All Forum Posts by: Rick Turman

BP Family,

I have a question that has been killing me.  It may be dumb, however I need to have a warm and fuzzy as I am unclear how to calculate this and am loosing sleep.  I've had an 80/20 Construction loan for a previous flip and looking to get into an 80/20 Note 12-1 within the next few days.  Are you to calculate your 20% down into holding, or does it somehow get factored into the proceeds when paying back the loan.  I didn't factor this into my holding costs in my previous flip and am wondering if I made a mistake.  Here is my current situation:

HUD Home

Purchase Asking Price: 87,000 (Min net would leave me to believe 87 is needed to purchase)
Rehab Costs: 45,000
Holding 25,000
Sales Price 179,900
Profit set for 23,000

HUD is asking 10% for EMD
Lender asking 20% however EMD is applied to this 20% as Down Payment

Am I missing something here? Looking forward to your responses.  I haven't pulled the trigger yet on any contracts nor has or offer been accepted yet at 80K.

Good afternoon everyone! I would just like to thank you for everyone's input over the past few months and along this journey for those that are veterans following me through my First time flip.  I know a lot more now than I have when I first started this venture.  

We closed on the selling of our first flip today, which would be a week shy of our 6 mo holding that we planned well for.  The journey was fun, stressful, and definitely a life learning experience.  We may have over renovated a little as we let our taste speak for the property, however the new property owners loved every detail about the house and are not changing a thing.  All in all, you don't go broke if you turn a profit and that we did.  

We initially shot for the moon and were targeting a higher market value that shouldn't have been.  Our agent stated that we had we stayed on the market a little longer, we would have possibly sold for our asking price, however everyone wishes for that and that just didn't fit what we had planned for in the budget.  

Numbers below:

3bd 2 ba 2125 sqft.

Purchase: 84,500 (Includes 9,400 Earnest Money Applied to Purchase Price)
Renovations: 67,000
Holding: 23,100 
Original List: 219,900
Final Sale Price: 198,900
DOM: 83
Proffit: $24,300

Already have our eyes on house 2 and may be putting an offer in as early as next week! I can now close the books on this venture and claim that it is possible to make a quick ROI on real estate investing. Here's to the fastlane ya'll!

Update,

I have requested for the property to be de-listed through my agent and he replied that this cannot be done however they can reduce the price and it will be put on what is called a hotlist?  I'm not sure what this means, but should I move forward with this?  We had 2 recent showing that resulted in 0 offers.   I will be reducing this below 200K to spark interest.  DOM here is avg of 85 days and we are at 53 as of today.   Thanks guys.

Update to the house,

I have not dropped and or de-listed the property as of yet.  I was notified by my agent to hold off for 1 last week as he had scheduled 3 private showings for a walk-through yesterday and the outcome seemed promising.   

One of the couples scheduled another walk through Monday as a follow up as they are looking for a place for their parents.  We shall find out what happens Monday if the offer will be made as it seemed like they were very interested.  

Thanks for all the help and stay tuned.......

Thanks Russell Brazil . I will take that into consideration. Perhaps delist and populate a few new pictures such as new lush green landscaping and a few items that we staged. Cheers mate and thanks again. I will keep everyone posted within the next week.

Update to progress,

Second open house went extremely well.  I had requested an open house a week after the price drop but didn't realize it was the weekend of Labor Day.  My agent didn't realize until after the fact however he was blown away by another amazing turnout.  The house was packed.  Everyone loved it.  0 Offers.  

The ironic thing is the neighbors listed their house for 224k this past week which may have drove traffic to ours.  Theirs has 1 bd more than but does not offer an attractive inside but new carpet.  

As I've heard this before, Open Houses rarely turn offers.  I will give it a couple weeks and then have to make a decision on where to go with this.  Perhaps we drop again or start looking for prospected tenants and become land lords.

I am thinking about going as far as 1 week, and dropping it which was suggested by Tom and Russel earlier in this post to hope spark interest in moving forward. Even if it sells in a month, It will take about a month to close which will push out longer than I wanted to hold the property.  Time to move quickly and strategically!  

@Tom Day & @Russell Brazil

My apologies for not getting back to everyone in time.  Another day in the grind had me away from my passion for far to long.

@Luc Boiron,

I have a deal with my Agent on this property for total of 5% so in this case, he is taking 1% cut as I bought the house from him as well as he's selling it.  I tried to go less as I will be bringing his broker more business, however they countered at 5% (3 to Buyers and 2 to CO-OP.)  There will be more discussions moving forward as I build rapport.  Eventually I will obtain my license but that's another story to discuss.

