Rental Property Investor · Rockford, IL · Member since 2014 · 385 posts · 702 votes
So when I initially planned on flipping 5 or so houses this year I had this crazy notion that it would be semi reasonable....1 every two months or so. Instead I ended up buying 1 from a charity and 2 at a foreclosure auction on wednesay! So we officially have 3 flips we will be starting in march and one that should be finished in a couple weeks. Perhaps I should have shot for 10 instead of 5! To think last year we only did a single flip. Oh boy well a few lessons we learned from our second flip.
1. Time is money, even though you might make a great profit with a gut rehab they tend to take a lot longer.
2. Foreclosure auctions are amazing! Often a really good realtor will be able to get you into them before the auction don't be afraid to ask.
3. Properties at the foreclosure auction tend to be in better shape than some of these houses that have been sitting for years vacant.
If anyone has any questions please feel free to ask as I will try and help out as much as I can. The cities we have bought flips in this year are woodstock, joliet, marengo and rockford.
Numbers on our second flip were 40k purchase price 90k rehab and 175k sale price
Investor · Valdosta, GA · Member since 2013 · 22 posts · 6 votes
8y
How did you finance your first flip? I have 2 rentals in a terrible market where the homes aren’t appreciating at all, therefore I’m stuck with them as rentals. I’m tapped out on down payment for another but would like to do a flip to set “gasoline to the fire”, as you mentioned. I need to make my next move and it has to be my best move. I don’t have much support, it’s just me trying to make this work, so any advice is helpful. You’re my inspiration today.
Rental Property Investor · Rockford, IL · Member since 2014 · 385 posts · 702 votes
8y
@Richard Wilson Alright I'll answer on one condition you have to ask another question lol. Seriously though a bunch of new investors don't ask questions, they are valuable not only to the one who asks but also to the one who answers. By having to stop and think about not only what I did but how I did it and what could be improved upon improves my business as well. So on to your question about time allocation, when I first started out I wore every hat imaginable. I was the property manager, general contractor, wholesaler etc. A couple problems with that is one I spread myself way to thin. No one project could have all of my attention because I simply didn't have any extra time in the day to give. Two I was doing way too many low dollar tasks, running to the hardware store mowing the lawn you get the picture. There is a great article by @Brandon Turner from 2015 https://www.entrepreneur.com/article/245311 I encourage you to read it. To give a very brief summary he talks about the worth of an hour. What tasks you can outsource so that you can concentrate on the aspects of your business that really make you money. So to make a long answer short I don't run to the hardware store anymore, I don't swing a hammer ever. I farm out my property management so I can concentrate on high dollar tasks such as finding the properties running the number handling the financing. Eventually though I want to build systems to replace what I am doing so I can do even more high dollar tasks. Hope this helps and as always I will try and reply to as many questions as I can.
Beloit, WI · Member since 2016 · 100 posts · 40 votes
8y
Congrats, Philip!
@Arthur I've got one rental in Rockford (east side, the relator I bought it through has ten rentals in Rockford and says that she focuses on homes east of Alpine, so that's what we did), and one in Machesney Park. Planning to buy a third this year. So far we're happy with our PM, which we use because we aren't in the area at present.
Rental Property Investor · Rockford, IL · Member since 2014 · 385 posts · 702 votes
8y
@Tim Johnson Come on Tim you know how our first flip went lol, we paid more than we should have up front, we spent to much on the rehab budget and we over improved for the neighborhood. Oh and we also priced it to high so we wasted 30 days we didn't have too. Overall we ended up making just about 8% on our money not a slam dunk by any stretch of the imagination but at least we didn't lose money and we learned a ton in the process.
1. Do not assume because you have made your house the nicest in the neighborhood someone will be willing to pay extra for it. Everyone who walked into our flip absolutely loved it and then wanted to pay about what other houses in the neighborhood were going for.
2. Run your comps based on how you plan to finish your house, if all three of your comps have granite counters, back splash and tile you had better budget for that. On the flip side if none of them do are you wasting money by putting those things in your flip?
3. Time is money, providing you have the money if you can farm out a job that would take skilled workers a week but you a month think about doing so. If sweat equity is your goal than of course stick with that route but just remember you have to pay taxes insurance utilities and more for every additional day you hold your property.
Indian Trail, NC · Member since 2017 · 24 posts · 5 votes
8y
Thank you for the great information and congratulations , I actually starting looking into auctions this morning looking for our next flip so this info came at the right time!. I have a question, do you get to look at the properties before the auction?
