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Updated over 4 years ago, 04/06/2020
I’m paying 80% of ARV on flips. Thoughts?
I'm paying 75-80% of ARV on flips.. can you get them for less these days?
Depends on your area. San Fran, not a chance you could get one for less than 80% ARV. Jacksonville, most likely you can. I live in Utah and investors are paying over 80% all in ARV for flips....IMO, it's ludicrous. For that reason, I do all my investing in Indianapolis. We look to be all in at 65% and definitely no more than 70%. The US market as a whole is very hot so most investors are overpaying, but that doesn't mean you have to. Depends on your situation. Me and my partner have been picky and held to our criteria because we can. We have passed on MANY deals that other investors are drooling over, but we make a much higher ROI than they do and our investments are much safer than there's because we have a much higher margin of error. You can go to places like KC or Birmingham and get flips for 55% ARV. Just depends on what's acceptable to you and what your market has to provide. I'm not an expert in the Florida markets so you'd have to do some of your own research, but from what I understand you should definitely be able to get closer to 65-70% all in ARV.
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#2 Land & New Construction Contributor
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Originally posted by @Maher Bateh:
I'm paying 75-80% of ARV on flips.. can you get them for less these days?
You want to be 65-70% max especially right now. You should be able to find delas like these in Jacksonville. How are you finding your deals?
@Greg Dickerson Jacksonville is a hot bed for investors believe it or not. When a wholesaler send me a lead it's sold in days 2/3 days. I also purchase through the local county auction site. When I starred in 2013 I was paying 70% of ARV but from what I can see those days are over....
@Trent Stone
Living in Utah, logistically how are you able to flip homes in other states? Seems it would be very difficult...
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#2 Land & New Construction Contributor
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- Charlottesville, VA
Originally posted by @Maher Bateh:
@Greg Dickerson Jacksonville is a hot bed for investors believe it or not. When a wholesaler send me a lead it's sold in days 2/3 days. I also purchase through the local county auction site. When I starred in 2013 I was paying 70% of ARV but from what I can see those days are over....
Yes auction site rarely produce a deal and wholesalers have pushed up prices due to easy funding for investors but Things are changing. Many hard money lenders are holding off right so some flippers will be sidelined as well as some wholesalers.
The best way to get better deals is to go direct to seller. You can also let the wholesalers know where you need to be on price as some of their buyers will be stepping back right now. Also look into markets like Pensacola you can get the margins you need there right now.
Paying 75% - 80% of ARV is very scary. You're going to have settlement charges when you buy (about 1.5%) plus sales cost of approx 10% (commission, closing help, and settlement fees) if you get a full price offer, that leaves you with roughly 10% for rehab and profit.
@Maher Bateh Shout out to David Greene and "The Book on Long-Distance Real Estate Investing"! He talks about how to put together your core-4. I vetted and interviewed several key players to our team and found the ones that I trust wholeheartedly. We have amazing boots on the ground in Indianapolis so we don't need to be there. They want us to win just as much as we want to win, if we succeed so do they. Teamwork! Also, like David says, rockstars know rockstars. Good chance if you find one or two of them then you can fill in the rest of your team with other rockstars. The margins in Indy are so much better than here in Utah, I think it would be silly to focus all my investing energy here when I'm doing so much better there.
I could be wrong on this, but truly believe that ARV's of the past 6 months, need to be shaved by 5 - 10% moving forward.
There WILL be buyers in the market no matter how the Economy is doing/ recovers. But I think it's best to play it safe, and if you expect to sell a rehab for 300k in August or Sept... .shave off at least 20k.
just food for thought.
@Maher Bateh It's about to get a lot tougher with the moratorium on foreclosures as part of the CARES Act.