All Forum Posts by: Rick Turman

Well my friend, I do not have to much experience with companies other than what I have used locally.  B2R would be new to me so I do not have any insight for you on them.  I know the company I used was 80/20.  Was a little rough at the beginning, but as we progressed, everything was smooth sailing.  When you started reaching out to wholesalers, did you find them on BP or did you run into him elsewhere? How did you go about working with them?

We are at day 29, which would be 3 days past the drop from 219,9 to 209,9.  Our agent should be contacting his list of guests that walked and other interested clients to obtain feedback from their walk as well as update them that the price has decreased.  I just hope we don't have to way another month to get an offer.  I'm starting to think perhaps our picture quality could be what's hindering that initial push to get them to walk.  I just did a little research on that and may be throwing new ones up in HDR as other Brokers are doing.  Follow the trend right?  Anything other than dropping the price that you did to spark more interest perhaps staging and re-posting photos?  Thanks @Neil Metzger and keep me posted on your new Wholesale/rental gig!

Congrats and welcome aboard Neil! Sounds like a mirror image of our first. We also listed early August and had planned for an early July listing to market. We kept adding items to the home as we worked because we were behind schedule. This led to our thinking that we could fall into the next best level of value. We had our first open house 3 weeks in and couldn't keep people out of the house! We thought for sure we were getting an offer. Wonderful feedback.... Everyone loved it..... 22 people walked out house and signed oir books however a week has past and not one offer. This tells me the price may be a bit too high for the area. With this being said, we dropped 10k and punted today hopefully that offer will roll in-in the next few days or week. We will still make a great profit for our first, but will be no where near where we thought it would be after all was said and done. I think of it this way, our loss is now out gain. More or less like tuition. Had we not done what we (you and I and everyone here on BP) have done since day 1, we would not know nearly what we do now. You're never broke if you make a profit! I too would love to get into rentals. Right now, not sure if I am ready to take the leap as I would like to build equity to pay cash for a few more flips prior to jumping into the rental business. If you think otherwise or have a plan you wish to share, I would love to hear as it may be the missing link to boost all motivation towards the rental genre. With this being said, and my apologies for the long story and the hijacking of this thread., I wish the best in your endeavors and to a successful journey that lies ahead!

Originally posted by @Jean-francois Ndomb:

@Rick Turman Thank you for sharing. How did you start off recruiting your contractors. I am over this paralysis thing and looking to finish my list of contractors and get something started. Great detailed work.

 Contractors, right!  I kind of lucked out with my scenario.  I pulled in 2 to work with.  There's a great story to go with this also.  The first contractor was actually a Home Advisory contractor my buddy and I called on to do some punch list items to finish up a basement reno that we personally did.  We were slammed with working for the corporate world and balancing family and needed an extra hand.  After he criticized our work and then told us what a great job we did, he fit in right away.  We egged him on to working on some flips with us and is now interested to tag a long.  He does wonderful work.  

The Second Contractor kind of found me.  I kept asking my Agent if he had any GC's in the area or knew of any from working with previous investors and would always tell me he would let me know if he came across any.  After 3 months, he noticed a company working on a kitchen reno at his neighbors next door.  My agent then bumped into him in the driveway and told him that I was actually looking for a GC.  He has a history of managing and flipping over 1k Homes in CA and was a flipper himself before switching to contractor work during the turn of the market.  Turns out this GC had been praying to come across an investor to follow his passion and start working in the field he wanted to for a while.  And here we are now signing a contract to work on our first flip with this new GC.  

As J Scott mentioned, I couldn't ever get up early to get to Lowe's at 6AM. Especially since the newborn always kept us up at wee hours of the night. However a lot of investors are saying either this route or attending REIA meetings within your area have the best of outcomes. I have yet to do this but am registered.

Sorry I went on a tangent, however with stories like this, it was almost meant to be, and if it continues, I may be one step closer to following my passion than I ever was a few months back.  

Keep that head up, and your GC/Contractor will find you.  When I stopped looking is when it all fell in place.  

Good luck!

@Shanel Wiggins,

Thank you for the kind words!  I do apologize for not getting back to you sooner.  It's been a crazy past few weeks with getting everything in line to close this week.  My Real Estate agent and his team had a convention in Florida this past week which pushed closing to this Thursday.  With this being said, I was down to crunch time to get all my ducks in a row.  

