Needing a Flipping Mentor

[Preston Gealy]

Hey guys,

I have been flipping houses for 4 years and I'm about 50% on successes. We lost almost $100,000 on the others. Looking for a mentor in the Pittsburgh area to reach out to me and possibly give me advice on what I'm not doing correctly. Any help is appreciated!

[Jeremy Taggart]

@Preston Gealy

Some high level tips/advice. I do rehabs in the Pittsburgh area myself so just based on experience/working with clients and knowing the local market. 

I like 3+ beds, 2+ baths, 2+ car garage, flat/usable yard space if in the suburbs, enough parking, stay off busy or hard to get to roads, stay away from a lot of steps, good school districts if in the suburbs, close enough to amenities that you have a good buyer pool, good room sizes, master suite always helps on flips as well.

Don't buy weird or funky properties. Stick to cookie cutter if you can on flips. I've seen a lot of people get burnt by buying houses that have funky layouts or just look weird/non conventional on the outside. Retail buyers will get turned off by even the smallest things so those can increase your risk. 

I like to stick to areas that have a lot of other similar types of houses. If you are in an area where there are a lack of comps then you increase your risk on the back end. The higher the sample size of similar types of homes that have sold the better. 

I also like to stick close to the median house price in the area. That's where you are going to find the most buyers. 

As far as ARV prices I like at least 150k+ on the backend. It's easy to get burned on the cheap flips since one unknown might pop up on the rehab and can destroy any profit you would get. If you stick to at least the median priced areas it gives you more room to get some meat on the bone.

I also don't like to buy the most expensive/biggest house in the immediate area since you can potentially run into appraisal issues on the back end/have a lack of buyers since it's more of an outlier. Higher chance of profit yes but also higher risk.

Aside from the house itself you have to make sure your numbers are right. For the ARV consult with a good RE agent that can pinpoint that resale value for you. As far as rehab costs if you haven't done a ton of rehabs get a contractor that you can trust to get you a rehab quote before purchasing and maybe even add a little more on top to be conservative especially with the crazy inflation prices we are seeing nowadays. I've seen a lot of folks get burnt on flips with plumbing/electrical by not properly accounting for those since they aren't as readily apparent as the cosmetic stuff. The contractor is arguably the most important part of the equation so you need someone that can be trusted to get the job done and won't walk off the job and take your money.

I have also seen a lot of folks forget to account for holding costs. Interest payments to lender, cutting the grass, utilities, property taxes, insurance (higher on flips since the house is vacant), etc. 

Lastly is be careful with your estimated holding time. Using hard or private money can be great on flips but if the contractor takes longer than expected to get the job done or the house takes longer to sell and you are holding the property for way longer than anticipated paying 10-15% interest can really cut into your profit as well.

Flipping in the quickly changing market today too you have to be even more careful. With the unknowns on where the market is heading I would just be even more conservative since it has been starting to cool off as this year goes on. I don't think prices will go down in the Pittsburgh area but stuff might take longer to sell and prices stall out. Definitely don't bank on the continued appreciation we have been having the last two years to get your profit on a flip.

Hope this helps!