I have a good problem and need advice!

[Ashley Boyd]

We bought our first flip! We’ve had it 2 weeks and 2 people have stopped by to stay they are interested in buying the house. My husband is meeting with a potential buyer this weekend. We are 90% done with demo and are about to order cabinets.

How do we approach the (premature) sale of the house. Do they buy it at ARV and pick the finishings? What if they want upgrades outside our Reno budget? Do we finish the house and hopefully multiple offers?

Purchase price $220k

Reno budget $80k

ARV $395

(ARV could go up to $425k *if we're working off of price per sqft comps. No house has sold for $425k, but we have more sqft than the other comps).

Help!

[Eric Teran]

@Ashley Boyd I am going to tell you a story that I learned from a billionaire about 15 years ago. I worked at an architecture firm in Southern California and this client was a developer who flipped million dollar homes. He would buy a property around $5 million, invest another $2 million and sell it over $10 million. This would be done within a year. His philosophy before buying any property was to have his selling price set. If anyone at anytime after he bought the property offered him this price or higher he would sell and move onto the next flip. Even if he just started the design process. He told me he didn’t need to be greedy. Why risk a solid profit that he accounted for when we don’t know the future. Who knows what happens in 6 months when there may be no buyers and he was left with holding cost.

This happened to two of his projects while I worked at that firm. One of the projects the client bought the property and the developer finished it by providing allowances for the new owner. On the other project the new owner took over and did his own thing. Our client was happy! He made his profit without the stress of the design or construction process.

I will tell you of another client around the same time who was also a developer but was greedy. He held onto his properties after multiple offers during construction and then the recession hit. In the end he lost a lot of money by trying to make just a little more.

I will always remember these two developers. The billionaire was self made while the other was a millionaire through his family money.

With all that said, if they are willing to purchase the property and you can make the profit you wanted then I would recommend selling it and moving onto the next one.

Good luck.