Liveable Condition Flip

[Kevin Murray]

Hello BP. I am a newbie investor interested to know if anyone has experience with safe, conservative "liveable condition" flips that do little more than get a house suitable for an occupant and able to pass inspection for a traditional loan. I mean less than $3k for minor repairs, maybe a little paint, and a top to bottom cleaning - and that's it. Since I'm in California and have no local investment options that I can remotely afford, I have no choice but to look out of state. Too early for me to do a BRRRR and I don't want to leave any cash in a deal right now. I realize long-distance traditional fix and flips are risky, especially for an inexperienced investor. With that said, I have seen some investors approach the deal as a wholesaler would, find a below-market deal or motivated seller to get the property under contract at a discount, and then just get a handyman in to get the property into "liveable condition", touch up paint, make sure everything is functional, do an intense cleaning, and then re-list the property for a small profit after closing costs etc, maybe using a flat rate listing service.

I have about $100k cash to invest, and so wouldn't need a lender for this type of deal but could use a bit of HM if the numbers make sense. Bottom line is making a huge profit is not important to me for my first deal, just doing a simple and conservative deal, learning a bit, and hopefully walking away with a few extra bucks would be my goal. No heavy duty rehab with a GC and all the risks that go with that, just a simple and very straightforward flip with minimal risk to get my feet wet. 

Curious if anyone has any thoughts on this or experience they could share. Again, I'm not trying to get walk away with stacks of cash here, just learn and eek out what profit I can and get to know the business. Keeping lenders, property managers, and GCs out of the whole thing for my first deal seems like a great way to roll with training wheels on for the first ride. 

Thanks to everyone for being awesome and so helpful. 

[Evan Polaski]

@Kevin Murray, I think I am confused as to what you are looking to accomplish.  What are you trying to learn from this endeavor?  There are two issues that I see.

First, in my market, and I believe most major markets, you will not find a property with such little work needed at any type of discount. With the market as hot as it is, distressed sellers will likely be in distress due to a large, unforeseen maintenance issue arising.  So there are not many distressed sellers of properties that would allow you to only spend 3-5k to fix it.

Secondly, typically to get discounted properties, you will be waiving inspections.  Not always, but a lot of time.  When you only have a small profit built in in the first place, when your buyer does their inspection, you will likely wipe out your entire profit very quickly.  Having bought and sold over 20 properties myself, I have never had an inspection come back clean.  Even on a full gut, permitted rehab, there were about $5k of fixes asked to be done.  The less intensive the rehab, the more likely things will come up.  If your inspection going in doesn't catch them, your profit will be gone very quickly, and you will be out money.

With 100k cash, I would recommend either trying to partner with a flipper to start getting some deals done, or looking at some turnkey rentals from reputable specialists out of state.  These could create some decent cash flow, and you have time to let appreciation happen, if it will.  But buying 2-4 properties OOS could start creating some solid returns to let you continue to grow that portfolio, while also learning more about the business, renovations, etc.