All Forum Posts by: Pat Arneson

What are some reasons wholesalers either hold and flip vs. assigning out? I have a few wholesalers in my area who flip a ton of houses but also list some that they are willing to assign. My assumption is they avoid the headaches or have too many in their flip queue and would rather assign. Just seems odd why they wouldn't flip them all...

Quote from @Nicholas L.:

@Pat Arneson

just curious - are you able to share what experience you have, what types of deals you're looking at, and what price point you're looking at?  i always get nervous when new investors state that they're 'anxious' or impatient to get a deal.  that can be a recipe for trouble.

not trying to be discouraging, just trying to look out for you.  no one - not an agent, a wholesaler, a contractor, an appraiser - is going to take any responsibility whatsoever for anything.  the success or failure of every single step of every single project is on you.

I've mainly been targeting off market properties through wholesalers. In addition, on market and off market REO's. Foreclosure auctions are on the table, although least preferred due to the lack of interior access (maybe with more experience). I have seen some on market properties that would work as well, but your numbers need to be solid since you'll need to submit highest and best quickly as they move so fast.

Buy box is $300k-$600k, SFR/Condo/Townhouse.

Quote from @Matthew Paul:

@Pat Arneson Before you buy anything , you better find a contractor you can trust .  The majority of the contractors out there dont want to work for flippers . If you dont have a contractor lined up before you buy anything , you will be waiting months before you can start work just looking for a contractor . 

As far as estimating costs , every house is different . There is no hard and fast method , besides experience . 

Hey Matthew, thanks for your reply! Why are contractors hesitant with working with flippers? Is it solely related to flippers wanting to keep costs low?

Quote from @Tim Delaney:

There is some great advice here already. My approach was to partner with a GC, so he handles the rehab estimates with his years of experience.

Another option is to read J Scott’s book on estimating rehab costs.

I've heard a lot about this book. Is it still relevant? A lot has changed since 2019. If it is, I will certainly pick it up and give it a read.

Quote from @Ryan Irwin:

Quote from @Pat Arneson:

Another strategy would be to reach out to your local network of fellow investors/flippers.  Ask them what they are paying for their rehabs and you can use that as a baseline for estimating your costs, based on square footage, etc.  

While a lot of flippers won't give out their contractor info, they should be willing (or even proud) to tell you how much they are paying for rehab costs.  These conversations can help with sharing stories, etc.  

Hopefully you know some local fellow investors, but if not, certainly developing this local network is important and would put an emphasis on that as well.  

This is a great idea. I know a few investors around the area, but will look to connect with more. An interesting fact about flipping in CA -- effective July of this year, investors are required to disclose their contractor name and contact information.

Quote from @Wilson Lau:

Quote from @Pat Arneson:

I’m looking for someone to help ease my thoughts… California Bay Area

I have everything ready to go for my first flip… financing, financial spreadsheets, acquisition and disposition playbook, design criteria, etc. I have title and appraisal experience, so comps, etc don’t worry me  

The one thing that is giving me heartburn is estimating rehab costs… good deals move quickly. I have no time to schedule a contractor to walk through and provide a comprehensive bid. I see investors selling for $100k-$125k above purchase with full kitchen, baths, flooring, paint, etc rehabs. I’m presuming profiting as well. I don’t see how those numbers make sense…

I’m considering paying some contractors to walk an on market house with me (that I don’t intend on buying as the numbers would never work) just to get an idea of their costs. I can then take those figures and estimate for future deals based on size, room and bathroom count, etc. 

Is this the best play here? I’m anxious to jump in and start making deals, but these rehab costs can make or break a deal. I’m fully prepared that there may be unforeseen costs, but I can’t even estimate properly for your standard cosmetic rehab… 

Hey Pat. From my observations, on market deals almost never make sense for flippers. Even if the numbers look good, you will get tons of competition that eventually will drive the price off your excel sheets.

Where are you planning on doing your flips?

Hey Wilson,

I don’t intend on purchasing an on market property for fix and flip although I have seen a few that make sense. The walk through with a contractor for an on market property is simply to get a sense of their costs without any urgency. 

