@David Biederbeck
Hi David. I'm in the same spot as you. I've been spending the last couple months looking at every last wholesale deal I could get my hands on and analyzing them all. I've also been going to some REI meet ups and doing everything I can to learn from those who do.
Here's what I THINK I've learned:
-Spreads are really thin. Very established high volume flippers are willing to take on work at very thin margins and this is who you're competing with to aquire properties. These are guys who learned the ropes in 2010 when flipping was printing money. Now they have huge infrastucture, in-house project managers and contractors. The run 50+ flips a year and need to source properties to keep churning.
-A lot of the deals youre seeing from wholesellers are probably yielding something like 10k per flip. This is ok if you have multiple teams to do the flips and you run 20 flips at any time, spending about half of that 10k on paying your team. It's very hard to find flips that make sense from an annualized return perspective when purchasing with 100% cash instead of leveraging.
-Higher end flips can yield more but the risk is way higher. A small % change in ARV is a big change in absolute dollars so your knowledge of the market better be spot on. Also, some of these require building an addition to force a value increase. More risk and more holding time. More ways to mess up if you don't know what you're doing.
-Yes, you need to be willing to buy within hours when you do find that one very good wholesale deal. Your competition surely will pull the trigger that fast.
-So far, it looks like wholesale is still the best way to aquire for guys like you and me because the price is the price. No bidding up.
-I've bid on dozens of auction properties, both courthouse steps and online like hubzu. Others are willing to pay too much and it's a huge time sink for analysis only to lose in the end. I would not recommend.
-It looks like sourcing your own deals is hugely important to profit in the current market. It seems like wholesalers make as much on a house as the flippers do for small and medium size deals. This means either direct mail or getting a real estate license so you can start putting cash offers on a bunch of houses to see if something sticks.
-If you can get a realtor to work with you, you might source better deals from the MLS or a short sale. Not many are willing to put in 10+ offers for 1 sale. This could easily double your profit margins.
My current plan is to do a couple small flips in high demand areas with thin margins. I chose deals where I won't make a lot, but I also have very low risk to lose much while I'm learning the ropes. I'm considering this to be a warm up / training. In parallel, I'm getting my license so hopefully I can source my own deals and perhaps grab a couple % commission on the buy side.
I'd love to keep in touch with you to see how things are going and how they work out for you.
Take all this with a grain of salt, I might not know what I'm talking about!
Good luck
Jake
