All Forum Posts by: Andy Sabisch

Super informative post - shows that there is more to a flip than what many claim (gurus).  Despite having done a number of flips ourselves, I picked up several tips and points to consider from your post.

Congratulations on getting it behind you!

 Eric

Appreciate the perspective.  There are areas in the country that still have B and above properties for a fraction of what a similar home would cost in other areas and watching some of the shows and talking to friends in your area, I would be in sticker shock with what you are dealing with.  Moving from the NE to the South affords areas where good deals are still available and rentals are strong.  I am not looking at Section 8 tenants but rather focusing on family areas which should remain strong into the future.  We lived there a few years ago and are moving back for a number of reasons so we are familiar with the area and where to avoid.  Agree that owning cheap properties ensures you get tenants that are more trouble than those in higher grade neighborhoods and we have always tried to buy in teh right area for the right price.  Moving would have a relative who would manage the rest of our rentals but this one is over an hour each way which is why we are looking at options.  

Andy

We are planning on relocating on 6 months and rental housing in the area we will be heading to is markedly less expensive than our current area.  We plan on keeping our rentals that we currently have (well managed) with the exception of one which we are on the fence about (located away from the others).  It is a duplex that generates about $725 / month cash flow.  Condition is B+ / A- and is in an area that is in high demand with stable tenants.

If we sell this property, we would net about $100,000 thanks to the appreciation and mortgage paydown since we purchased it.  In the area we are moving to, we could purchase rentals (3/2) for $100K each (purchase and light reno).  If we used the $100K, we could buy 4 putting 15% down and have 4 rentals providing cash flow.

The questions:

1) Would you keep the original property that cash flows $725 and have it managed being away from the area or sell it and use the cash to purchase rentals in our intended destination?

2) With a purchase price of under $100K, most lenders shy away from those deals . . . would you look for a lender to buy 4 with 25% down?

3) Open to other suggestions or options?

Thanks, Andy

No experience with this company but when someone offers returns of 22% to 26% in today's environment, I would be just a little leery.  Hope someone can give you some feedback but even a search turns up nothing comes up and the parent domain investsecure.co is both new and has no content . . . . as they say, buyer beware.  Interested to see if any of the BP family have dealt with this company (domain is under a year old)

OK, have a question I am hoping to get some thoughts on.  Looking at a property that checks all the boxes including price and have a signed contract.  Had a pest inspection done but when we looked over the clean bill of health, there was a small note that said the inspector did not go under the house because it was muddy . . . ok, that was money thrown out the window but calling him back, he agreed to go under when the rain stopped and inspect the crawlspace.  Well, active subterranean termites were found.  Engaged the seller who agreed to 1) have the house treated and 2) address any damage.  Their pest company treated the entire property and came back once the floor was opened in the dining room to treat underneath.  The contractor removed damaged flooring and replaced 8 2x10 joists that had damage.  They opened the wall and removed paneling behind the drywall that had been eaten as well as drywall that was eaten (guess they like the paper).  The studs were not affected.  There was damage to the storage room wall which is on the other side of the dining room wall which was opened up and the drywall removed.  

So at this point the seller's contractor (who has been providing me with routine updates) has repaired / replaced what was found in the areas that the pest company identified active termites.  If we budget waterproofing (membrane) for the crawlspace and accept that the treatment was done (with a bond) and the repairs completed (photos provided), what would your thoughts be on proceeding with the purchase?  Not sure of wondering if there is more damage we did not find is being paranoid but the seller has said she wanted to take care of the issue.  

I welcome your input . . . . Andy

There are a number of examples you can find online but most inspectors today use software that walks them through what to look for, what to take pictures of and builds a 60+ page report minutes after completing the inspection.  I am sure there are exceptions but most of the reports we see all say "Recommend that you contact a licensed electrician / plumber / HVAC / roofer for further inspection" and if you read the fine print, they typically say that they are not responsible for any missed issues.  When we buy a property, we never use an inspector which we see as a generalist but rather contact our trades for a check of issues we are concerned about - roof, HVAC, electrical panel.  They know if we buy the property, they will get the work so they are typically able to give us a check and provide something in writing which carries more weight with the seller than a home inspection report does.

If you want to see the wording in a typical report, do a search for Home Inspection Software and look at a few of the sample reports they provide.

This is just one opinion based on past experience so I welcome hearing what others have found.

Looking at the Zillow listing and the estimated value, hopefully you are getting it for south of $50K. Are you using a GC for all of the work? It is under 1,000 ft2 which helps hold costs down but you are saying the ARV will be $150K when none of the properties around it are valued at that . . . don't want to be the most expensive house in the neighborhood. Looking at the ones that are above $125K, they are larger and have 2 baths . . . that makes a difference when selling. Even if you can carve out a half bath, it adds sellability (we have gone that route and saw the difference)

Some of your estimates are high and others low.  $4k for an A/C unit . . . what is there now?  A full system will be more or is it just the outside unit you are pricing?  Kitchen cabinets and counters for $500 . . . even a basic kitchen will be $4000+. Demo and dumpster seems high.  The interior looks a lot rougher than the ones on Zillow which are probably dated and there looks to be some hidden damage that can shock the budget.  If you have done flips, do you have a tradesman that can look at it and give you an estimate for his area of expertise and point out what you might be missing? 

Remember you make you money when you buy so if you want to go with this project, make sure you factor in worst case . . . reno takes longer than you expect and the sale will take longer than you expect so the holding costs can take a bite out of profits especially if you are using a HML.

I think I answered this question but definitely NOT the third option. Never take someone else's word for what the ARV and reno costs will be especially if they are trying to sell you the property... guaranteed you will be underwater by the end of the deal.

Pulling comps that you know are valid are essential. Either using online sources or have an agent that can pull them for you. This is one reason we buy locally as we know the area. In urban areas a few blocks can make a huge difference in ARV so remote buying tends to worry me. There are pay apps to get comps . . . you call on how much they are worth and how many projects you are doing to justify the cost.

I think we all have spreadsheets or tools that can help us determine if a deal is worth investigating. Once you have done some and have trades you know what they will charge, you can get a ball park number fairly quickly. One thing this also does for us is to vet wholesalers . . . if both the ARV and reno numbers are out of whack, I tend to discount deals that they send in the future and there are a lot of wholesalers that should never have gotten into doing it.

Hope this helps.