All Forum Posts by: John McDonald

The Florida market is in a downturn, especially Miami and it may be tough to turn a flip around until the market turns around. While we're seeing 193 home st > 40% discount, there's a lot of competition in that market. 

We love Michigan and Ohio though. Plenty of population growth and capital is moving into those markets and there's a huge inventory of homes the are in need to rehab. 

In Detroit proper alone, I'm seeing more than 250 deals at > 40% discount from comps. It's a fantastic market. 

In Cleveland, we're seeing 95 deals at > 40% discount off comps. 

Another strong market is St Louis, MO. Plenty of F&F inventory, good for starter investors and we're seeing about 226 deals at > 40% discount off comps in metro St Louis. 

Great question, here’s a quick breakdown of what we find when talking to folks.

Wholesaling:

Stressors:

- Constant hustle for leads, you’re always chasing the next deal.

- Heavy emphasis on marketing, cold calling, and negotiation.

- Tight timelines to find a buyer once you’ve got a property under contract.

- Reputation risk if deals fall apart before closing.

Why it might feel less stressful:

- No rehab or construction headaches.

- No need to manage contractors or permits.

- Faster cash, get in and out in a matter of weeks.

- Lower capital risk since you're not buying the property.

Flipping:

Stressors:

- Managing contractors, timelines, and budgets, and all the ways those can go sideways.

- Holding costs (interest, taxes, insurance, utilities).

- Market risk, if the market softens during your rehab, profits can shrink or disappear.

- Unexpected repairs or inspection issues that eat into margin.

Why it might feel more stressful:

- Bigger financial exposure, you’re buying and holding real estate.

- Delays can cost you real money.

- More moving parts, especially if you're flipping multiple properties at once.

Flipping is usually more stressful, but it can be more rewarding financially if everything goes according to plan. Wholesaling tends to have a grind-y stress, less risk, but more hustle and volume.

Feel free to reach out if you feel we can help in any way.

I'm located in Draper. Would love to attend a meeting in the area. 

When you're just starting out, it's helpful to work with someone who has experience in your local market. The can help guide you on the process and dramatically limit your risks. At this point, you don't know what you don't know. 

With that said, it doesn't sound like you have much experience in construction. While that's not a deal killer, it certainly helps. Take a look at comps for the property. If it's on market, you can use FlipSquad to see comps and comp analysis. That will give you a better idea of the top of market value for other, similar homes. Don't overspend on the rehab. You're better spending less(mostly cosmetic repairs) vs moving around walls or adding bathrooms. In many cases, that wont add enough value to justify the cost. 

Feel free to reach out if you have any questions. Good luck with your flip. 

@Sahil Tadwalkar
Great question — and you're absolutely right that profits are largely won or lost at purchase. Based on what we see in data from Flipsquad, and focusing purely on deal quality (excluding financing terms, local quirks, or lender overlays), here's a general breakdown of what successful flippers typically aim for in various market conditions:

Typical Purchase Price as % of ARV (All-In, Pre-Renovation)

For San Jose and the Bay Area, based on Flipsquad data:

• Flippers routinely stretch up to 80-85% ARV when:

  • Holding time is short (less than 3 months).

  • Rehab is light-to-medium ($40–$70/sf).

  • The end buyer pool is strong (desirable schools, walkability, etc.).

• Savvier investors still aim for 75% ARV or lower, but it's rare without off-market access or distressed conditions.

• At 85% ARV, you're likely in “retail-light flip” territory — minor improvements, high sell-through confidence, and fast turnarounds.

What to Watch:

• Rehab Budget Accuracy: In tight ARV margin deals, every $10K in under-forecasted rehab can wipe out profits.

• Comps Movement: In San Jose, small swings in comp prices can shift ARV ±5%, which is your entire profit in many deals.

• Speed > Margin: Many Bay Area flippers optimize for return on time, not maximum margin — flipping 3-4 properties at 80% ARV quickly might outperform 1 at 70%.
  
  

Good luck with your flips and feel free to reach out if I can be of any assistance. 

In my experience, cosmetic improvements are one the best ways to improve tenant retention,  increase cash flow and significantly increase the value of a property. This, of course, depends on the state of the property and many other variables but lets take this example.

