All Forum Posts by: Kevin G.

Hello everyone,

I am new to the house flipping business and have just started one with my partner from work in the Bay Area, CA. We are struggling to get offers accepted on homes and find properties that need a new roof or have mold/pest issues. We have walked away from several homes that needed a new roof, but I am starting to think that may have been a bad idea.

To experienced flippers: would you typically flip a home that needs a new roof? Do you calculate the cost of the roof repair and lower your offer based on that?

The homes in this market that just need cosmetic repairs are going way over asking, and we are getting beaten out easily.

Thank you for any help!

Getting into the real estate game in California has been tough for me. I recently started a house flipping business in the Bay Area, which is going okay so far, but the market is super competitive. However, I am now looking at more long-term holds and exploring my options in this intense market.

One option I am considering is buying a decent amount of land (around 200 acres) and leasing it out for farming. As a newcomer to land leasing, I am not aware of the hurdles I may face.

I am contemplating leasing part of the land to farmers, solar companies, and other entities to generate some cash flow. I know that leasing land for solar purposes is significantly harder, as you need to be located near a power grid, and the building time can take a very long time. Furthermore, solar companies can back out of the deal if your land ends up not working out for them.

I have researched the average rental price per acre for farmland in California, which is around $430/acre, indicating that it can be pretty lucrative depending on the deal.

Has anyone tried land leasing in California? It almost seems too good to be true, and I don't understand why more people wouldn't do this.

Hello everyone,

I am new to house flipping and have recently gotten into the game. I came across a home in the Bay Area that requires extensive work and essentially needs a full rehab. The home is essentially bare bones, with the wood being in good shape but requiring new drywall, flooring, a full kitchen rehab, a full bathroom rehabs, electric work, and repair of the septic system outside.

The total rehab cost is estimated to be around $150k-$200k, and I'm wondering if hard money lenders typically finance a deal that requires this much remodeling costs and still fund 100% of the rehab. The current purchase price is $185,000, but I would likely go over asking since this is what we are seeing in the Bay Area market, even for flips.

The ARV for the property is $770k, and currently it sits at 60% of ARV if funding the full rehab. Therefore, I believe this deal should pass a hard money lender's criteria.

Alternatively, would a construction loan be a better option, given that this project requires a lot of work?

Quote from @John Clark:

Quote from @Kevin G.:

New to flipping. Do I really need a General Contractor?

Yes, unless you are a complete idiot. Get several flips under your belt and get a sense of what things you can do on your own. Then maybe, maybe, you could do some stuff on your own. I think you will find you can't do much, especially when you have to co-ordinate with the general contractor doing the stuff you you know you can't do.

Don't forget -- who draws up the plans? The general won't because you are doing some of the work and he can not represent to the city when stuff will be done and whether it will be up to specifications/code. You can't 'cuz you just don't have the ability.

I’m talking about more licensing purposes than actual work completed. Our guys are more than capable of doing all the work needed, they just are not license. So I’m asking how needed is it and has anyone ran into problems working with guys who aren’t licensed? 

These are for cosmetic rehabs. 

My partner and I have just started a house flipping business and plan to use local workers whom we trust and who have done remodels on investment properties for us before. However, these workers are not licensed, but they work hard and efficiently.

Most of the rehabbing we are planning for these flips is cosmetic. The most recent house we offered needs a complete remodel inside, but the structure is sound.

For example, we need new kitchen cabinets, sinks, paint, flooring, and drywall in certain areas of the house that have been damaged, as well as new light fixtures and interior and exterior paint. The work is mainly cosmetic, except for the drywall repairs.

We are concerned about hard money lenders requiring licensed professionals to do the work or requiring licensing later on, leaving us scrambling to find a general contractor.

Fortunately, one of our hard money lenders has said they will not ask to see licensing as long as we are not doing anything structural to the house. Another one of our HMLs has stated that they want to see licensing anytime we are going to have any work done to pull permits.