To answer your questions, MPP is Maximum Purchase Price.  Thanks to J Scott and BiggerPockets for bringing this our way, his book "The Book on Flipping Houses" (A Must have as well as sequel "The Book on Estimating Rehab Costs") explains in more detail how to find a reasonable Maximum price you should pay for a property.  What I am finding is this generally is in the area of 50-55% the Actual price you know you can sell the home for (against comps).  e.g.  The home I aquired, was for 93,900.  There is 1 comp in the area that sold end of Dec that wasn't even flipped, just painted and new carpet that sold for 194,000.  Taking this into consideration you can clearly see that my purchase price was at least half of my selling price.  The reason for this is to give you a good idea on what you should pay for the property while taking into consideration your Holding Costs, Renovation costs, and Selling costs.  

Here is what I did for this property.  If you Read the captions near the top, it will explain each section.  Then from those sections, I attached $ to them.  MPP (Maximum Purchase Price) = Sales Price (What my COMPS are near) - Fixed Costs (You can see my running column on this and is what i considered part of my fixed or "Holding Costs") - Profit (How much you want to make on the home) - Rehab Costs (How much money you are willing to put into the home, or what you walked the home and found needed to be fixed)  I fluffed some numbers in my fixed costs, but you can see the MPP here would be 91,628.00 as my highest offer on the property.  With all into consideration, I found a few more comps in the area around 224-230K so I took the offer at full price at 93900 which was a no brainer.  I close Thursday, and Demo starts Friday!!!!!

I was inspired by J's books that I formulated all of his sample spreadsheets a bit further by adding checkboxes to his sample rehab costs sheet I walk the property with my iPad, check the box next to the item in the home that needs changed to where I walk out of the home with a running total (estimated) costs on what it will take to reno the home.  Took me a while but I was stuck in analysis paralysis for so long, this was probably 1 of the benefits that came from it.  I have created a faster system that works wonderfully.  I Have Contracts now furnished for new Contractors, and by using the sheet in the image above, I can pretty much get a good idea on if the house is a good buy or not prior to walking out of the house.  I think on the next few properties I find, I will apply everything on site, and then if it's good, put an offer in with my Real Estate agent before even walking back out.  

I hope this information helps and finds you well.  If you have any questions, feel free to PM me and we can connect!  Good luck with your future flips, and have  a wonderful remainder of the week ahead!

Originally posted by @Shanel Wiggins:

Originally posted by @Rick Turman:

Just wanted to share the good news with my BP Family.  You all told me to Jump, and I said how high!  

I took the leap away from analysis paralysis last week as I have been eye balling an REO during Fannie Mae's First Look. let me tell you.... Those 15 days were the longest day's of my life haha. When it hit the MLS, I was the second offer in, however my MPP allowed me to offer asking price. The first offer turned out to be a low ball offer and I just found out today that my offer has been ACCEPTED!

Here our my Layout:

Actual Purchase Price: 93,900 ~4,000 less.
I know we can sell it for 194,000.00 but we will go a little above comps.
Fixed/Holding Costs around 26,340/@6 Months
Rehab Costs: 40,000
Leaving a profit of 30,000 for our first flip

If we stay firm on our Rehab costs, and we sell higher than comps (Perfect world) We may make close to $40,000 or $50,000.   Wish us luck!

Our last question for you is.... What's next?  Does anyone have a process laid out on the steps after the offer has been accepted?  J Scott has a process list from his first book that I have outlined, but want to hear if any others have amended to that list and or found something that is easier?

Looking forward to everyone's responses!  Happy Flipping!

 Congratulations on taking the leap!!! I will be taking mine soon!! 

What is MPP? And what is included in the fixed/holding cost?

 @Shanel Wiggings 

@Wayne Brooks, Thanks for the kind reply! Pardon my ignorance as I am still a young grasshopper... I do recall my agent mentioning something about the mortgage as well cannot be more than 120%. Luckily the Construction loan I received was just shy 5K of that 120% mark. 80/20 is what I am out for. They wanted to be certain that I had at least 20% skin in the game. So far all should work out well. Only thing pending right now is that I have the deal contingent on a Land Elevation Certification. The MLS states the home is not in a flood zone, however the Auditor site shows the flood zone just short of the dwelling almost touching the stoop. The image is too hard to tell where it ends hence the reason for the certification.

