All Forum Posts by: Jamie Parker

Quote from @Luka Milicevic:

Quote from @Jamie Parker:

Hello Everyone,

I hope that everyone is off to the races to start in off the year. I have come to the realization that my calculations are not as solid at I once thought. Since 2021-2022 and the surge in prices in basically all markets across the country, how are fix and flippers evaluating properties. Particularly Nashville. The properties I am targeting are thought of for infill development first, but when those numbers don't work rehab second. I am finding that my offers are not in the ballpark of what sellers are expecting. Being on the nose is an anomaly, but it seems that my estimations are really far off.

What I was using was 70% ARV - repairs with a repair estimate . Wholesaled a deal in September that didn't hit that number. I understand that the price is what someone is willing to pay. 8 Years ago these numbers worked, but today, I have reason to believe these numbers do not work anymore.

Links to 2 properties in Nashville and 1 in Memphis using the same approximations. Was told that the offer wasn't close, or we were not in the same stadium. If what I am facing is Seller's expectation of market condition, i understand. IF my numbers are truely "too low" I just looking gain confidence in how I am analyzing properties and estimating repairs.  

1710 10TH AVE N, 37208: https://docs.google.com/spreadsheets/d/1B0CoSbGxQFbRBVzXBERw...

6121 Southampton Dr 38119: https://docs.google.com/spreadsheets/d/1a3WBEcgv2SMggu5P2HrK...

2014 Salem Mason Dr, 27208: https://docs.google.com/spreadsheets/d/1Jzr5TN9PYhuiFuD2THLb...

Spoke with a seller yesterday, before I go with these numbers I thought it best to ask for some guidance. 

Any advice will be greatly appreciated. 

Nashville is a ridiculously competitive market. I have never found a true 70% deal. I just bought a flip now for 70% ARV NOT minus repairs. As in it's like 85% - repairs. 
The deal still works. 

My best flip I've ever done was 73%-repairs. 

I'm sure they are out there but this is just a rule of thumb and I would rather use J Scott's approach when he analyses deals outlined in his book.

You factor in your desired profit as a cost and you work backwards. The deal can make sense even if it doesn't meet some arbitrary "rule"

 Thanks for the insight, everything you guys are saying has been extremely helpful. I will check out J Scotts book. Working it backwards, I will need to talk with someone about an offer Im looking to make. Since i havent done any rehabs, its easily to get the estimations wrong.  

Quote from @Bryan Hartlen:

@Jamie Parker are you having trouble getting properties under contract OR assigning the contracts to flippers?  

We don't use the 70% rule for anything except to decide if we're going to look at the deal… and even then we just want to see if it's close before we spend time running numbers. Our analysis is ARV - Rehab estimate - Finance Costs - Holding Costs = Profit. That Profit number needs to be above our minimum threshold (which is large enough to handle any rehab oh $hits).

I live in Phoenix but invest out of state. We haven’t bought a property from a flipper here for years. The margins are too tight and most deals are being offered at 80 - 85% of ARV. That said, I’m assuming that someone must be buying these wholesale properties.  The Nashville market may be similar.  You may need to offer more to sellers and sell to a smaller group of investors (who may buy with cash and/or are willing to work on tighter margins).

To help understand your market better, put your name on your competitor wholesalers’ lists and see what they are “offering” and compare those to what you would expect using your current model.

At this point I am having trouble getting the property contracted. As mention about the 70% rule, doesn't seem to be working. 30-50k in an offer can can lead to being laughed off the porch. Which is somewhat frustrating if a flipper would pay 5-10k for it at that price. Ive been told to build a huge buyers list to just get it under contract and market it. However in these times, I would rather know what the numbers are, or understand how to get to a "strike price" from a rehabber perspective. 
I think understanding that will get me more accepted offers. 

I am on a couple wholesale list in Memphis. The list in nashville have all dried up or I am just out of the loop. For the nashville market my first thought is building, then rehabbing. I understand the building number somewhat better but that market is saturated and I have all these leads that could move if looked at as a rehab. In memphis rehabs and rentals are definitely a thing. 

I agree with the small group of investors. Getting something under contract is as easy as give the seller all the money. But sometimes that just work on the other side, so I work hard to stick to a strict analysis even if that means deals by volume. But 70% isn't working nearly at all. 

Thanks for the insight'

Quote from @Evan Polaski:

@Jamie Parker, for what it is worth, I tend to agree that you can't take the 70% rule for much of anything.  

To me the only thing that is working now is partnering with people who have their own salaried teams.  My current flip was bought from a wholesaler in a partnership with a builder friend of ours who has his own salaried framers, roofers, plumbers and electricians.  He will do work at cost, I am paying for everything, and we split the profits.  

Granted, I am a part-time flipper, but most houses I see the pricing does not make sense for what I have to pay for labor.  The house I currently own, I am saving over $100k (estimated) on the rehab cost by partnering with this builder (and it takes me out simply finance the deal and, hopefully, make a very good profit).