We are brand new to this as you can tell. 

Quote from @Bob Stevens:

Quote from @Kevin G.:

Currently, my business partner and I are looking to put an offer on a single-family home for a house flip. The house is listed for $230k, and we plan to offer $235k. The potential after-repair value (ARV) for the property is estimated to be $440k. Based on our viewing of the property, we estimate rehab costs to be around $90-100k, but we anticipate that it may end up costing more. The main fire damage was contained to the living room, and the fire department removed the drywall from the ceilings but otherwise, everything seems to be reparable.

We plan on using a hard money lender for the deal, which funds up to 75% LTV of the ARV. However, if they do not, we have an additional $30k cash reserves as a buffer.

Would you consider this deal? Additionally, would you be willing to flip a house with interior fire damage?

 Of course, its ALL about the numbers, get it for 200k, 

Unfortunately, there is no way we'd get it for that price. Our market is the Bay Area and it's very HOT! 

Quote from @Chris Seveney:

@Kevin G.

We estimate but it may cost more?

How much more? Did you get a contractor and an engineer to review the damage to see what is still salvageable?

These are questions you will need to answer for the HML

Sorry, there is a typo in my post. We anticipate it to cost LESS but won’t know for sure until we get in there. These are just estimates based off what our contractor has told us. The house is only 980 SQFT and a 2bed/1Bath 

Quote from @Andy Sabisch:

Fire damage throws a wrinkle into any deal.  There are those that do these type of homes on a regular basis and know how to either encapsulate the remaining wood to ensure the smoke smell does not come back or replace to eliminate the issue.  The costs are higher than a straight reno so be sure you have either checked with those that do it locally or budget accordingly.

You reno estimate is based on what?  Just the fire repairs or are there other updates you will be doing to the property?  With the fire damage, the estimate seems low for the full reno.

I quess the market is still hot for you to offer over ask for a fire damaged property? Is it on or off market? How long has it been for sale? Has the HML validated the ARV?

Before pulling the trigger, double check your ARV (be conservative) and reno costs (be through) and add a contingency. There is money to be made on any property but as a mentor of mine said, every property has a price - for some that might be $0 but again, every property has a price that makes sense.

What kind of contingency would you offer on a deal like this? Sorry we are knew to the house flipping business. 

it appears the fire was just contained to one area, and the rest of the house seems to be fine. We will still be renovating the WHOLE house but the main damage is in one spot.

This house is only 970 SQFT and a 2 bedroom 1 bath. So after talking with our contractor and viewing the property that is how we came up with the $90-100k. 

The market in our area is very hot, so yes that’s why we are offering $5k over. The HML that I’m working hasn’t validated the ARV but he prefers we get an offer accepted before he starts running the numbers on the property. We are constantly putting offers on homes here and most of the time we lose out. It’s so competitive. 

Currently, my business partner and I are looking to put an offer on a single-family home for a house flip. The house is listed for $230k, and we plan to offer $235k. The potential after-repair value (ARV) for the property is estimated to be $440k. Based on our viewing of the property, we estimate rehab costs to be around $90-100k, but we anticipate that it may end up costing more. The main fire damage was contained to the living room, and the fire department removed the drywall from the ceilings but otherwise, everything seems to be reparable.

We plan on using a hard money lender for the deal, which funds up to 75% LTV of the ARV. However, if they do not, we have an additional $30k cash reserves as a buffer.

Would you consider this deal? Additionally, would you be willing to flip a house with interior fire damage?

Quote from @Chris Seveney:

@Kevin G.

How much cash do you have?

Assume that one month a year each of the other units will be vacant. Add in repairs and expenses to the property. You effective payment is probably going to be closer to $4,000+ per month.

Current cash for this deal is $56k for down payment, and I have an additional $15k for emergencies. 

3.5% down would be $36k and the other $20k for closing costs and other fees.