All Forum Posts by: Patrick Kaiser

I would look for deals and if something that good pops up, you can refi it. Otherwise, you can wholesale it. You might also be able to get a DSCR loan on it as a rental and refi later if the rates are reasonable. Have multiple exit strategies but you can always refi after you go under contract if you have a quick lender.

Depends on the circumstances of your investments but I think it's generally easier not to have it. You are held to a higher standard as an agent and can be brought before the board for unethical behavior. If you are primarily buying houses off MLS, you can get a discount by representing yourself but if you're not buying listed houses, I believe it's generally easier not to have a license. I have a license, and I can definitely say there's nothing in the course which will help you be a better investor. The licensing courses are simply not set up that way. You should try to get some kind of education from a local investor or flipper is you can, Youtube and TikTok will not provide you with any real knowledge, especially local knowledge.

I'm a 100% logic driven math and numbers kind of guy, so it is difficult for me to understand people that don't think like me. 

What I am calling reasonable is in line with the comps and current active/under contract listings. When they buy these they buy them from wholesalers who give them projected ARV's. My comp analysis is usually pretty close to the wholesalers, even though wholesalers tend to paint rosier pictures than me. Even then, the vast majority of my flippers will want to list 10-15% above my analysis, the wholesalers analysis, and Zillow's awful estimates. None of these numbers matter to them.

I'm not the world's busiest agent but I've closed 15 this year and have 10 more listed currently. I've closed about 30 flips total. On all but 1 or 2, the closing price is within a few thousand dollars of my CMA, except for maybe those I listed right around the end of April when the market took a big hit.

I don't care if they get above my CMA I have no pride in the situation. But when they list $50,000 above all comps, consistently, pissing away their profits, they don't keep flipping and I lose business and they lose money. It's sad when they were looking at possibility of making $20-$25,000 and end up with nothing. And this doesn't happen once or twice it's more the rule than the exception for me anymore.

You've said you get your asking price more often than not. I get my CMA price which has been established since before the project began over 90% of the time. And I'm usually within $2-3k especially on the appraisal price. The difference is that they list at some ridiculous made up price I can never figure out how they come up with these bogus numbers.

To @Jeff S. The losses are unrealized for sure. That's why I struggle to explain it to them. But when we get to closing table and they break even, they quit the business and thats bad for me. I've started reminding people they are losing $100 every day they have it on the market but they just get upset and don't do anything differently so thats not good for me either. I do ask them exactly what their holding costs are, as well as electricity, HOA, other bills, taxes, and insurance. I caluclate it both monthly and daily and try to help them understand that each month they don't sell, after listing, these are losses against their net. They simply don't get it.

@Mark Cruse They are usually relatively new investors, they almost 100% get referred to me by wholesalers because I have 10 years experience in all construction trades including painting, drywall, cleaning, restoration, and general contracting as my father was a contractor. I also had a business for 4 years called home detailing where I would detail a house like someone detailed a car including windows, carpet, tile, minor drywall repairs, paint touch ups, basic handyman work, and 100% only worked on houses turning them over after tenants and to get ready for sale. I got hundreds of houses turned over. Therefore I am able to help the new flippers throughout the project at least generally showing them what needs to be done (if they listen, which they often don't). I've also flipped a few myself though I'm not an extensive investor but I help them avoid things that don't have good ROI and check in with them every week while the work is being done to make sure things stay on track and on budget. On top of all that, I help contain costs because I do all my work at a flat fee of $3000. Sorry if this sounds like an advertisement but I think the wholesalers send me all the newbies because they are not great at most of this stuff and I hold their hands and walk them through it and I don't gouge them at the end because I focus on volume more than how much I make per transaction. And I get consistent business from flippers, wholesalers, lenders, etc. all who send people my way.

@Bob Okenwa My broker is an appraiser and has done more than 10,000 appraisal and as we work closely together I'm very well versed in how appraisals work and 90% of the time can give a very valid range for what the appraisal will come in at and shoot for the top. My broker is also an investor and his business partner has even been featured here on a BP podcast. There are limiting factors to appraisals since they are now federally regulated. Most agents don't understand how appraisals work and how they differ from CMA's and are often blindsided because the appraisers didn't use the best comps. They are not supposed to. They are bracketing the house to make sure the items they adjust for are accounted for on the comps. And if you know how they work you can know the limitations of what they come in at. In 60 houses, I've only had bad appraisals a few times and I have challenged them and won every time. I've had appraisals come in lower than contracts before, but never out of line from what I predicted before the contract began. Not once. I could pay for an appraisal upfront but since I only charge a flat $3000 for my listing fees, its' not worth it to me. At some point I just have to let people make mistakes if they are determined to do so. Because, as you said, it is hard (impossible in my experience) to reason with unreasonable people.

Background: I am a real estate agent who runs a flat rate listing company, meaning I make the same amount no matter how much houses sell for. For that reason I don't mind necessarily care if houses sit on market forever, but they are losing tens of thousands of dollars over and over and over again and its sad.

How do I get flippers to list their homes for reasonable prices? I have listed probably 40 or so flips over the last few years as an agent. Obviously I'm just getting started, but I want to hear from both flippers and agents as to why I cannot convince flippers to list their homes for reasonable prices? I've got 12 comps all adjusted for upgrades, overall market analysis, detailed zip code analysis, exact model matches, recent flips, let's say all that data suggests a list price of $425,000, inevitably 90% of my clients want to list at $475,000 "just to see". The wholesalers ARV estimate is $430, my CMA is $425, we have 3 different ways to analyze the property all arriving at price between $420,000 -$440,000.

