Fixing and flipping off the MLS?

Question

Hello all,

I have mentioned in previous posts that we are selling our home to kick start our fix and flip biz. I have talked to our Realtor (who is selling our home) about this and asked him if he works with "investors" and if he had any problems making low ball  offers, and I think he is on board. He has came through with my request on some potential properties and we went out and looked at some yesterday. I came home afterwards and ran some quick numbers on a couple of them, and will have to offer 10k below listing to make them work.

My question....Is it a good approach to look for fix/flip properties on the MLS or am I wasting time? I know if my offers get accepted this could work, but do the seasoned fix and flippers generally do this? Just trying to get my head wrapped around this.

Thanks for your time
Jason

Mark Bradford · Answer

I use the MLS as well. I try to buy a flip a year.  So we are alittle slower.  The problem I have with this is the no offer by an investor for 15 days on an REO.  I am just getting to the point where I would like to start doing 2-3 a year.  But I need to add new ways to get properties. Most houses in my market that are not repos will not support the 70% math. Then when we go to sell the appraisal seems to be hard to get higher then the one "next door" that has not been renovated but sold as an owner occupied. But with all that said the business makes money and we love doing rehabs!

Steven Del Prete · Answer

As others have said if the numbers work then it just works.
 For instance a listing came up last Monday and went under contract that Wednesday morning. Listed at 215k and an exact comp a few homes down just sold at 299,900. I never got a chance to look at it and not sure on the number they bought it for but obviously the numbers worked haha

Dell Schlabach · Answer

We have a few crews running rehabs, I also find deals for a full time rehabber and a couple part timers, we buy aprox 90% of our deals of the mls.

If the numbers work, the mls is a great source.

Billy V. · Answer

@Jason Cotner "seed money" simply means money used to get started.  If it is enough to buy a flip outright and complete the rehab great.  If it enough for you to have some skin in the game and use a HML that works too.  For my first deal I used my cash (seed money) from the sale of our primary residence and a HML.  After a few flips I was able to start buying using just my own money.  Of course I started doing 2 flips at a time and then started entering into higher price points and have just started adding square footage to properties with the help of HML. HML are a great tool if used correctly.

Jason Cotner · Answer

Mike LaCava, Yeah thanks Mike The 70% rule is how I am running my numbers, although, I do believe I need to be a tad more conservative with my numbers to count for the unknown.

Thank You 
Jason

Jason Cotner · Answer

Billy V. Thanks, I'm glad to hear you guys have been successful with this. Please forgive my ignorance, but when you say "seed money" do you mean reserves for say a hard money loan? This is the route I think we are going to take.

Thank You 
Jason

Mike LaCava · Answer

Jason Cotner I buy off MLS and several other ways. Makes no difference as long as it meets my investment strategy. I like to buy using the 70% rule and better whenever possible.
70% of ARV minus total cost of repairs = my maximum price
example - $200,000 ARV x 70% = $140,000 - lets say $40,000 in repairs = $100,000 max purchase price so I may offer $80,000 to leave some room to negotiate. There is a lot more to it but this should give you an idea.

Billy V. · Answer

Hi Jason,

We started our flipping business just like you intend to.  We sold our primary residence and used the proceeds as seed money.

When we first started we were getting our flips through an assets manager who dealt directly with the banks and non-profit agencies.  As the market heated up this property source dried up.  Since then we have been purchasing all of our flips off the MLS.  I like it myself.  Plenty of time for due diligence and there are lots of properties to make offers on.

The bottom line is that it doesn't matter where you get your properties from (as long as it is legal).  What matters are the numbers.  If the numbers work off the MLS than go for it.  If they don't than you will have to find another method for locating and acquiring your inventory.

Good luck,

Billy