Houses that I have seen flipped in this area are re-selling with the original appliances from the most part.  I have yet to see a few with new if not those that were left with previous owner (used).  Ours was pretty much a complete gut, so to stay on schedule and within budget (didn't haven't as planned) we cut the fridge out as this appliance is more of a personal preference (French door, double door etc).

Staging.....  We had a budget for that too and wanted to use the furniture for future flips, but used that budget for this house.  We had a private showing where the person didn't know what to do with the rounded window area.  We listened and now have a nice elegant table with two chairs with a table setting and some flowers so you can overlook your back yard.  We also setup some flowers within each bathroom for aesthetic looks.  We actually had a week of rain here and now the grass has turned greener than spring, so I think a few updated pics here and there wouldn't hurt especially with the kitchen furniture as a nice added touch.

Thanks again for the advice, and I will keep at it!

@Jason V.

@Jason V.,

You are absolutely right about landscaping.  We finally got a week straight of rain which has restored the lawns of most properties.  It wouldn't hurt to upload a new image with this included.  My wife took the photos of the property without the use of a wide angled lens (Very much needed) therefore we may need to just have the Agent return to get the full front view of the home's offerings. 

I agree with you on the amount of storage/counter space in that kitchen.  Not much to work with.  That was one complaint that rolled through, however when they opened the door to their walk in pantry, they retracted that comment and stated this would work most defiantly.  A lot of people refrained from buying the property to flip as they were unsure of what to do with the kitchen area and or the floor plan.  With a little imagination, I think we managed to concur that with ease.  I could post some before pics for those who are interested.

Thank you for the kind words Jason!  I will be applying some of your suggestions here within a few days if there continues to be no movement.

@Kevin Harrison,

As stated earlier, perhaps the aggressive price point we were hoping to strive for may or may not pay off.  It seems that we would have had a buyer earlier in the week last week at full asking, however she thought it was in flood, and could not justify the Flood insurance price.  One of the contingencies on this property with Fannie Mae was they completed a Flood Elevation Survey.  Being that it wasn't in Flood, I would purchase.  Sure enough there was a less than 4% chance the dwelling would be affected in any way therefore it is not in the flood zone.  Long story long, she was under the impression that it was, and instead put an offer in on a property on the opposite side of town.  I spoke with my agent and he assured he is letting everyone know that elevation cert is on file.  This client may have been missed as he did state there were too many people at the open house that he couldn't keep up with.  We will be hosting another Open House this Sunday.  If there are any suggestions you think would help separate "Tire Kickers" from interested buyers, please feel free to offer any suggestions.  Thanks Kevin for the awesome input!  I am excited yet anxious for the outcome.

@Russell Brazil,

Are HDR photos the new trend these days?  I have been doing research on how one obtains HDR quality, and have found a way to do this ourselves in a surprisingly easy manner.  Just need to obtain a wide angled lens and we will be in business.  

As for pricing, I have seen the metrics on our property and it seems Tuesday's and Wednesdays have the most views.  Why is that?  

I like your idea on the pricing scheme however what are the chances re-listing at that price would drive interest and increase it to what we are asking now?  Is there any?  

I love everyone's criticism and suggestions, and will keep closely at hand and make some changes within the next few days/weeks to come.  

@Adam A.

@Adam A.,

I didn't know that much about FHA however we are in the clear at this point for the 90 day 20% point. I have kept a close portfolio on this property of before and after pics, quotes, receipts, insurance policy, Renovation schedule, etc, and have it ready for any appraiser as J Scott mentioned in his book. I feel confident on this part, and hope that the work done justifies the asking price point.

I can see why no one would want to move during school season and didn't think about that until after the fact that it started.  The good thing about this town is that there are 4 different school districts all within equal driving distances.  My guess is it may not affect it that much as the buyer could move and still be in the same district, but who knows, i'm still knew to the Market here so I could be completely wrong.

We held a broker's open house and obtained their input as we wanted to price it around 229,9.  After their walk through they suggested a more reasonable price around 213-214,9 would be idea for the area.  Instead we started at 219,9.  A lot of them are surprised it hasn't been sold within the first 5 days on the market as they expected.