$300K property purchased at 10% cap rate. Assume 10% of purchase price for cosmetic improvements($30k). Total investment is $330k. Once you've stabilized the tenants, you sell after one year(long term capital gains) with a newly increased rent and compressed cap rate of 7%; the new value of the property is $492,857, for a profit of $162,857. 

My colleague uses this formula to make $1.2M/year(net) on multi-family properties nationwide. It works. 

Hi Brian,

First, congratulations on your killer first deal! You've done a great job finding, fixing and flipping.

Although, it may not help you with this first deal, the more real estate you own, and hold, the more depreciation you get to write off which helps, dramatically, offset your capital gains on flips. Perhaps take a portion of the profits and roll them into a long term investment so that your tax burden on your following deals can be reduced. 

I dont suggest that live in the property for 2 years, as during that time you can quadruple your return on cash and that will far offset the savings from your capital gains. 

@Josh St Laurent also has solid advice here, BRRRR till the cows come home.

Cheers,

Hi @Seth McGathey

Given that this is a multi-family property, you'll be better off using cap rate as a determination of value rather than comps. Especially considering that you dont have many similar comps to choose from. Cap rate will give you a much more accurate value for a mulit-unit rental property, unless you decide to see each unit individually, then you're back to stand home comps. 

Let me know if you have any other questions. 

Hi @Mostafa Khalifa
According to Manta, a full gut renovation in Detroit typically ranges between $100 and $200 per square foot, encompassing new plumbing, appliances, structural improvements, a new roof, and HVAC systems. HomeGuide reports that a full gut renovation costs between $60 and $150+ per square foot, which includes demolition, structural changes, new electrical and plumbing systems, a new roof, HVAC, finishes, and appliances.

Given the varying estimates, your projected cost of $35 per square foot appears to be on the lower end. It's essential to consider that material costs, labor rates, and unforeseen structural issues can significantly impact the overall budget. Engaging with local contractors for detailed quotes and consulting with individuals who have recently undertaken similar projects in the Warrendale area can provide more accurate and current insights.

Good luck with your investments. 

There's a ton of options available but it often comes down to available resources and the goals of the investor.

1) A HELOC on your home or existing properties in your portfolio.
2) If you have a solid banking relationship, you could secure a line of credit.
3) If you have relationships with high net worth individuals, you could secure financing by setting up an investment vehicle that allows you to share profits while you scale.

It's important to secure a strong relationship with bankers. As you become more successful it becomes much easier to secure larger loans with better terms. 

Here's a quick break down of the various options available: 

Traditional Financing

• Similar to a regular home loan but with stricter requirements.

• Usually 20–25% down payment.

• Requires good credit (typically 680+).

• Lower interest rates, long-term (15–30 years).

• Offered by small/local banks.

• More flexible underwriting (good for investors with multiple properties).

• Often allow creative deal structures or slightly riskier properties.

Government-Backed Loans

• FHA Loans: Can be used if you plan to live in one unit of a multi-family (up to 4 units).

• VA Loans: For veterans; same as above, must live in one unit.

Private & Alternative Financing

• Short-term, asset-based loans from private lenders.

• Higher interest (8–15%), high fees, but fast and less credit-focused.

• Great for flips or short-term holds.

• For rental properties, approval based on rental income, not personal income.

• Lower down payments (~20–25%).

• Ideal for buy-and-hold investors scaling up.

• For 5+ unit properties.

• Based on property’s income and cap rate.

• Often balloon-style with 5–10 year terms and 20–25 year amortization.

Creative & Seller Financing

• Owner acts as the lender.

• Negotiable terms.

• Great if the seller owns the property free and clear.

• You take over the existing mortgage payments.

• Requires trust from the seller but low or no money down.

• Rent with the option to buy later, can be a good entry point.

Other Options

• Tap into equity from your primary residence to invest.

• HELOC is flexible; refinance gives a lump sum.

• Partner with someone who has money or credit.

• You bring the deal, they bring the funds.

Using Retirement Funds

• Can invest in real estate directly.

• Must follow strict IRS rules (no personal use, etc.).

I hope this is helpful. Good luck with your investing journey.