Flipping Houses under 200K ARV

[Account Closed]

Hello All, 

I am a new investor in the Houston, TX area. We just had a great meeting with a investor/contractor who has been in the business for a while and he brought up a point that i thought was interesting. In our business plan we have decided to start with flipping houses to build up a cash reserve before we start purchasing buy and hold properties. Our criteria is 3/2/2 with purchase price under 100K and ARV of about $150K.

While discussing this with this other investor he mentioned that when looking to flip properties you should really stay away from the 50K - 150K properties as this is where the buy and hold investors are looking to buy, and a flipper cannot compete with the prices that a buy and hold investor can offer. He also mentioned there is less risk in flipping properties with an ARV of $200K+ as the buyers are more secure and can get approved for a loan easier than someone looking to purchase a $100K house.

So my question is, is there anyone successful flipping houses in the $150K ARV range or should we revise our business plan to focus on houses with a higher ARV?

Thanks

Craig

[J Scott]

Price points are relative.  If you're flipping in Atlanta, $150K houses are not generally considered low-end, and you can do very well flipping these types of properties.  On the other hand, if you're looking at $150K properties in San Francisco, you're going to have some difficulties.  Each market/area is different.

Also consider that:

-  If $150K is the sweet spot for buyer demand, you'll have a larger pool of buyers than you would for $200K+ properties.  

-  $150K houses don't generally get you into the custom-house range, so there is less risk in choosing finishes and designs.

-  Lower price houses require less capital, which often means less risk/stress.

- FHA will finance under $200K in any area, so you have a pool of FHA buyers that you may not have at higher price points.