All Forum Posts by: CK Hwang

Hey everyone, I'm currently looking at a house off the MLS. It needs a ton of work, but this is not the ugly I'm talking about. Instead, this house is ugly in the sense that the architecture is from the 1970's, square and boxy with roof tiles that run halfway down the exterior. It doesn't have terrific curb appeal...it's just ugly to look at.

Was wondering if anyone has ever taken on a house like this, where it has little curb appeal. Is so, how did you calculate ARV? I assume it would have to sell lower than comps since it's not pretty to look at?

Also, what was your rehab strategy? put money into getting an architect and tearing off the facade and building a nice facade with better curb appeal? Or just do bare minimum to sell below comps so buyers would look past the ugly facade?

Would love any advice you guys might have. Thanks.

Hi Aaron, thanks for the advice. The permit itself is not terribly expensive, it's really the cost of digging out the wiring, plumbing etc I guess. Do you have any thoughts of just leaving the jacuzzi there but remove all the pumps and filters etc and sell the house with the jacuzzi as is? Do you think that would be a deal killer?

Hi everyone, I'm currently working on a flip project. It is a 5 bedroom SFR in Orange County. The house came with an in ground jacuzzi, which is a first for me. Unfortunately the equipment such as the pumps, heater and filter are pretty old and need to be replaced and now I am faced with 3 options

1. Replace all the equipment and try and sell the house above the comps to cover the cost of equipment. Unfortunately equipment cannot be repaired.

2. remove the equipment but leave the connectors and sell the house without the pumps, filters etc at the original intended sales price within comps.

3. Remove the equipment and fill the jacuzzi in with concrete and sell the house at the original intended sales price within comps.

The comps my realtor used had an even spread of houses with and without pools/jacuzzis and it seems like having it neither helped to raise nor lower the price. Any advice on the best option to take? and why? Thanks so much in advance.

@Amy yes, that's the method I use too, where i tend to spend more on inspections initially to minimize the surprises later on, because I've found it hard to be competitive with my bids if I have to pad for any rehab surprises.

Will Barnard thanks for your input, it's valuable for me because it's good to know that there are variations in the market, as I was finding the 70% rule worked in some markets but not others and I thought I might be factoring something wrongly.

Thanks for the input everyone. Just out of interest, with the 70% rule of thumb, is this based on a 15% nett profit?

Josh, the formula you gave (MPP=ARV-rehab costs-money/holding costs-desired min. profit) is the one that I am using instead of the 70% rule of thumb, and that's why i raised this question because based on that formula my offer price is above the 70% mark.

One of the questions I am wondering though, is if the percentage value holds the same for all properties no matter the price range? The reason I ask is because I recently came across this situation where I found a person with a home they wanted to short sell. The loan on the house was $700K, and the ARV value of the house was approximately $690K. We wanted to negotiate a short sale with the bank for $500K, which the bank flat out refused. As an aside, my banker friend told me that 200K loss on a house was a lot and unlikely to be approved by the bank since they could sell it for more on the open market given the current demand. If I used the 70% rule less repairs, that would be even lower, with an offer of $433K. However, if it was a $300K house, the absolute figure would be less and could possibly be pushed through. Are people getting different percentage values in different price ranges?

Hi everyone, I was just reading through this article today,

http://www.biggerpockets.com/renewsblog/2013/01/16/how-to-lose-money-flip/?utm_source=BiggerPockets+Newsletter&utm_campaign=65d81ad5e0-January_17_2013_Newsletter&utm_medium=email

when I came across this paragraph

So based on the typical house flip formula of 70% of after-repaired-value, minus repairs, he should not pay more than $65,000 ($100,000 * .7 – $5,000 = $65,000).

And I was just wondering if anyone is really sticking to the 70% rule in this competitive buying market? The reason why I'm asking is because i'm currently working on a flip in Orange County, CA, which I believe I should be able to make a profit on, but my buying was way off the 70% of ARV mark.More like 80% of ARV.

But if I was to offer 70% of ARV value less repairs, I am pretty much 100% sure there is no way I would have a shot at purchasing the property or any property I have been making offers on, because even in REOs and short sales, the banks will give a discount, but not even that much of a discount based on my experience of past offers.

So was wondering if anyone was actually sticking to the 70% rule and actually managing to buy inventory? Also does the rule of thumb, 70%, vary depending on states or cities? ie, 70% works well in AZ but perhaps 75% in Coastal CA would be more accurate?

Thanks in advance.