All Forum Posts by: CK Hwang

see you guys there!

Hey Chris, as far as how easy it is to pull out equity, it's something you'll need to talk to a lender. A retail banks, i.e. wells fargo, BOA, probably very difficult and tedious. A mortgage broker would likely have products that would be much easier but of course at a higher interest rate. An alternate to cash out financing could be a HELOC if you're living in it. These generally easier to get but is a variable rate.

Hi Chris, 

there is no major issues with this plan, not as far as I can see, however the plan is really brief, and as in any plan, it's really the execution and the devil is in the details i.e. can you really buy at 80k house worth 200K? maybe in colorado it's possible. but I'd be surprised if one could buy something at less than 50% of ARV and only spend 20K to fix it up.

Perhaps before getting too deep into the business plan, I would do research on the type of expected numbers for your market, then figure out of the plan is viable. 

Andrew, something to consider is that if you do want to move out of CA, is whether you want to move back at a later point in time. If you do, it will be much harder to do so as I've always found it harder to move from a less expensive to more expensive place, versus the other way around. 

I moved from a more expensive city to Socal, and when asked by friends and family if I will ever move back, I tell them that even if I wanted to, I can't anymore because i'm priced out and would need to be making significantly more here in CA to have the capability to move back. And that is hard because compensation (be it as an employee or business owner) generally seem to take the level of the prevailing wages/price in the area, unless you make it so big that the business goes nation wide or international.  

Leslie, I second Jay's thoughts. Flipping is probably one of the most capital intensive of all real estate investing. Have you thought about wholesaling and trading options instead? I think those will likely require far less capital. 

Hi Guy, thanks for your advice. 

Hi everyone, this is a wonderful discussion as it SWD and GWD has been something I've been trying to figure out.

I did have a general question. In the event where I was to buy a property with a SWD and was going to flip the property, when I sell the property, what is it that changes the SWD I received to a GWD that I am conveying to the buyer? 

Is it the act of purchasing title insurance when I am selling it? It is legal documents signed in the process of transferring the deed to my buyers?

Any advice would be greatly appreciated. Thank you.   

Hi Rod, 

it's hard to tell why the flips in your town isn't selling, especially if they are priced correctly. Perhaps you could provide a link to these flipped houses sitting on the market? it would be easier to tell. It could be that the sellers are receiving offers, but just holding out for a higher price as the cost of repairs might have put them over market value. It's hard to know what goes on behind the scenes.  

Are there better markets for flipping? I think so, but it's really hard to know because timing matters as well. For example, right now, my market is pretty good for flipping but in 2011 it was awful due to a lack of buyers. The strategy then really was to buy and hold for a couple of years. So it's hard to tell if a good market is good because of geography or because of timing. 

Personally, I find flipping to be one aspect of real estate investment that needs to be pretty local. Of course, I'm saying this because my team is small. I'm sure there are lots of more experienced flippers here that flip in other states, but for my limited self, good or bad market, I have to flip locally. As such, instead of letting the market determine whether I flip, I try to find my niche in my market, and try to work on that. 

For example, knowing that my market is pretty expensive and most retail buyers need a loan, I tend to target what i call aspirational properties which are properties that fall somewhat between upper middle income and upper income. This is where i find my niche due to the large amount of cash required. However as this market is starting to slow down, I am needing to find another niche, which I think is easier than finding another market.  

Sorry not sure if my answer is kind of off topic. 

Hi Johnathan, thought i would just chime in here since I do work in a market fairly similar to yours here in Southern California, where demand is high, prices are high and a good deal is hard to find. 

As far as spread goes, I generally try to buy the house at 80% ARV or better. Most of the houses i work with are in the 600-800K range and all said and done I normally do a clean 40-60K in net profit. The numbers are not spectacular by any stretch in terms of percentage, but I try to just keep things moving along rather than sit around hoping and praying some great deal comes along.

Personally, from my limited experience, in very hot or premium markets like Boston, NY city, Socal, Bay Area etc, the 65% or 70% rule doesn't really apply unless you plan on buying in the war zones in these areas and even then I think you would still be hard pressed to find a deal at those numbers. 

Personally, if you have access to the MLS, I would look at a bunch of transactions by flippers in the area you plan on working in for the type of properties you plan on buying. Look at the buy sell prices and then see what the average percentages are. This would give you a more accurate number FOR YOUR AREA and for your type of property. Numbers from out of state would often have little relevance.

An easy way to understand the whole process, as explained to me by a bank asset manager is as such.

Pretend I found a like for like house in Atlanta for $200K versus in Newport Beach for $1.5m. Both owners are distressed and willing to work with me on doing a short sale. I offer 70% or ARV for both.

For the Atlanta property, the lender take a loss of $60K. Not a bid deal, an amount that most mid to large banks can approve on a regional level, so not a huge chain of command to go through and the holding costs for the bank will probably be more than that anyway. 

On the Newport Beach property, bank takes a loss of $500K. That kind of amount, the loss needs to be approved at a much much higher level and very often it's not going to be approved because the bank would rather hold out or just hold the property since it would be cheaper to do so.

So just a quick example why the 70% rule doesn't work everywhere.