But to your point, flipping is not what it used to be.  There are far more people trying to buy all houses.  More demand means prices go up.  And, at least for me, there always seems to be either someone that is willing to make pennies on a flip or someone like my builder partner, who can always do the work for so much less than I could, that he can pay more for a property and still turn a healthy profit.

Thank you the insight.  I need to find a rehabber or contractor to work with on these leads. Partner with them, maybe dont take a wholesale fee to partner with the deal? If the rehabber/contractor wants to pay me out, let them give me a price to walk away vs "demanding a fee" for lack of better terminology at the moment?

I purchased a list for Memphis, 2000 addresses. Not as much new construction as infill development, so rehabs and rentals will be the turn primarily. I spoke with a large home buyer in the area and the way they put the numbers together makes sense. Its definitely not the 70% rule. I agree with you and @Doug Smith because I been laughed away enough to realize that aint the game anymore. 

Quote from @Doug Smith:

Yes, I'm a lender, but we have an arm that's been investing for close to 20 years now. We've never used percentage-based criteria, like the 70% Rule, for purchases. Simply put, we start off with the As Repaired/Completed Value (ARV), then subtract from that number a reasonable profit, the rehab cost (scope of work), which we've gotten good at, a contingency reserve for any "unexpecteds", our cost of capital/carrying costs (interest and costs of the leverage used), and our costs/fees on the buy and sell sides of a flip. That gives us our "strike price", which is the highest amount we're willing to go to purchase a property. I've found that those percentage-based rules have mathematical flaws in them. MInd you, we've gotten really good at our scopes of work and we have one of our GCs go through the property with us to give us our scopes of work. We've also advised this method to our investor clients that borrow from us. I will die on the hill that the 70% Rule is flawed. We avoid lending to folks that don't really have their math/numbers together. I hope that helps you.

On another note, just because your offer isn't close, as you said in your narrative, doesn't mean you're wrong with your offer price. There are a lot of idiots out there overpaying for deals right now...well...that always seems to be the case. If you get your system and modeling down and follow what I mentioned above with respect to coming up with your strike price/offer price, you shouldn't look back if someone overpays for the property. It's just a math problem and if you've done the work up front you shouldn't second-guess yourself. There are many, many investors that don't do their math up front. 

ARV - Profit - Repair Cost -Reserve Cost- Cost of Debt- Fees = "Strike Price"

Thank you for the insight. 

Repair cost estimates I have used recently come from my mom rehabbing a rental she owns in fall 2024. New Roof, New Windows, Paint interior/Exterior, New Appliances, New Garage Door, New Fascia, New Fixtures (Bathroom and Ceiling fans), Electric Service Upgrade, 1204 Sqft, built 1960. Total cost/sqft landed me around 30$/sqft or $36,120.

How would should I factor Reserves?

I will take it. As a wholesaler, I understand there are guys just throwing out numbers and trying to close it. They may do tons of deals. I have always worked from a reputation first approach. Because one day I want to buy these deals myself one day. So its like im enforcing it as a practice.

The 70% rule, from my understanding, comes from the lenders underwriting requirement. A hard money or institutional lender my be anywhere from 65%-100% LTV. Since I cant account for what their money cost,I have found that is the biggest flaw. I have used it as simply an arbitrary number.

4033 LEWEIR ST, 38127 : https://docs.google.com/spreadsheets/d/1BCW5cMoX7TrWKk3BwJRQ...

Offer Analysis I my initial offer was around 20-25k. That felt too low. Then I settled in at a "Strike Price" around 50k. That felt better. Something else that I have been seeing, Sellers dont want anyone to view the property unless they accepted an offer. The property could be boarded up with no pictures.

Debt analysis, the profit grossly changed from $21,836 to -$3,559 depending on the cost of Debt and the length of time to exit. Without getting in to Cash On Cash, This deal looked good at 50k then I realized unless I could get it around 35-40, there could be a hold up at river if the property didn't sell with 6-9 months of purchase.

Hello Everyone,

I hope that everyone is off to the races to start in off the year. I have come to the realization that my calculations are not as solid at I once thought. Since 2021-2022 and the surge in prices in basically all markets across the country, how are fix and flippers evaluating properties. Particularly Nashville. The properties I am targeting are thought of for infill development first, but when those numbers don't work rehab second. I am finding that my offers are not in the ballpark of what sellers are expecting. Being on the nose is an anomaly, but it seems that my estimations are really far off.

What I was using was 70% ARV - repairs with a repair estimate . Wholesaled a deal in September that didn't hit that number. I understand that the price is what someone is willing to pay. 8 Years ago these numbers worked, but today, I have reason to believe these numbers do not work anymore.