You explained Renting this property for the first year.  There is a high demand for rental properties here, and with Marathon Headquarters being down the street, we believe this may be a perfect rental/home for that young executive.  Marathon has/will be hiring 10k more employees for their newly built building, as well as Hotel going up.  This should drive the demand for housing up, and perhaps rentals even more as a lot of their employees are on set projects.  I was looking into renting out as I'm being told it may rent for 1400-1600/mo but as we have a lot of equity tied into this property, (Credit Cards/Cash) it may be difficult to justify renting unless we can re-fi and pay off that debt, and lower our mortgage, then it wouldn't be a bad idea.  I would love to have a property that is cash flowing and then rinse and repeat the process.  What do you mean by put up for sale at 6 months rent for a year?  Does this assume you have a renter on a monthly contract and if the home sells at month 7 kick them out?  Thanks for the input!  I will look further into my options on re-fi and or renting this property with so much equity in, unless you have some tips and tricks you would like to share!

@Tom Day,

I'd hate to wait the three months if there is a more efficient and better way to approach this.  Then again we are only at day 31 today so perhaps I am rushing this.  I'm sure this is every first time flippers worst fear.  Once this one passes, it should be easier and easier.  As for pricing, If there are 0 interested buyers halfway into September, I think at that point it would be time to drop again below the 200$ range as you suggested as well as others.  I'm starting to think that the Rental wouldn't be a bad way to go and could have better return in the long run.  We wanted to get a few flips under our belts to obtain enough equity to start paying cash/purchasing rentals to cash-flow from to keep our passion paying for itself without touching a dime of our monies.  Then again baby steps shall get us there.

Going back to this below 200k price range.  I understand that in most searches, 200k and up is another range where 150-199 is a range of it's own that would target that lower market.  Have you or anyone else had success listing at this price range and ending up with a higher offer?  I'd hate to list at 194,7 and get an offer at 190 and us pay closing, at that point it would be a flop.  I cannot let fear get in the way so I will stay positive through this whole process and learn from the experience for future flips either way.

Thanks Tom and everyone else who took the time to answer/respond to my questions.   It has been a fun yet interesting venture thus far, and looking forward to what lays ahead!  Have a wonderful week ahead!

Before I respond to everyone, I just found out that someone was going to put in an offer last week (After the walk) but thought the property was in flood zone so they put an offer in on another property close by!  When I dropped the price of the home Friday, I had asked that this piece be noticeable whether in the beginning or end of the listing and has been added since I had a feeling this would be questionable but needed to make sure everyone was well aware.  I even had a flood elevation cert done.  I'm thinking about making or buying a sign that says NOT IN FLOOD and put it right on the For Sale signs in our yard!

@Jason V. @Jay Hinrichs,

Thanks for the fast reply!  I forgot to post the link.  Here is the property:

http://www.realtor.com/realestateandhomes-detail/1...

DOM here now seems to be 30-60, but justifying the amount of interest we are getting on this house, it was clear that my price started too high to begin with as no offers were rolling in as we expected.

We obtained comps when we started in April.  Highest was 194 lowest being 134.  Our 194 comp had 1-200 sqft less and sold as is nothing done to it and is diagonal from us.  Property values around have increased over the time of the flip as well.  We priced ours at 219,9 (a little aggressive) however our finishings that were added were thought to put us in a higher price category sparking interest of a few buyers in that price point.  Since we had a ton of walkers and private showings, no one had negative feedback.  They loved everything but very quiet on the price.  There was one couple that mentioned it being right outside their range.  What we did was dropped 10k to hopefully spark more interest, and drive it back up with a bidding war.  That will be great in a perfect world.

If what we did was a good move, buyers should be offering this week. We are ok on holding costs until end of October (would be 3 months after flip) anything after that will be digging into profits. I'd hate to say this, but since we were trying to reach that higher price category, maybe we over renovated bearer in mind break even is at 189. Purchase price 93,9. ERC at 65 but a lot needed done. We would like to turn a profit of at least 20 which would be close to about 18-20% ROI. The way I look at it is you don't go broke if you're making a profit.

Thanks for your time guys, and looking forward to your feedback!

Morning BP Family!

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.  We're starting to think perhaps our picture quality could be what's hindering that initial push to get them to walk. We did a little research on that and may be throwing new ones up in HDR as other Agents are doing. Follow the trend right? 

Is there anything other than dropping the price that we should be doing to spark more interest; perhaps staging and re-posting photos?  Any and all help is welcome.  We would like to push past this first one so we can approach two more before EOY.

Thanks everyone, and have a wonderful week ahead!