All Forum Posts by: David Lowe

Hi, @Katherine Earle,

Had to pass this along...

I'm on my weekly conference call and heard a definition of "HATERS":

Having

Anger

Toward

Everyone

Reaching

Success

David J Dachtera

"Success is not a destination. Failure is not an event. Success is a process, failure is a choice."
- DJ Benedict

@Aaron Norris, @David 

David

I know first hand the success of Aaron Norris and The Norris Group, his father showed me how to use this formula. By sticking to the "rule" you don't get in to trouble, you make money on each flip. Every market has its niches but it has always done me well to stick to my guns 70% of ARV minus fix up equals buy price.

Time is money, so if the project doesn't fit the "rule" why waste time pushing a 82% of ARV deal through your system. I don't need the practice, heart ache, or drama. Any of you that have fallen a little short on your expected cash on cash return consider this. 82% minus 70% equals 12% on $400,000 that's $48,000 on $300,000 its $36,000 and on $200,000 its $24,000 some of us would call that a lot short!

Most of the wholesaler types that come to me with deals have this 8 to 15 % component missing from their deal.  This 12% eliminates any errors and locks you in to being perfect.  All of you reading this should be laughing at "BEING PERFECT" on a flip.

Good luck

Jim

@David Loweundefined

 The 70% Rule only works in price range of $70K to $200K. Below $70K, you got to use more like 60%. Above $200K, use 75% or even 80%.

The 70% Rule is too aggressive in a down market and too conservative in a rising market. It's a rule regurgitated by one guru after another and being touted in seminars as THE RULE when buying. But, you got to use a spreadsheet like below: (instead of listening to the gurus)

It was a 4/2 and we added 200 sq ft then opened 2 walls and moved access to master bedroom and laundry around.  Our standard rehab is kitchen, bathroom,  heat and air, flooring, doors, wall texture, lighting, drywall grage and epoxy floor, landscape front and back, concrete driveway.

I'm proud of my guys start to finish 59 days.  I have a slick marketing website I will forward to you, the truth is we sold it before the site was up.  The market is white hot, just one more reason to spend your time looking for the right deal.

Jim

I love the term back to basics, this is a real basic.  A company can cut corners and kick and scratch for 5% Cash on cash BUT WHY!!  We do this for income not capital preservation.  Here is a deal we are doing right now.

We are closing a flipped property in Riverside, Ca,  The rehab took 59 days and 5 days to find a full price buyer.  This deal looks like this.

Purchase $176,000 48.8 % of ARV

Rehab. $ 43,000 12% of ARV

Commission, 2 side of closing, utilities, $ 28,575 7.9% of ARV

Finance. $ 14,876 4.4 % of ARV

totals. $ 262,441 72.9 % of ARV

Contract sale price $360,000

Take a look at 4105 Seymour st Riverside, Ca. 92505  If there is any interest I will post our marketing package.

I added all this to confirm that you should stick to your guns, stay with the basics, if you need "help" loosing money or like to bring drama and heart ache to your business and home buy flips in the 80% plus range you will most likely get more than you bargained for.

Good luck 

Jim keller

Its just starting point for most folks. Problem you are going to run into is California has a high entry point. Look up the Norris group they are in your market.

Alex

In our market we use 65%.  I would imagine 70% would be about right.  To answer your question if it is possible, the answer is 'Yes'.  There are more deals at those numbers and better than any one person could ever do in your market.  I don't even know your market, but I know it is true.  

@Jeff S. is spot on with his guidance here. We are a lender that lends in San Diego and throughout the rest of the western United States, Texas, GA and Florida as well. We also have a unique perspective as we share resources with Wedgewood, Inc. and HMC Assets, the former being one of the largest flipping companies on the West Coast and in operation for nearly 40 years, and the later a very profitable note buyer and seller. So in terms of numbers and valuations and asset analysis relative to ROIC (Return on Invested Capital) percentages, we're look at it form every conceivable metric you can think of because we're invested in this REI Industry in more than several different areas. The critical failure component I have seen over and over from investors is applying someone else's "rule of thumb" to transactions that don't have a "rule of thumb". The much better approach is to establish your own individual transaction fundamentals to the market areas you would like to be in. If you can't find a transaction that meets those fundamentals, then you keep looking or change your area of focus. @Jeff S.

@Manolo D.

I would have to disagree with your comment. I just flipped 2 properties in San Diego and used the 70% rule there just like I do here in Las Vegas. But as always in real estate it's still about location. When you are talking California properties, the closer to the water the better the price. But the rule doesn't change much. Just have to know your areas in my opinion. BTW Cali is HOT RIGHT NOW!!!!

Thanks