What Would You Do?

Question

As a Newbie Investor, I am afraid of making a Bad decision & I would so much like to avoid it... As you all know from experience, I have spent weeks looking for my first deal. Most sold before I found them or were sold by the time I first looked at them. The house for this discussion is one I found a couple of weeks ago and asked my Realtor about. She shrugged it off, saying if it hasn't been purchased by an investor yet, their may be a reason. It has been on the market for - this year so far.... price keeps dropping. Asking for house now is $39,000. (two weeks ago 50k)

3/2. COMPS - $136.000. I have been to the property/ w/o a GC. I know its gonna

need. Sidding, Roof, Flooring, Kitchen and Bath redo, New back Deck. New Door and

windows, Redo Garage, Landscaping, Fixtures, etc: Hvac, prob a water heater, new

appliances. I hope I am being Conservative with $50k in Rehab.  Any advice on the numbers I would appreciate. Thanks

Profit & Projections

Total Projected Pre-Tax Profit:

$15,073.25

Total Personal Cash Invested

$10,125.81

Holding Costs Per Month:

$1,170.00

Return on Investment (ROI):

148.86%

ROI (Annualized):

258.73%

45 Days

90 Days

270 Days

$21,300.67

$19,602.29

$12,808.74

Tom Mole · Answer

This is your first flip, right? Please look for an experienced partner to share this with. This house has issues judging by the photos and descriptions you've provided. These places tend to turn up surprises that can blow a thin budget out of the water.

Your realtor might be right, but I hate to listen to dream stealers. This could be just the deal to get you going. Partner with someone, though. You can find someone who operates in your area on BP certainly.

Do you have any local REIA's you could attend. In Los Angeles we have plenty of them and it helps a lot to meet people more experienced and willing to help. Some are very hungry for a deal and can help with funding.

It takes experience to work with razor thin margins. Make this one a success, not a reason to dropout of the business. Please find a partner and make this work.

All the best.

Pat L. · Answer

@Kim Gloor

I watched a large duplex with a barn & 800 ft deep lot for 18 months.

Listed for $89,900 it was a total rehab. Over time it dropped to $69,900 & by this time the owner had installed new fces & HW tanks. He had an offer of $59,900 & turned it down.

(I find there is a price point that some investors will jump in at regardless of the rehab costs).

I already had a buyer in mind so my partner & I did a detailed inspection/viewing. However, after a detailed critique by the only tenant left my partner was NOT interested.

So I offered a verbal, $40,000 CASH no conditions & was laughed at.

10 days later the agent called & asked us if I would go $45K & the rest is history.

We have often scored low ball offers only to be told by fellow investors that they had made higher offers on the same property, yet we were the ones who "stole it".

Throw in a low ball offer to compensate for hidden issues, carrying costs etc & see what happens.

Good luck

PS I did a total rehab on a 2100 sq ft home here for <$30k & that included materials & labor (I do most myself). I replaced every window door, bathroom, the kitchen & all flooring.

I put in a new fce & central a/c along with completely new siding & gutters. We buy most of our materials @ contractor auctions.

Kim Gloor · Answer

Good Morning! Jordan Thibodeau  and BP members.

Yes, No, No...

Ive been to the property and used a rehab SOW spreadsheet and then compared it to J Scotts spread sheet and included a 15% for Additional repairs.

The house is solid and no foundation or major structural problem. Some wood rot under bay window from missing siding.

My Question is about the Spread/ Profit. I will not proceed with out GC. Is 15k worth this type of flip?

Thanks....

Profit & Projections

Total Projected Pre-Tax Profit:$15,073.25 Total Personal Cash Invested$10,125.81Holding Costs Per Month:$1,170.00Return on Investment (ROI):148.86%ROI (Annualized):258.73%Profit if held for...45 Days90 Days270 Days$21,300.67$19,602.29$12,808.74

I

Kim Gloor · Answer

@Pat L.

Great, and inspiring story.  Thank You for sharing!

Thanks for the tip also, for buying materials.

Kim Gloor · Answer

Hi @Jim Lally

This property is not in a flood prone area, however talking with neighbors is sound advice.

This is not the only property I've looked at. It does keep showing up, keeping  my curiosity.

I have two counties that I look in and within each county, a couple cities hotter than others.

This property area the average days on market is 101 with 193 listings. Vs another area

20 miles away 64 days on market and 530 listings.

I have a lot of competition, that knows what their doing and gets the Good stuff fast.

Good Luck to us All! I plan to see you at the Top.

@Shevaughn  Rawlins

Thanks for your advice.

Shevaughn Rawlins · Answer

Kim- I would do a market analysis of the area to determine if it's a hotspot. The last thing you want is to purchase a property, rehab it and have it sit on the market with no interested buyers. Also, interview the neighbors because they will typically give you some valuable information about the area. I agree with the other posts, find a good GC that can give you estimated repair cost. Good luck!

Jim Lally · Answer

• Hi @Kim Gloor

I'm in the same boat as you right now.  I've been looking for a good deal for months now and simply haven't found it.  You say you've been looking for weeks.  That's really not that long.   Have you found other properties before this one?  I  guess what I'm trying to say is don't become fixated on one property.  If your coming out with $15k in profits that may quickly evaporate if something unexpected comes up (even with a GC estimate).

This is the reason I haven't found the right flip property myself, the projected profit was just too thin!  Make sure you look at external factors affecting the property as well such as flood zones and of course location.  I walked away from a great deal because I spoke to a neighbor who showed me recent(within the last year) pictures of the property under 2 feet of water.  You have to think about resale.

Definitely have a GC walk through the entire property with you to determine everything that should be addressed.  Lastly have a reputable home inspector look at the property as well.  He may spot things the GC will miss.

Good Luck!

Jim

Kim Gloor · Answer

@William Larsen

Thanks. I will do that.

Bill Larsen · Answer

1st thought:  If this house were in our market, with a pp of $39k and ARV of $136k we would buy it in a heart beat.

2nd thought:  When houses sit in our market, there's usually a reason nobody wants them.  I would have a licensed contractor walk the property and give you a bid, and also make sure your ARV is accurate.

Kim Gloor · Answer

@Tom Mole

Thank You very much for your reply.  Yes, very first flip.

This house has issues judging by the photos and descriptions

It does..... I was truly sad when I ran the numbers.

It takes experience to work with razor thin margins. Make this one a success, not a reason to dropout of the business. Please find a partner and make this work

I wanted and needed someone with experience to look at pics and numbers and confirm this deal would or would  not be a good starter.

Your realtor might be right, but I hate to listen to dream stealers

Love, Love this statement!!!

Again, Thank You.

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