Purchase a First Flip Property in Late Summer, or Wait For the Winter?

Question

I am looking to begin an initial flip property, and as its early August I wonder if I should wait and make the purchase this winter to be put on the market in early spring.

In talking to local rehabbers I've heard some of the following conflicting comments:

1. Rehabs need to be back on the market no later than October 15th. 
2. Do flips in the first and second quarters and buy and holds in the third and fourth quarters. 
3. The market is all year long - understandably said by a wholesaler. 
4. Take a large margin deal whenever you can find it. 
5. Make your rehab-house purchases while others are busy purchasing Christmas gifts.

There is a winter season in Denver, with fewer sales as in most locales. If I could find a great deal in a strong neighborhood I would be less concerned, but what I see are usually tighter margin deals making 15-20K as wholesale prices have risen.

Is the end of summer a more difficult time to do an initial filp project? I would be using borrowed funds.

Mark Updegraff · Answer

If this is your first rehab, take the time you think it will take, and double it.  Then, take the amount you think it will cost and double it :D

I like #4, if the margin it high enough, it doesn't much matter when you get it.

I personally take it on a case by case basis.  What work specifically needs done?  A new roof?  Well, I don't know about denver... but forget about it in December / January...  When rehabbing in the winter, utilities are a lot higher as well... For me, I like staying busy all year long and that means get your exterior work done in the good months, and do your interior work during the winter.  I'm pretty weather focused when planning rehabs.  Rainy season, snowy season, windy season, hot season etc etc etc.

Cheers,
Mark

J Scott · Answer

Very much agree with Mark...

I'll also add that, while I buy all year long (and sell all year long), I find the best deals in November and December.  That means that the properties will go back on the market in January and February, which tends not to be a great time to sell, but the deals were good enough when I bought that it doesn't matter.

Buying in March or April will probably yield the easiest sales (as you'll put them on the market in May or June, most likely), but this is a very competitive time to buy, and in my experience, it's tough to find great deals in the Spring.

Things may be different in your area, of course...

Account Closed · Answer

there are usually higher number of good deals in the winter because of less buyers (kids in school) etc.  there are still good deals throughout the year, they just sell quicker.  I keep my eyes open for good deals all year long.

Mark Updegraff · Answer

Yes!!  Know your very specific neighborhood!!  In my area prices on similar homes (sq ft, lot size, condition etc) changes drastically in a matter of blocks.

I would suggest picking 1 neighborhood and getting to know it intimately.  The closer to your house, the better ;-)  Spread your wings from there and you'll start traversing through different rental rates, and purchasing prices.

Burt L. · Answer

I appreciate the replies. An initial property would have an ARV in the 150K range, and winter sales are about half of summer sales (about 1800 vs. 3500 closings per month winter/summer).

There is certainly an economic cost to not having a deal, though I can look forward to wider margins in the winter and prefer winter work as Denver winters are relatively mild.

Its good to know that spring purchases are tighter; I may be able to make a November/December purchase and be back in the buying market before the end of February.

I don't want to lose momentum as doing a first flip is a large hurdle and I see many wan-a-bees at investor club meetings who never get a business off the ground and there is alot to be said for continuing action.

It may be that I need to concentrate on learning many of the neighborhoods so I can recognize a deal more quickly and make offers faster. Maintaining momemtum is important, and though I don't want to wait for winter it may be wiser.

George P. · Answer

you pay less when you purchase the house during the winter months. kids are in school, holidays, shopping, etc.

but that also applies when you want to flip.

i love buying houses in the winter months cause i am the only one looking at them. lol

Luis A. · Answer

I know most of this is common knowledge but I have houses sold at the beginning of November and have put a house on the market in December that went under contract 15 days later. But then again, here in Atlanta people don't have to walk through 4 feet of snow to go look at a house.

However, the true answer is: it depends. What kind of property are you flipping? How is your market during the winter? How long is rehab going to take? Etc.

Since you are borrowing funds and talk about a tight margin I would be concerned. If you hold the house for a long time, the interest payments might eat up your profit margin. Plus, you are in Denver and it is quite possible that winter weather might be very crappy.

Justin S. · Answer

Plan to NOT sell from Thanksgiving to New Years and then be thankful if you do.  Basically get a larger spread home.

Purchase a First Flip Property in Late Summer, or Wait For the Winter?

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