All Forum Posts by: Andy Sabisch

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.

We have shifted from flip to hold due to the market interest rates which tend to result in longer holding times and carrying costs.  Buyers are less likely to get into budding wars in many areas and putting together a solid rental which cash flows from day one at at least 10% has been our approach for the last few years.  We are working numbers to see if flips are where we need to refocus.

Good approach....knowledge is power and taking the time to gain that is commendable.  A lot of people watch the TV shows and think it is easy money ... most of us learned the hard and expensive way.

Good luck in your journey ... wish you were closer to help!

Hard Money loans have been the downfall of many new investors.  The fees and overall costs of these loans needs to be a key factor including what if the project goes over time . . . . you can be underwater in no time.

Underestimating repair costs and overestimating ARVs based on Zestimates are the next stumbling block.

There's money to be made but make sure numbers all work WITH contingencies defined and overages expected . . . remember, a project will always cost more and take longer than initially thought!

The problem with metrics is that there is no one metric that fits all investors and situations.

Looking at some of the enervation shows on TV, the price they pay and what they put into the property would never work in the markets we have experience in.  A 3/2 in CA is a bargain for $300K while in our markets, $300K would get you a move in ready 4/2 on the water.  So for us to use a metric that looks at having to make $100K on a deal to make it worthwhile is a non-starter.  The seller would have to be paying us to take the property if we wanted to make that amount.

We make use of the tools here on BP to help frame out a deal as well as using our knowledge of the local market to gauge what a property will be worth renovated.  We know what the cost is to pay for some work and determine if we do some ourselves, is the time vs money a route to go.  We also look at how fast we can complete the project.  If we can get in and out in 30-45 days on a cosmetic flip, we will take less profit than a 6 month or longer rehab.  Having professionals we can call to see how backed up they might be factors in as well - if we can't get a roof done ASAP, that holds everything else up if we have a leak so again, more time, more holding costs, lower ROI.

Unfortunately I do not think there is a magic metric that can tell you if the deal is a winner or not.  It comes down to factors like your area, your market, your experience, the team you can draw from and how mush you need to make to support the investment of time and capital.  If you are pulling a HML, you need to fully understand the cost of money which can break a deal with one thing going wrong in the process.

Hope this helps and I am happy to discuss this further if you want to PM me.

Permitting can become a bottomless pit your funds go in never to be seen again.  We are selling one property in a location that has permits and other restrictions it would take Sherlock Holmes to find and when you inadvertently hit one there are fines plus the permits and delays.  If you are having other investors to steer clear that might explain why the property is still on the market.  Remember if a deal sounds too good it probably is.

Eddy

Texas has a number of groups to investigate and Austin has a large one with a workshop coming up on the 21st.  Check out their website at https://austinrenc.com/

We used the REIGs in our areas when we got started and they were exceptional resources and places to make contacts.

Good luck!

Good summary of what your market is looking for but as we all know, each market tends to have its "wish / want" items which differ from market to market.

Flow is definitely a selling point but make adjustments come with a cost.  Some markets can support that expense and others can't.  I know that anything in California price-wise is far above many parts of the country.  For example, here in NE PA, you can buy a 4/2 on a lake for under $500K while in CA, $500K will get you a starter home in most cases.  We try to find properties that either be modified while keeping the sales price in mind or have a flow that works just needing updating.

The open concept is another point that works for some but not the way it was pre-pandemic in many areas.  The pandemic forced people to work from home and having spaces that worked as offices became important.  We still find buyers (and renters) that like open to a degree but want / need the office space for remote or hybrid work arrangements.

When dealing with a market that does not have huge spreads on properties, one needs to define what is really important versus what is nice to have and see if the math works.  In the markets we deal in, numbers can kill deals that would be home runs elsewhere but a 2x4 costs about the same in both (just the sales price does not support a rehab that would be middle of the road in a place like CA.

Having before & after pictures is a string tool when dealing with HMLs and real estate agents to gain business.  We have seen that having a professional marketing piece builds credibility which is invaluable in this business.  It even helps with finding contractors as you can show them what quality you expect and they in turn can show you what they can do.

Will it help you sell more or get more money?  No sure about that as buyers want to see the finished product and showing them before pictures will often not be well received.