All Forum Posts by: Andrew Taylor

@Charlie Fitzgerald, argh. Didn't think of that, but I'll find out. Thanks for the tip.

FWIW, the lender I've been talking to is FundThatFlip.com if anybody has any opinions of them they'd like to share. Since all of their money will be crowd-sourced, I can't really imagine they'd care if I crowd-source my part, but I'll follow up.

Between you and me, if it takes 6 months or a year, then I'm a crappy contractor and I need to find something else to do...:) I've been in residential construction for 15+ years, and done fire & water damage restoration for the last 7 or 8 years, so this is kind of right up my alley.

But for the purposes of this argument, say 6 months at the outside. Realistically, I'd look to finish the rehab in 2 months or less and then list the house for sale.

I appreciate the input, @Corey Woodruff. Any advice on what those terms ought to look like?

I have a lead on what seems to be a good candidate for a fix-and-flip deal, and I've got tentative approval from a lender. However, the lender is requiring 20% down, which is going to be somewhere in the neighborhood of $75k. I'm currently looking for an investor (or investors) to fund that portion of the deal.

My question is, what kind of terms are typical? Is it a percentage return (i.e., you put in $75k, and when the project sells, you get your $75k back plus x%)? Or is it a percentage of the profit (i.e., when the project sells, you get x% of the profits)? Or something else?

I really have no idea what's a typical arrangement, and I don't want to A) get screwed or 2) look stupid. Thanks in advance for your input. (And if you want to invest, PM me!)

I think your rehab numbers may be low, depending on the size of the house and the neighborhood. The roof and HVAC alone might be 1/3 of your $60k number, and kitchen and bathroom rehab could easily use the rest, depending on scope and finishes.

Are you going to be doing a lot of the work yourself? If not, make sure you get bids from all the relevant trades. And get bids for the worst-case scenario; what happens when "slight mold remediation" turns into "the house and everything in it is full of mold"? You'll have to disclose mold when you sell, too - will that affect ARV? Would you pay full price for a house you knew had a previous mold problem?

Don't forget fixed costs related to purchasing, carrying, and selling, which could be $15-18k. You don't want to get to the end and find out the job is costing you money out of your own pocket. 

I don't mean to sound like Debbie Downer this morning, but I just looked at a deal this week where the seller estimated rehab at $60k, and the actual rehab is going to be closer to $100k, not including the fixed costs. If I'd pulled the trigger on what seemed like a good deal, without turning over all the stones first, I'd be screwed. Make sure you know what you're getting into. 

I think your rehab numbers may be low, depending on the size of the house and the neighborhood. The roof and HVAC alone might be 1/3 of your $60k number, and kitchen and bathroom rehab could easily use the rest, depending on scope and finishes.

Are you going to be doing a lot of the work yourself? If not, make sure you get bids from all the relevant trades. And get bids for the worst-case scenario; what happens when "slight mold remediation" turns into "the house and everything in it is full of mold"? You'll have to disclose mold when you sell, too - will that affect ARV? Would you pay full price for a house you knew had a previous mold problem?

Don't forget fixed costs related to purchasing, carrying, and selling, which could be $15-18k. You don't want to get to the end and find out the job is costing you money out of your own pocket. 

I don't mean to sound like Debbie Downer this morning, but I just looked at a deal this week where the seller estimated rehab at $60k, and the actual rehab is going to be closer to $100k, not including the fixed costs. If I'd pulled the trigger on what seemed like a good deal, without turning over all the stones first, I'd be screwed. Make sure you know what you're getting into. 

Sounds like you answered your own question: finish the house that'll give you the most equity, refi, and then finish the other. 

The numbers on the first house seem awful tight, though. Was reading somewhere around here the other day an article about fixed costs when flipping, and the author's FC were near $17k on each deal. If that comes out of your $20k profit, you're not going to have much wiggle room. 

That's why you don't put $150k into it. You put as little of your own money into it as possible. You can recover 20% of $150k a lot quicker than you can recover $150k.

@Ryan Taylor, I'm coming up with $389/month net positive cashflow using your numbers above, including allowances for vacancy and maintenance (but not property management). That's not taking into account any kind of seller financing (which I don't think you've got enough information on - i.e., what are the payments before the balloon?). Also it assumes 20% down payment, 1.5% closing costs, and $0 rehab costs.

IF you could get tenants to pay their own water and/or do the lawn maintenance, then you'd be even farther ahead, but I'm not sure whether or how you could pull that off. If it's a single building, it's likely got a single water meter, and re-metering is going to be expensive if not downright impossible. Might be able to tell the tenants you're just going to split the average water bill three ways and they're each going to have $40 added to their rents to cover it. Of course they might flip you the bird and move out.

I would advise against taking the seller up on his financing and balloon payment; that seems like a disaster waiting to happen.

@Ryan Taylor (aka Little Brother), ask for the rent rolls. They'll tell you what each unit rents for, whether it's month-to-month or leased, etc.

Then when you put it under contract, you can ask for the actual lease agreements (and maybe make the contract subject to verification of stated rents or something similar).