This is not once or twice for me, but upwards of 30 houses sitting on the market for months, most of the time in the hottest real estate market in the history of the U.S. After 60-90 days, multiple price reductions, and extra $10-12k in holding costs, house closes for lets say $419,000. 90% chance we could have gotten multiple offers and sold for around $435,000 if we listed at $425,000. 

All said and done I still make my money, but the flippers are losing (and I actually calculated the average) around $12,500 per flip by doing this. What am I doing wrong? As a flipper what can I tell you to convince you that numbers don't lie? The market is shifting and it's more important than ever to list reasonably and I had 2 more flips in the last week listing 10% above all comps. I have very detailed analyses. Both these clients are experienced flippers, one has sold 3 houses, the other about 5 (all 5 with me and my CMA was within 1% 4/5 times, and every time they insist on listing 10% too high)

I agree with the above, I have no idea what the last sold price / sq ft is and I have never used it. You run comp analysis on similar homes, larger homes, smaller homes, adjusted for upgrades, lot size, condition, check the neighborhood for homes that sold the closest physically and adjust for how long ago they sold. Even then I barely use price/ sq ft for any purpose other than making adjustments if the comps are significantly larger or smaller, or the lot size if significantly different. 

 I am not on Columbus, sorry all the way out here in Phoenix. But I think a structural engineer would be a good start because they are not trying to sell you anything. Let them tell you how to fix it and then probably follow directions. If they tell you it's major, I think you're probably stuck. But maybe you'll get lucky and the contractor was trying to get themselves more business. 

 The joists needing to be reinforced if that is truly the issue does not seem like a $25-$30k problem. Obviously I'm not an expert in that area and houses on this kind of framing are not common in my area, but I have sold 2 in this condition with cracked joists under the house. We were quoted $15,000 by one contractor. Then we had it inspected by an engineer who said that it just needed to be, and I forget the terminology, but they left it with a jack and just screw 2x6's on each side the length of the split. The engineer cost $600 and that included 2 trips, before and after, and we found a contractor who said it was going to be $600 but I told him if he can get it done in 2 days we pay him and extra $300. So he did. We got the property sold for $1500 repair costs. 

Another house with similar issues we paid a contractor to fix before listing and then it passed inspection with no structural engineer needed. Total was less than $1000. 

It's possible your problems  are more extensive than mine were, if there is real problem with the whole foundation of the house settling and requiring massive undertaking to life the house, reinforce the foundation, etc, but if the problem is seriously just some cracked floor joists, then a structural engineer and a licensed framer should be able to take care of these problems in my limited experience for a few thousand dollars. 

Most brokers don't like untraditional real estate agent activities. You will need to find a new brokerage if you plan on engaging in things the broker doesn't like. I understand why brokers don't like this, if they have many agents to monitor, the activities need to fall within a certain box in order to monitor them effectively. You should look for a broker that allows and preferably participates in this kind of investing. I have a broker here in Phoenix that specifically started the brokerage to allow for investment friendly activities after himself being throttled by other brokerages. We are allowed to pursue any activity that is legal including wholesaling, lease options, subto financing, flipping, buying and selling our own properties, selling leads, referring to investors;: all of these activities I have heard from other agents in some form or another are limited or disallowed by other brokerages. 

The only thing I'm not currently allowed to do is anything that involves a trust account as my brokerage does not have a trust account because the broker does not want the headache of managing and reporting that comes from having a trust account. If I deal with leases, which I don't often, I write up the lease agreement for a fee and don't manage the property long term. 

Biggest challenge right now is selling properties! I have 10 listings and only 4 under contract and the days on market for my other listings is well over 30 on average. The sellers are generally still not accepting that the market has shifted and in certain price points is down 5-10% and they are losing all their profit to holding costs. The average homeowners and wholesalers are accepting it but the flippers do not seem to be on board especially if they purchased these properties when rates were lower. 

 "Human capital is greatly underestimated in the rush to make money in the rehab industry". 

I couldn't agree more with this sentiment. Way too many people relying on a few videos or a 10 minute seminar who suddenly think they are experienced. Just because someone who's been in the industry a while does not make them an expert, but having no experience means you should move more carefully in the beginning. If you are not experienced in construction trades, your money is probably well spent using an experienced general contractor until you know enough to hire trades out individually. With holding costs being $3-$4k a month, a 1 month delay, which is not hard to imagine at all if someone screws up a project, is probably going to cost you $4000. And that's one contractor. If we fall out of escrow due to discovered defects during inspection, that's another $4000 gone. Now you've lost $8000 for nothing when hiring decent contractor alone probably would not have cost that much. 

It is truly startling how many people go out there and just try to wing it. It is possible to succeed that way, but in order for almost anyone to do that, they need to be able to listen to those who are experienced and especially with those who's interests align with yours. Sometimes the contractors are trying to extract as much money out of you as possible. I've seen a lot of even experienced flippers using lenders, agents, contractors, all of whom are just truly taking them for a wild ride, and nobody is there to tell them otherwise. I had someone pay $18,000 for a roof and they are telling me how great of deal it was, until I show them a quote from a nearly identical roof we replaced a month earlier for $8000. I had someone pay $12,000 for a single A/C unit when at the time we had another comparably sized unit replaced on another house for $6700. And again, they are trying to argue with me how great a deal they got. These things are not adding any value to the house in the eyes of the buyer or the appraiser. 

Some people are happy just so long as they made money. But things are getting tougher, and inexperience is causing money loss even from those who might have been making money previously, but now only the ones who knew how to bargain and ensure every single thing was fairly priced (which almost nothing is right now) are still making decent profits.