All Forum Posts by: Andy Sabisch

Have you done local flips before? We have run into investors that started remote and regretted it as the challenges that come up locally are magnified remotely. There are some solid suggestions above but as Brandon said, having a dependable GC is a key factor. Did you select the remote location based on how cheap the property was or are you familiar with the area? We have been in areas where a few blocks changes a good deal into one that is for sale for a reason. Urban areas can change quickly so make sure where you bought has resale value or at least plan on a second exit strategy (rent, etc.) if you cant sell and are left holding it especially if you have a HML. Carrying costs can quickly make a deal a nightmare.

Appreciate the feedback . . . . 6 months will be over soon enough and I guess we need to revisit the terms of the lease moving forward.

Two things to remember when you go with a wholesaler . . . the ARV is often inflated and the repair costs are usually low so what looks like a good deal is often far from it when you get into it. We have seen a number of wholesale properties that went for far more than they should of and then are sitting on the back end because the sales price is too high and has to in order to break even. As they say, you make your money on the buy and over estimating the sales price especially looking months down the road where anything can upset the market to spending more than you expected will kill flips. One bad one can wipe out 5 good ones so be sure of your numbers and never rely on what a wholesaler is telling you (they want you to buy it not make money). We have found one decent wholesaler after meeting with more than a dozen and it was clear that the rest knew very little about comps and repair costs. There are people making money doing flips out of town but we do not have traveling crews of a network of GCs around the country so we try to stay where we can keep an eye on things. Knowing the area, having local contractors you can call to get good numbers and making sure the buy is right are key.

So here's a question.  Rent on our units is due on the 1st, late on the 3rd and at either day 10 or 15, eviction proceedings are started.  Also after the 2nd late in a lease period, rent goes up $25 a month for the rest of the lease.

Have one tenant that is always late and usually later than the 15th in her case.  By law we have to give her 10 days once she receives notice to cure it before we can go to the magistrate. 

So we get the rent and late fee on the 23rd to the 25th.  And getting it that late you know the next month repeats the story. 

Any thoughts on how to handle the last 6 months of her lease as renewal is out of the question.  Thanks

That's a loaded question.  Are you doing the work yourself or contracting it all out? Will you be the GC or need to hire one?  Have you done similar projects or is this your first? Do you have contractors ready or will you need to find them from ground zero?  All of these have costs associated with them and affect holding costs which play into cost per ft2.  Also different areas can vary widely in costs.

If you can narrow things down a bit it would help with a more detailed response.

As others have said, make sure you do a full background check and even that will not ensure you are 100% protected (we can tell you first hand about that).  One thing we have started doing is to call the current / previous landlord and see how things were left.  That can often be more telling than a background check which many not have input from the previous places they lived.  

The one challenge for us has been tenants who have never rented before (starting out) . . . be interested if others have found a solution to this as we have had 3 evictions in the past 3 years with first time renters who seem to think rent is the last thing you pay each month (and actually told the magistrate that).  One actually told the judge that we had more money than they did so it wasn't fair to evict them . . . gotta love them at time.

This is a post that applies to any tenant . . . just because they meet eligibility, make sure the fit works both ways.  We have tenants that looked good on the application and background check that when they showed up with pet in tow (no pets allowed), 10 relatives and vehicle filled with trash and cigarettes in everyone's pockets that we knew this would be a problem lease.  No discrimination but when we talked, both sides realized that the rental was not for them.

What condition is the tub?  We recently had to deal with a damaged tub and opted to tile the walls once we pulled everything out.  It was time consuming and while it came out great, not sure the time and cost justified the effort.  We have installed wall units in the past and they have held up to rental demands as well as tile.  You don't want to get the $100 sets but for $300 to $400 you can get a solid, durable wall unit.  Just remember to routinely check the caulking when you do your routine walk throughs.

There is more to returns than this question would allude to.  If I can do a cosmetic flip and have the crews that can knock it out in a few weeks so we can relist it and do three in the  time it takes to do a full rehab which will have my money and attention tied up for months, the simple flip would be my choice.  In a full rehab you will invariably find the unexpected which throws the timeline off and costs money (hard money, holding costs, utilities, etc.)  If your goal is to get your money turned, a 10% return in a month versus 40% in 6 months seems to be a no-brainer.  But if you have the financial resources and the trades ready to rock, run the numbers and see what option works best for your specific project.  We have switched strategies on some projects when we ran numbers and getting in & out is also the goal on a flip.

Foundation issues as others have said would be red flag for us . . . often the estimates are low and unexpected overages can sink a flip (holding costs will eat you alive).  Unless you are getting a heck of a deal I would recommend avoiding a foundation issue property until you have a team of contractors that you can count on and can find out what the repairs would run.  The rest of the repairs you can budget with a decent confidence but foundation issues can be a killer . . .we have passed on a few that in following up with the eventual buyer turned out to spot on as the cost was more than double the estimate in 3 cases.