If the Flood Zone touches any part of the dwelling, I may need to reconsider the property as the value of the home will decrease as well as the buyer will need flood insurance prior to their lender even considering a loan.  

Can I submit a new offer for less on the home based on the outcome of the elevation certificate?  Just a thought.  The property is a perfect fit for a flip and has a lot of potential, but this is the only thing setting me back at the moment.  Thanks!

I've heard of REO properties purchased by Owner Occupants to be restricted to sell their properties for no more than 120% purchase price for the first 6 or 12 months from time of deed date. But to restrict to non owner occupant for 3 months and 120% is crazy!

I sent my 10% EM to their 3rd party today, signed their addendum, and found that to be included.  I figured we can list the property at Month 2 as it would/may take a new buyer up to 1 month to close and or we can add in their contract contingency to said date if need be as a buffer, but now I can be certain that holding costs will push me to month 3. :-(

Has anyone heard of this or is it pretty normal with Fannie Mae or any REO for that matter?

Thanks all!

Just wanted to share the good news with my BP Family.  You all told me to Jump, and I said how high!  

I took the leap away from analysis paralysis last week as I have been eye balling an REO during Fannie Mae's First Look. let me tell you.... Those 15 days were the longest day's of my life haha. When it hit the MLS, I was the second offer in, however my MPP allowed me to offer asking price. The first offer turned out to be a low ball offer and I just found out today that my offer has been ACCEPTED!

Here our my Layout:

Actual Purchase Price: 93,900 ~4,000 less.
I know we can sell it for 194,000.00 but we will go a little above comps.
Fixed/Holding Costs around 26,340/@6 Months
Rehab Costs: 40,000
Leaving a profit of 30,000 for our first flip

If we stay firm on our Rehab costs, and we sell higher than comps (Perfect world) We may make close to $40,000 or $50,000.   Wish us luck!

Our last question for you is.... What's next?  Does anyone have a process laid out on the steps after the offer has been accepted?  J Scott has a process list from his first book that I have outlined, but want to hear if any others have amended to that list and or found something that is easier?

Looking forward to everyone's responses!  Happy Flipping!

@Greg Behan, after reading that, I can see where it became confusing:

Perhaps this will make more sense.  I know I can sell this property for at least $194,000.  My Fixed Costs will be around $26,340.  I'd be fine at making $20,000 off this flip with rehab costs at $40,000.  I actually submitted an offer for $93,900 and am being requested to provide proof of funds so I hope I am being considered.  If that's the case, I can turn a profit close to $30,000 or more at this point.  I've added a profit of 30k below to show what MPP I should be aiming for.  In this case, I am hoping to get the property for ~94k.

Now, my concern is that these fixed costs will go way over what working capital I currently have.  With your experience, have you worked the fixed costs to get wrapped into your Monthly payments while holding the property or is some mainly an up front cost during Reno?  (in laments terms, when do the fixed costs hit you at what times during the reno, and how do you over come each?)

I'm sorry if I'm confusing you or anyone, just need assurance that I did not butcher this deal.  Thanks!

So, i'm starting to re-think if I took the right step.  I used the MPP formula to come to a great price on the home, which I may be in escrow by as early as Friday.  Woohoo!  Long story short is, After I look at the MPP formula longer, and my lender only providing 80% with me footing the remaining 20% doesn't leave that much room to breathe. Where I'm going with this is, have any of you fluffed your Reno cost to include Holding costs or, are they paying out of pocket for those?  

Lender Offering:

ARV: 133,900

80% ARV: 107,120

20% ARV: 26,780

Here's my MPP Formula Layout:

MPP: 107,660
Actual Purchase Price: 93,900
Reno Costs: 40,000
Holding Costs: 26,000 @6mo
Selling Costs: 194,000
Potential Proffit: 34,100

AM I overthinking this or am I on the right track?  So in total, I will front the 20% and the Holding costs if any which could equate to a total of ~$52,000.  What do you all think?  Thanks!