Jason, I see that you are in Chicago so perhaps I can offer you more specific info particularly about our market. What we have in Chicago (and a lot of places around the country) is a case of huge ranges of home prices even within the same area. This presents an excellent opportunity for arbitrage that does not exist in other times. The type of appreciation that occurred during the boom times was exactly that - appreciation. Today, to raise value in a property you must deliver an excellent product at a low price.
To answer your questions:
1. Yes, in 2009, I did 6 total. So far in 2010, I have fully closed on 4 projects and have 4 more under construction.
2. The most important thing you must ensure in this market is to make your initial purchase cheap enough. This way, you are able to make improvements and still make profit after your final sale. A good way to think about it is that it may cost 100,000 or more to do a really excellent rehab (plus holding costs, financing, etc) on a really dilapidated house, but it could raise the value of the house by 150,000. The difference is your profit. The cheaper you buy it, then the more flexibility you have in delivering a profitable and sellable product. Also, if you buy cheap enough, then you can sell for cheaper than the competition and still earn your profit goal.
3. I would say your house is over priced. Moving forward, I would try to sell the house just to break even, or rent it out until the outlook has changed.
Jason as you can see from my answers my business model requires me to buy as cheap as possible. In Chicago, you can look on the South and West sides for cheap properties, starting as low as 5,000 in some places. The price of the house does not represent the actual condition of the house, and is priced based on the underwriters estimation of the product, partially based on factors such as original debt amount owed, etc. A huge aspect of the price is the neighborhood. REO homes in "bad" neighborhoods are heavily discounted. The money comes in the difference between the REO home that is purchased and the retail price of a final product (what some on this forum called ARV). Right now single family homes on the South and West side sell for as low as 5,000, and pretty poor shape REOs average about 20-30,000. ARV in a lot of these areas are between 80-120,000. The truth is, if houses are selling for about 110,000 on your block, you're probably going to want to be happy selling it for 90,000, as long as you make profit that is amenable to you - that is worth your time and effort.
As you know people are getting shot every weekend in the South and West sides, though that why properties are so cheap. In essence, the cheapness of some of these properties is in risk premium. However, although those places can have high crime, the people that live there still need housing, and most are law abiding citizens that just want to have a piece of property they can call their own and take care of, and live a decent life. There are many buyers out there even in the "hood." Other factors include the sheer amount of REOs.
This year, I have been doing more South side - around places like Roseland, Chatham, South Shore... an example of a deal I did recently was an 18,000 purchase price, with a 15,000 renovation, and the final sale price of 80,000 over 4 months. The next cheapest non-REO house on the block was listed at 95,000. The buyer was an investor that has subsequently been a return buyer.
On the West Side I prefer Austin to Humboldt Park, though I recently did a more expensive but highly profitable flip in Irving Park. My brother completed a job in March in Albany Park and it was under contract in 2 weeks.
There are a lot of areas that are nicer than the West and South sides that flipping activity still occurs in, but are at a higher price point. In this case, you are looking at places like Albany Park or Portage Park, or in the suburbs like Evanston and Oak Park (say purchase price of 100-200,000 with ARV of 300,000-400,000). I haven't ventured far past those suburbs (yet). To a lesser extent, these flips are occuring in Chicago neighborhoods like Irving Park. You can use the MLS to find historical data on sales and keep track of flipping activity.
I am not afraid to tell you this because actually the market here in Chicago is very competitive. Even in the really terrible REOs in the really horrid neighborhoods, the people coming in and out of these buildings are frequent. Especially on the MLS. There are thousands of deals out there on the MLS. What I like to do is just search for SFHs in a neighborhood and sort by cheapest. The gems are picked up quickly - they are usually under contract after a few days. However, I like to look at the ones that have been on the market for over 90 days - it usually denotes greater leverage for your negotiation of the sale price. And like I said, its all about getting it as cheap as possible.
Also don't be afraid of getting shot. Just don't drive there in a BMW. Say hi to the neighbors if they're out - ask them about the neighborhood. I always like to ask if there have been a lot of people coming to see the place - invariably the answer is always yes. Smile be friendly. Don't wear your Longines watch. Don't bring an iPad.
Elisha, your question regarding 90 days... well often times it depends from market to market. Here where I am, it might take 90 days just to get a building permit.
