Flipping without Buying

Real Estate Deal Analysis & Advice
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Flipping without Buying

Allen Fletcher
Investor · Colorado Springs, CO · Member since 2015 · 252 posts · 131 votes

Background: My parents lost their jobs in 2014 and were forced to move to another state. They tried to sell the house, but they were slightly under water on their mortgage (home prices still had not completely recovered from the bubble bursting at that time). They found a couple that wanted to rent the house for a year and then buy it. Their renters made changes to the house (without their knowledge) and then changed their minds about buying and left them with an unfinished house that had lost value due to the unauthorized renovations. My parents tried to short sale the house (they could not afford the mortgage and their rent) and put it on the market for $190k, the bank said the house was worth $230k which is $14k less than they owe on the house. My dad knows I am looking for a deal and offered to let me fix the house up and sell it (they do not have the capital to fix the house up) and we could share the profit.

The house is located in Southern Oregon, may parents live in Northern Utah, and I live in Ohio. Does anyone have any ideas on how I can flip the house while being so far away?

Sincerely,

Allen Fletcher

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Jeff B.
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
10y

@Jay J. OMG, all you did was promote of BP and gave nothing to the O.P.

Be a contributor, not another pop-up - - sorry man, you rang my bell.

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  • Jay J.
    ., OH · Member since 2015 · 361 posts · 127 votes
    10y

    Welcome. You have already set yourself up for success by joining BiggerPockets!! This is really the premier place to start learning about RE and what it can do for you!

    Now, you do have an interesting situation to deal with, but I'm sure one of the BP members that has done this type of 'remote flip' will comment in no time. But while you wait...

    1. First things first, learn the basics --> http://www.biggerpockets.com/starthere

    2. Then, download the BiggerPockets Ultimate Beginner's Guide and start reading some more!!
    The UBG will will walk through many of the key topics of real estate investing. Ask anyone here, its an invaluable resource. --> https://www.biggerpockets.com/real-estate-investin...
    3. Once that's done, get to listening to the free BiggerPockets Podcast - A really great podcast with interviews and a ton of great advice. --> https://www.biggerpockets.com/renewsblog/category/...


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  • Dell Schlabach
    Investor · Canton-Akron, OH · Member since 2012 · 917 posts · 477 votes
    10y

    Couple questions 

    The house is worth 230, they owe 244.

    Say you put 30 in renovation, 15 in selling holding closing, and you want to make 20, that puts selling price at 309,000

    You think after renovation it can sell for that? 

    If not how is this a deal?

    0Reply
  • Allen Fletcher
    OP
    Investor · Colorado Springs, CO · Member since 2015 · 252 posts · 131 votes
    10y

    @Dell Schlabach the house does not require a major overhaul. The kitchen is already updated, all flooring is in pristine condition, the interior painting is fresh and updated. The only major renovation projects for this property are a horribly done master bathroom remodel that will have to ripped out and re-done, the well needs some TLC, the exterior was painted or horrible color, and the landscaping was not cared for and thus all died (due to the well having problems). We estimate (very conservatively and roughly) no more than $20k for rehab and have priced comps at $280k (we were conservative here as well). This gives us roughly $16k of room to cover remaining costs and profits.

    This is not a traditional deal, if circumstances were different I would walk away from this house, but my parents are stuck with it and I want to help them sell it and not have it cost me a penny at worst. I do hope to get a few sage words of advice from experienced investors (like you) so I can maybe find an upside from a terrible situation.

    Thank you for your questions,

    Allen Fletcher  

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  • Mike Palmer
    UT · Member since 2013 · 164 posts · 55 votes
    10y

    So a few years ago (in a down market) it was worth $230k and they owed around $244k? And now (in a more sellers market) it is worth $280k?

    You will need a team in the area (including a realtor, contractor, etc.), which will more than eat up the $16k you have left to work with. It doesn't sound like there will be any profit in this deal, and a good chance you will lose money. Are the payments current? Is it vacant? Are you showing $280k as ARV or as-is? If that is the as-is value then get it on the market the way it sits and you might have a chance to come out ahead.

    If not, I would maybe look at some creative options. Can you sell it as-is, either sub2 or on a lease option? Can you partner with a local investor in the area that can buy it as-is and is willing to re-work it on thin margins and re-sell (maybe an investor/agent that also does their own rehabs would be able to make this work...)? Could you rent it at lower than market rent value to someone that is QUALIFIED to make the repairs (maybe rent it short-term to a handyman at discounted rent in exchange for the materials and work)?

    It seems to me you will need to think outside the box on this one...

    0Reply
  • Allen Fletcher
    OP
    Investor · Colorado Springs, CO · Member since 2015 · 252 posts · 131 votes
    10y

    @Mike Palmer

    To answer your questions, payments are not current, it is vacant, the ARV is about $280k.

    What do you mean by sub2? I have never heard of that being an option. If you think that it might work I will look at that as an option.

    Thank you for your response. It is for a couple of outside-the-box ideas that I started the discussion.

    0Reply
  • Mike Palmer
    UT · Member since 2013 · 164 posts · 55 votes
    10y

    Sub2 is subject to. You sell the house (give them the deed) subject to the existing financing (keeping the existing loan in place). So they would assume making the payments on the loan that is already in place. There are some risks with this so you will want to know what you are doing and may not be the best method for your first deal.

    1Reply
  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    10y

    @Jay J. OMG, all you did was promote of BP and gave nothing to the O.P.

    Be a contributor, not another pop-up - - sorry man, you rang my bell.

    2Reply
  • Allen Fletcher
    OP
    Investor · Colorado Springs, CO · Member since 2015 · 252 posts · 131 votes
    10y

    @Mike Palmer thank you for the clarification.

    0Reply
  • Neal Collins
    Developer · Portland, OR · Member since 2014 · 732 posts · 490 votes
    10y
    I wouldn't hold my breath hoping someone will come along with an offer to purchase and would hope to keep the nonperforming note in place. First off, you need someone that can either pony up the cash if the note is called, or is smart enough to be able to calculate that risk and proceed in a manner in which they would want a larger margin than what you're talking about. I think you should setup some appointments to talk with some brokers and some contractors, and then go fly out there and see what needs to be done and determine how much it will cost. If it makes sense to put money into it then go for it. If not then write the trip off as a business expense and go figure out how to help your parents through a rough time. It is crazy to think that nationally we are in such a seller's market with lots of RE activity and they are still underwater that much.
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  • Jay J.
    ., OH · Member since 2015 · 361 posts · 127 votes
    10y

    Wow @Jeff B., a little harsh, no..?

    Yes, I linked the OP to the "beginner' content of BP.  As I stated in my post, I couldn't help him (because I too, am a beginner) but I knew he obviously has questions that other people here can help with. (as well as the info I linked could provide general RE knowledge too)

    Sorry your bell is so easily rung..

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