic - - how bad can it be.
Post: Can you eyeball a listing and estimate costs?
- Posts 92
- Votes 51
I've never done a rehab before - just own vanilla townhomes, collect decent yet problem free rent but I've continuously tried and failed at obtaining a flip home. Anyway....I'm asking what might be a dumb question but then again maybe not. For those of you who are experienced - are you able to look at a listing, and come to a rough rehab budget? Again- ROUGH. Here's a listing as an example: (Disclosure: I have ZERO interest or ownership or anything with this listing. It happens to be 40 mins from my house is all. )
https://www.realtor.com/realestateandhomes-detail/4308-Conco...
Just based on what you see in the pictures - are you able to have a mental idea how much it will cost to rehab and if so how do you come to that? Thanks
Wow, I really apologize. I distinctly remember writing a rather verbose reply way back when - - and today I see there's no reply from me so don;'t know if I didn't hit "post reply" or what might have happened.
Regardless, thank you very very much for that insight and detail, very appreciated.
Quote from @Eric Fernwood:
Hello @Mel Park,
The problem is not software. You do not need more than a spreadsheet. The problem is selecting the right comps. The inability to select the right comps is why all the major real estate websites fail to produce reliable numbers.
First, I will show the process. Second, I will talk about selecting good comps.
Suppose you are considering the following property.
You find two recent comparable sales, which are listed below.
The process is to determine the average $/SF of the comps and multiply that times the subject property’s SF. (238/SF + 235/SF) / 2 = 236.5/SF. 236.5/SF x 1847SF = $436,815. The condition of the property can have a significant impact on the market value.
Rental comps are handled the same way. Below are three recently rented comparable properties.
Calculation: (1.05 + 1.03 + 1.11) / 3 = 1.06/SF. 1.06/SF x 1847 = $1,957
The hard part is selecting comparable properties. This is where experience is required; no software can select good comps. Software does OK with objective data (SF, bedrooms, lot size, etc.) but fails with subjective data like photos (condition), proximity to nuisances, etc.
Below is a summary of the comp selection guidelines we follow.
- Distance: All comps should be within 1 mile of the subject if it is in an urban or suburban neighborhood.
- Age: All comps should be within ten years (newer or older) of the subject property.
- Size/square Footage: Only above-ground square footage is calculated in the square footage. The square footage on the comps must be within 20% of the subject. Basement square footage and finish are calculated separately from the above-ground square.
- Property type: Comparable properties must be the same as the subject property. Single-family detached homes must be compared to single-family detached, duplexes to duplexes, townhouses to townhouses, etc.
- Bedroom/bathroom count: Only above-ground bedrooms and bathrooms are counted. Comparable bedrooms and baths count must be within one of the subject properties.
- Style: It is not required, but you should try to use the same style of home. 2 story to 2 story, split level to split level, ranch to ranch.
- Sale date: Sold comps should have sold in the last three months.
The above are guidelines because you will likely not find ideal conforming comparables. An (experienced) human can make adjustments based on the best available comps. But no software can make that kind of adjustment.
There is another consideration with rentals. While recent similar rentals are good indicators, the current competition is more important in determining the rent. For example, suppose there are four similar properties in similar condition for rent nearby. If you want to rent your property quickly, you will likely price your property lower than the competition. The competition determines how much your property will rent for.
Happy New Year all....
Curious if anyone can suggest the right software for figuring out comps. Yes, I can guesstimate based on previous sales, etc -- but sometimes the same house in the same zip code - can sell for vastly different sums depending on what part of town it is. Is there software that is mostly accurate for comps?
I'd like to buy a rehab home -- but want to get a pretty accurate read what the house is worth if made ready for sale. Thanks
@Drew Sygit. Point taken.
I've been Googling - I find people who seem to buy houses - -- but they have none listed for sale. I wonder if they are buying it so *they* can rehab and flip. Are there any other search terms I should use to find wholesalers?
Noticed you're in Michigan. As a kid I lived in West Bloomfield - I visit time to time for MGM and Redwings:) How are things in Metro Detroit vis vis rentals -- - and rehab flips? Thanks
@Dan White. Thanks for all the thoughts.
Question: As I' understand it - I can't be a "broker" - I'd have to get a real estate license in PA - and after 3 years I can be a broker. So, if I get a real estate agent license - -- I'd have to work for a brokerage. At this point I have no intention of trying to become a Realtor. I've read about some in my shoes paying monthly desk fees or a percentage of transaction. Curious: Do you know which firms would allow a licensed person to be 'registered with their firm - therefore I'm street legal to conduct my flip transactions? Also - I'm sure getting a license does NOT teach me everything or close. When I buy or sell a home - the paperwork that goes into it - is that pretty much up to the settlement office/attorney?
On NoVA: I lived in Clifton many years - owned a business and commercial property in Woodbridge actually. NoVA prices means I can't do 2 cash deals at a time, but certainly I can do one. If you know of reputable wholesalers or agents certainly I'd be open.
Thanks
Post: Rehab and Flip: Just can't get my 1st deal
- Posts 92
- Votes 51
Quote from @Juan Jackson:
Atlanta is a very competitive market for investors. All out of state investors see what you see! Maybe its time to reevaluate your strategy! :-)
That makes total sense. But yes, like other investors - I want to buy a unit in a place with good employment and good growth forecasts. So be it Atlanta, Raleigh, Austin, - it's gonna be competitive. Unless, are you alluding to finding secondary markets or out in the boonies?
I've posted before but a quick recap: I own (3) Rental Units in metro areas - these are all vanilla 3bed/2baths the longest one I've owned since 2012. All 3 under property management - thus far it's beeb totally passive, the most I do is look at prospective tenant applications and give my opinion. (In my previous 20 year business, I dealt with consumer credit from 400-800 on a daily basis, literally dealt with CEOs and trailer park residents on same day - so I like to just give a look to the applications). (My homes are in Virginia and Georgia, I live in suburban Philly)
Made many offers on rehab houses over the past 8 months - missed each one and admittedly I and my broker have been conservative. We wee worried 6 months ago that ARVs would NOT hold up and therefore tempered our offers. Most of the time it looks like we got beat by sweat-equity homeowners, or - more professional rehabbers ie contractors who knew what they are doing better than I do.
I really want to do 1-2 rehabs per year. I can do cash for 2 homes a year - as long as they are turning over. I know there's ways to find these units - so far it's strictly me looking up MLS listings - sending it to my broker - and he tells me his opinion. (I trust him, he mostly warns me OFF deals and has never just tried to write me up) but - -- I also need to find deals and just looking on MLS may not cut it it.
*ARV software or website. Do I just guess-timate ARVV based on sales histories of similar homes? OR is there a site or software that drills down - ie street, subdivision, etc.
*How can I find homes to do this with?
*I have nothing but time. Is there merit in getting a broker license - with the goal being I can save unto 3% on the buy, 3% on the sell - thus enhancing ROI and letting me offer more for homes?
Sure, I could spend on Google ADS but I don't know whom I'm advertising to - - and what to do when I get a lead.
Open to Metro Atlanta, Northern VA, suburbs of Philly like Bensalem, Bucks County.
Thanks
THANKS Carini.... really appreciate it. I like the relationship I have with the property manager and I've actually used his Father for property management in a different town for years - hence I feel there's some trust there. However in my previous business I learned --- if I just blindly trust and don't even ask, it gets away from me. So what I do every so often - I'll call him and nicely ask about $40 here or there - maybe 2 times a year just so they know I'm looking. Appreciate your reply very much.