Links to 2 properties in Nashville and 1 in Memphis using the same approximations. Was told that the offer wasn't close, or we were not in the same stadium. If what I am facing is Seller's expectation of market condition, i understand. IF my numbers are truely "too low" I just looking gain confidence in how I am analyzing properties and estimating repairs.  

1710 10TH AVE N, 37208: https://docs.google.com/spreadsheets/d/1B0CoSbGxQFbRBVzXBERw...

6121 Southampton Dr 38119: https://docs.google.com/spreadsheets/d/1a3WBEcgv2SMggu5P2HrK...

2014 Salem Mason Dr, 27208: https://docs.google.com/spreadsheets/d/1Jzr5TN9PYhuiFuD2THLb...

Spoke with a seller yesterday, before I go with these numbers I thought it best to ask for some guidance. 

Any advice will be greatly appreciated. 

Quote from @Michael Dumler:

@Carsyn Childress, I can't speak on behalf of your market, but whenever I attend an REI meet-up in my respective market, I always connect with at least one or two wholesalers. If you're still not having luck sourcing a wholesaler, your next best bet is to network and connect with an investor-focused real estate agent. I'm almost positive I've seen Memphis real estate agents post on the forums. Hopefully, one of them can reach out to provide further assistance and insight into what you're trying to accomplish in real estate.

@Jamie Parker, what is Introductory Calls? VA company? I've been toying with the idea of adding an ISA to my sales business. Please shoot me a message. I'd be interested in learning more. Thank you!

 Introductory calls are "networking by phone" I have a 3 year old daughter with sole custody. There was a time when I networked at Meet-ups and other real estate related gatherings but i am not afford the flexibility to do so in volume. 

Social media is a good place to meet people, but do you really understand what they do? I call it introductory call. Hey this is what I am doing? what are you doing? How can we help each other? So adding this to my prospecting plan may provide reach to do deals that I may not have had before simply circling the usual watering holes. Not discounting face to face meetings, but at this time I am just not able to be consistent. So if im cold calling already, why not make appointments to speak with other investors in my market and abroad. A deal is a deal, but it helps if you have someone in mind when you contract it. 

Quote from @Carsyn Childress:

I have searched Facebook groups, Craigslist, and meet-ups with little to no luck with consistent volume. Is BP a hot spot for high volume wholesalers? I'm hungry for solid relationships, but the inconsistency is frustrating. 

I am a wholesaler, I live in Memphis but do most of my work in Nashville as a primary market and Texas, Oklahoma, Kansas, Arizona and anywhere else I can find a deal from networking for multifamily and land. I come across SFR in other states from time to time direct to seller.

I make around 500 calls per week. Since July Ive made nearly 13000, cold calls. Cold calling is something that has become something I enjoy. Since January I have added Introductory Calls as a means of growing my network. If you would like to hop on a call I would be glad to connect and see if I can add value to you and your organization. 
 

Quote from @Arron Paulino:

I had to remove four of my out-of-state properties in order to refresh the listings and start anew. I will be lowering the asking price and seeing if that will help in the sale of these properties. Looking to either sell individually or as a package to an investor. These are 2-bedroom, 1-bathroom properties that I had originally planned to keep in my rental portfolio, but my plans changed. My current agent suggested if it made sense financially, to do some rehab work to get the properties rent-ready, but I do not have the liquid funds to do so and sell these as-is. I do have monthly mortgages to be paid and not having rental income to offset my negative cash flow has been a learning experience and really trying to think of what options I have to have better success at this. Some interested buyers did go under contract but things fell through in the deals. We've noticed 3/1's have had more success as that is what investors are looking for and hindering my chances at a sale. Really looking for tips on what to do from investors who have been in this type of situation. Currently just waiting it out and hoping for the best to start the year so I can move on and dive into better opportunities.

 I am in Memphis, I would be curious to know more about the properties. I will say I am a wholesaler however I work remotely in the nashville market. I own a couple vacant lots and looking to purchase more in a small area. 2/1s in Memphis, as far as I know, are as desirable as in a bigger market. While 2/2s are better 3/1 are more desirable because of the heavy section market in the city. Sounds like you are in a tight spot. If there is anything I could do (drive by, analysis/insight on the area) I would be glad to help.

Quote from @Darnell Holland:

Hello, I am looking to do my first tear-down and rebuild development deal in Nashville.  Experienced developers, could you tell me how the process/financing works? How do you finance the tear down do you add it to construction? What would standard down the payment be? Please see the rough numbers below :

Tear down house price 350k,

Construction cost 165 sqft * 2 build=627k

Darnell I would be interested in what you came up with. I wholesale in nashville. The numbers that have worked so far are 150/sqft However that is in the 550-650k exit range. If you building 2 , again depending on your lot size and projected finishes. Loan to Cost is the calculation you are looking for. Not sure how long you held the land, but there are some instances that the land can be used as a down payment. 

Quote from @Leslie L Meneus:

@Jamie Parker sounds awesome

 Thank you.