New Member From South Florida

[Brandon F.]

I have been trolling around on this site since it was introduced to me a few weeks back and I have found myself lost for hours at a time and I decided today was the day I would make it happen.

I am living down here in South Florida making a salary I never thought I would see in my life, let alone at 23 years old. I have a background in construction through a vocational high school and a business degree that I have always dreamt of meshing the two together to get into the real estate investment world. Without a lot of capital or experience I took charge and enrolled in a mentorship program from an investor down here specializing in lease purchase. It was presented to me in a way that I couldn't turn down so I spent months scrolling through FSBO ads, emailing homeowners, marketing, and have nothing to show for it. Recently I have come to the conclusion that if I want to get into the rehab and fix and flip specialties of real estate I am going to have to take charge, switch strategies, roll up my sleeves, and get into it.

What I don’t have however, is the experience and knowledge. I am curious as to how some of you all on here began or what advice you would have to a 23 year old, eager and financially stable individual just getting started. I really am excited to hear what you all have to say and look forward to sharing in the future as I gain experience, thank you!

Brandon F
Boynton Beach, Florida

[Jon Holdman]

Moved your post over to the new member intro forum.

Welcome to BiggerPockets.

You appear to be wanting to do fix and flipping. (That's a real estate business, IMHO, rather than investing. But many would say I'm too dogmatic. Anyway.) That's a straightforward business. You find a junky house, fix it, and sell it. There's a basic formula you use if you want to make money.

First, you need an ARV. That is, the price you will sell it for. Some folks make this over complicated and talk about ARV and "quick sale price" and other mumbo jumbo. ARV is the price you can realistically sell it for quickly. Don't fall for the "price high and slowly reduce". Time is money. Figure out the right price and put it on the market for that price and move the property.

Now, this is absolutely the hardest part of this business. There are numerous posts on how to determine ARV.

Assuming you have a solid ARV, take 70% of that. That's you all-in total for buying a house. By all-in I mean the purchase plus whatever you have to spend fixing it up. If your buy plus rehab is 70% of the real ARV, you use hard money to fund the deal, you use a real estate agent to sell the property and you're in and out in six month then you should have a profit of about 10-15% of ARV. The low end is a more realistic estimate since you inevitable spend more than you expect and it takes longer to sell than you expect.

The next hardest step is actually finding a deal. Some areas, like CA, are impossible to find deals that good. The best people report is more like 75%. If you're good at doing fix and flips, then you still might squeeze a 10% profit out of these deals.

Then you have to find contractors to do the work. My experience is that there are retail contractors and wholesale contractors. Retail ones are people that deal with homeowners doing improvements. Their customers are inexperienced in home improvements. The contractors handle everything and (hopefully) make sure they get what they want. These folks are expensive. Then there are people who deal with investors. They're often much cheaper. They're generally just the subs, and those guys don't make nearly as much as the GCs who deal with homeowners. But they're going to do what you tell them. So you have to know a lot more than the homeowner. Now, I've made some really broad generalizations here and things aren't really that simple. But the bottom line is that if you're doing fix and flips you better be really knowledgeable about construction and rehabbing. If you aren't and you hire someone who is, they're going to take a big chunk of your profit.

Even with hard money you need some of your own cash. If the HML lends you everything you need for the purchase plus rehab, you will still need 10-15% of ARV to cover your own costs (points on the loan, purchase closing costs, holding costs) and you need cash to pay for the work prior to getting the reimbursement from the HML for the work. More commonly, the HML will want to see 10-20% of purchase plus rehab of your own cash into the deal.

If you want a real mentorship, not just some guru selling mentorships, find someone in your area who's actually doing fix and flips. Offer to actually do some (OK, a bunch) of the work for them in exchange for being allowed to shadow them.