My First Flip !!

[Danny Day]

I'm starting this thread because I am going to keep a running update on my first flip.

Today I have got the OK for all the funding I will need for my 1st home purchase / flip !! :cool:

I'm talking with a few wholesalers looking for something under $80k that needs minor work - nothing structural or foundation.

I'm meeting with a mortgage broker this week to get pre-qualified for the loan.

Now all I need is HOUSE to come my way...but I do want to have all my ducks in a row.

Question: A friend of mine told me you can not purchase homes from a wholesaler with a conventional mortgage loan. Is this true? I don't see why you couldn't.

Keeping my fingers crossed!! I'll keep you guys updated

Danny

[Paul B.]

As with any investment, you need to be very careful here. I do not like that you're walking properties without having a contract of some sort in place. How do you even know that they have a lock on the property?

I have a pretty good idea who you're using (NetWorth Realty, correct?). I am not in any way saying that they are shady, because I know nothing about them as a company. The president of the company in Houston is a licensed, active broker, and he has a stable of agents working under him. So that's a plus; at least you're dealing with someone other than your typical bird-dog.

However, here's a look at one of the "deals" they currently offer, a house located at 3816 Brandt Street. They say the ARV is $275,000 and that the cost to remodel is $45,000. With their asking price of $165,000, that leaves a profit "potential" of $65,000, according to them. We all know that's baloney, though, since there are usually other considerable costs in selling a house.

Since I am not in Houston, I can't say what the house is really worth fixed up, but I'll wager it's not $275,000. While I would not stake my life or reputation on a Zillow.com value, this site says the house is worth $224,000 -- and Zillow is usually high, not low by 20%. So that's another number that I would question.

Lastly, they are offering this house as a deal at $165,000, when it was on MLS recently for $175,000, then dropped to $149,900 with the listing removed. So, no takers at $149,900 as a listed property, but a deal at $165,000?

It's just not adding up for me.

I am not suggesting that people don't make money buying properties from wholesalers. I am sure many of them do. But, in my experience, I have never, ever seen a wholesaler give real world numbers with respect to the true ARV or repair cost, and I've caught many of them trying to sell properties that they don't even control. It always made me laugh to see a wholesaler offer me a "deal" that was $20,000 higher than the property was currently listed on MLS.

That just goes to show that some wholesalers -- not necessarily NWR, of course -- rely on lack of buyer knowledge to make their business work.

As with any investment, caveat emptor.