Rental Property Investor · Rockford, IL · Member since 2014 · 385 posts · 702 votes
8y
@Account Closed It really depends on the auction most will claim they are occupied and to not disturb the tenants. Fact of the matter is it seems 90% are unoccupied at least in my area and the 10% that are occupied the sales usually get cancelled last minute. One that I bought last week for example they tried a short sale about 6 months ago so we knew for a fact it was empty. Called my agent and we walked through the property a couple hours before the sale
Investor · Rockford, IL · Member since 2016 · 94 posts · 220 votes
8y
@Philip Williams Congrats on your success this year so far! Not even two months in and you've already almost hit your goal for the year, time to 10x that goal. I do buy and hold investing in Rockford and would love to connect with you at some point if your up for coffee or lunch. Currently I am transitioning from my W-2 income to go full time into real estate by August, and I'm always up for connecting with someone who like to talk real estate. I'm also about to list my first live in flip, so I'd be curious about any lessons you've learned in selling your flips.
It's always crazy how fast things can move once your in the game. We've had a similar experience as you this year. We bought 3 houses last year, and the goal was to buy 5 more this year. Next week we'll close on our 5th house, which is just crazy to me, time to 10x my goals as well.
Just came across your post today; it was featured on one of the BP E-mail Newsletters. Congratulations :-)
I would caution you on going too fast. When my partners and I first started, we bought our first flip at the auction, and we got so much confidence when it sold that we bought 7 more houses within a 4-month period. Long story short, one of our partners (who was a GC) screwed us over (stole money, liened a house, etc) and left us with 7 houses with under-estimated rehabs (because it was at his cost) and all taking longer than we had planned for. It took us two years to recover from that mess, and our average holding time of those properties was 11 months with 4 months being the shortest and 2.5 years the longest.
I told you why I'm a little wary of auctions, but it sounds like it's different in IL. Still would caution you to perhaps finish the ones you have before acquiring more, just to see it from end to end. No title insurance could come to bite you at the end too when you sell.
But overall it seems like you're on a great path to success with the right work ethic and team in place.
You mentioned you're stuck with your properties because your market isn't appreciating. This was a weird statement to me because appreciation shouldn't have any part in flips, i.e. you shouldn't be planning for appreciation when you buy a flip. If you ran your numbers and used sold homes (at that time when you purchased) as comps to determine ARV, you should have been okay, unless something went wrong with the project itself (e.g. it went over budget). Depending on appreciation was how people lost their shirts in the last market crash, so I definitely don't recommend that strategy (and speculation isn't really a strategy anyway).
It's good that you were able to keep them as rentals as a backup strategy. Maybe you can consider doing lease-options if you still want them to sell? When I can't get the selling price I need for my flips (because I spent more money on them than I should), I turned them into lease-options. It puts hassle-free tenants (with a buyer mindset) into the houses, and I can usually get the price I want because these folks don't usually have that many options to own a house and are willing to pay a premium for that option). That and I also lower my eventual selling costs because no realtor commissions are involved. Plus the tax benefits of selling a rental vs. selling a flip.
In terms of down payment, how did you purchase your two flips-turned-rentals? You might be able to find lenders who can do lower down payments, such as 10%. Or perhaps cash-out refi your rentals if they're not already in conventional loans?
Rental Property Investor · Rockford, IL · Member since 2014 · 385 posts · 702 votes
8y
@Amanda Strickland Hi Amanda thanks for the questions you have to have 25 percent in cashiers checks at the auction then you have 24 hours to pay the balance.
@Justin Sheley Thanks man yeah I changed my goals I think I'm going to shoot for 10 flips! Yeah I am definitely down to do lunch or coffee. Oh man way to many lessons to narrow it down, I've always wanted to do a live in flip your gonna have to tell me all about it!
@Nghi Le Hey man how's it going! Thanks for the words of advise, yeah I definitely won't be buying anymore until I unload a couple of these lol. That's a rough story with your GC I bet that's a common story. Fortunately my team is small enough that we don't have to worry about that yet. Once we expand further that will definitely be something to take under consideration.
Algonquin, IL · Member since 2016 · 8 posts · 1 vote
8y
@Philip Williams Congrats to you! How often do you attend the live foreclosure auctions and how many would you say you target before you are able to acquire one?