I’m looking for someone to help ease my thoughts… California Bay Area

I have everything ready to go for my first flip… financing, financial spreadsheets, acquisition and disposition playbook, design criteria, etc. I have title and appraisal experience, so comps, etc don’t worry me  

The one thing that is giving me heartburn is estimating rehab costs… good deals move quickly. I have no time to schedule a contractor to walk through and provide a comprehensive bid. I see investors selling for $100k-$125k above purchase with full kitchen, baths, flooring, paint, etc rehabs. I’m presuming profiting as well. I don’t see how those numbers make sense…

I’m considering paying some contractors to walk an on market house with me (that I don’t intend on buying as the numbers would never work) just to get an idea of their costs. I can then take those figures and estimate for future deals based on size, room and bathroom count, etc. 

Is this the best play here? I’m anxious to jump in and start making deals, but these rehab costs can make or break a deal. I’m fully prepared that there may be unforeseen costs, but I can’t even estimate properly for your standard cosmetic rehab… 

Quote from @Peter Mckernan:

Usually, the city website has all the utility companies for the city that you should be contacting. If you went directly to the agent listing the property then ask them, and if not then ask the agent that represented you for the sale to get you the contacts for it. 

I’m not so concerned with how to turn them on, it’s more what immediate issues may I encounter when doing so and how can I mitigate them. My straight forward thinking is, when water is turned on (slowly) I’ll pressurize all plumbing then open and clear out faucets, etc. Once everything is on then off, I’ll make sure the water meter isn’t running. For gas, obviously smell for it. Electric, I have no idea…

I don’t want to turn on the utilities, leave for the night and the place is either burned to the ground or flood. I’m just trying to play it as safe as possible considering it’s been vacant for so long and I have no idea the condition in which the previous owner left things. 

Are there any tips, tricks, or guides for turning on utilities after close of escrow and possession? This particular property (townhouse) has been bank-owned and vacant for the last 14 months. I am assuming all utilities were turned off. For water, is it best to hire a plumber to come out, turn on, and assess? I've read a few guides about turning the main on gradually, going fixture to fixture one at a time, etc. Once everything is pressurized, check the meter to see if it's running. I'm unsure how to handle the water heater. Commonly it's gas.

What about electric and gas? The utility will turn on both. I'm assuming they would sniff for gas leaks once turning that meter on?

I'd prefer to play it as safe as possible. Do folks here just let their contractor handle it?

Thanks!

Quote from @Mitch Messer:

Quote from @Pat Arneson:

Quote from @Mitch Messer:

Quote from @Pat Arneson:

I've read a few old posts regarding this topic and have those documents in order, but I still have the following questions regarding a private loan (from family) --

Loan Documents for Purchase -

1. We have the promissory note, personal guaranty, and deed of trust(title/escrow to handle) ready to go. Does the promissory note and personal guaranty go to title or should I execute these outside of escrow?

2. Does my lender need to provide escrow instructions or anything along those lines? Can he just wire the funds to escrow, I sign the deed of trust, and that's that? Or, do he need to send some type of escrow instructions that outline 1st position, will fund after all docs signed, etc?

Loan Documents for Selling

1. What will this same lender need to provide title and escrow when I sell the property? Is it just a payoff demand and wiring instructions?

Thanks! This forum has been extremely helpful.

Hey Pat, regarding your docs for buying:

1. The promissory note and personal guaranty are private documents that don't get recorded. That said, I would still recommend you have them executed at closing by your closing agent, along with the other docs. I also recommend you provide two sets for signature, so that both borrower and lender get signed originals.

2. Your lender just needs to wire adequate funds to close. If there are other liens to be recorded, you should have already agreed as to the lien position this lender will be in, and the closing agent should know it.

3. Also at closing: You should provide your lender with a lender's title insurance policy, separate from your owner's title insurance policy. I recommend you as the borrower pay for this.

4. Also at closing: You should provide proof that the lender is named as such on a valid hazard insurance policy effective at least on the day of closing.

Regarding the closing to sell or refi, yes, your lender will just need to provide a payoff letter with wiring instructions to the closing agent. Post closing, they'll need to sign a cancellation of mortgage document or equivalent.

Thanks Mitch, this is great information! 

RE: Post Closing. How will the deed of reconveyance/cancellation of mortgage work? I figured that would need to be a part of the closing to remove that deed of trust prior to new ownership. Thanks again!

Technically, it's the responsibility of the lender to cancel the mortgage.

However, as private lenders we typically request that the closing agent draft the cancellation document and send it after the closing is completed.

The lender can then execute (sign, notarize & have witnessed) the cancellation doc and then return the original to the closing agent for recordation.

Thanks Mitch! I pulled some past deeds and it looks like a substitution of trustee and full reconveyance can be drafted by title. Appreciate the help!