All Forum Posts by: Tony Hale

if a property is in an individuals  name and permits are pulled on the current owner then there is a transfer of property in to an llc Wholly owned by the same owner. Are the permits still valid and transferable in Baltimore?

@Tony Hale It is likely that a trusted contractor could help you.  There are some other threads that discuss estimating.  Check some of those out, but of course venture at your own risk.  

I can share what I do to evaluate.  

• Establish a target retail price.  

Find some real comps from the past 6 months or even less if you can get them.  1/4 mile radius. 

Be conservative.  Make sure your comparison is very close in sf, garage/no garage (detached or not), beds/baths, etc.

• Get an idea of holding costs, insurance, realty fees.

• Look at the distressed property and ask the simple question - What needs to be done to make it comparable or to hit that target retail? Now, put the estimate into your equation.  Consider 10% more for unknowns.

• What is your required % ROI. Be realistic, because the investors who consistently make money flipping don't always "kill it" on every deal.

• In the end, what you have left is the purchase price.  Now you know what the property is worth to you.  Doesn't matter what someone else says its worth or what the asking price is.  Now you know what it is worth for your deal. 

• Get the property for that price or move on down the road. Don't buy something thinking you can make it work. Rehab costs are what they are. Don't expect to tighten up the rehab to hit your ROI. It fits or it doesn't.

Now there are other strategies you can use - example:  you find a duplex in a good area, with solid homeownership.   Can you convert it into townhomes or condo - in essence selling each side or level separately. Is the return greater?  Are there comps for it?  OR, can you convert it to a single?  Are there comps for that?  Is one better over the other?  OR, maybe, none of these work and you just pass. 

Make sure it can be parcelled and is zoned for your usage. 

It's always OK to pass.  Don't push yourself into a mistake.  AND, always remember you can't make it fit.  Your deal is made on purchase price along with understanding rehab costs and retail targets. Don't let someone rush you.  If you lose the property - that's fine.  

Do put together the resources and people to be able to pull these numbers in and evaluate quickly.  In time, you will learn from your contractor - or establish some benchmarks that will allow you to get a better idea on rehab costs.  

Hope that helps a little. 

Hi @Tony Hale,

I also live in NOVA and invest in Baltimore. I focus on buy and holds, not flips; however, we purchase value add properties that need substantial work, so its like running a flip. 

I will first recommend you to read J Scott book about how to estimate rehabbing costs. Don’t think you’ll get a magic answer about how much a rehabb is going to cost, but you will have an idea of how much things should cost. Also, you will learn a process of mapping out a flip and other valuable lessons needed to run a successful flip. 

Once you educate yourself a bit on this topic, you can:

1. Walk a property and start getting a ballpark number of how much it will cost you to flip the property based on the things that you see vs. your goal (you should know what your competition is doing) and how long it should take to complete it.

2. Walk the property with a contractor and understand why he tells you you need to do X or Y. 

3. Explain to contractors what you want to be done. It’s different to say “new bathroom” than “gut the bathroom, re-tile the bathtub wall to the ceiling, vinyl flooring, new faucets, new toilet, no new plumbing is needed, etc.” or “we are just switching toilet, vanity, faucets, paint”)

4. Spot contractors that are BSing you 

To answer your question more directly, if you are targeting a cosmetic flip, you can bring an inspector, to make sure there’s nothing BIG you are missing. Usually,   in a cosmetic flip, you expect to not having to deal with major issues/costs, it should be a fairly easy rehab, and your margins might not have room for an unexpected expense an inspector should catch (defective electrical, plumbing, roof, HVAC, etc.). If you are going for a larger flip, an inspector won’t help you much. You already know the property is messed up. You should bring a contractor and maybe some subs. I usually walk the properties myself, sometimes with my contractors. If the offer gets accepted, during due diligence, I bring my contractor, an electrician, an HVAC technician, a plumber, and/or a roofer (not all of them at the same time).

I'm not sure if anybody that has reponded has worked in Baltimore more than I have from a construction perspective, but it is not an easy city to work in. 80% of contractors are looking to rip you off.  The city is looking to fine you for everything and anything, and you need permits for pretty much everything.  Any good contractor is going to want to get paid to do an estimate do to new investors calling 5 or 6 contractors cause they don't know their numbers.  Most newbie will always take the cheapest quote and 9 out of 10 times spending much more than what the quote is.  If you don't live in Baltimore, you must have a person with boots on the ground managing for you, otherwise your contractor will take advantage.  I've been using the same contractors for years, and I still show up on sites 3 times a week to make sure everything is going right.

An inspector is not the right person to hire.  You need to get a contractor (or two) to view the property and help you develop a budget.  So skip the first step and just bring the contractor right away.

If you are not experienced, you might want to start with more of a "remodel" type of project.  Those are slightly harder to find, but you won't get overwhelmed with the construction.

 Experience, learning.  

One of the things I think is most hopeful is looking at what flippers are actually paying to purchase the house, and what they are actually selling them for.

What I find is the greatest mistake is they look at what they can sell it for......then they subtract sales cost, they subtract what they think is the renovation cost, then take a percentage off that number to arrive at what they want to pay for the property.  The problem is....they always arrive at numbers far less than a flipper is actually going to pay for the property, and they keep spinning their wheels and getting no where.

So look at the actual purchase price people are paying, and the actual sales price, you know roughly the sales cost (I estimate 8% in Maryland), then that Delta is your profit and renovation cost.

Now arriving at that renovation cost, its just learning and experience.  And your experience level will largely dictate your renovation costs.  What costs someone $100k, might cost some one else $65k.  But if you want to flip successfully, you have to get your costs in line with what other flippers are paying.

That isnt really helpful in helping you to learn the prices, but is important to point out different people pay vastly different prices for the same job....what makes or breaks a flipper is their renovation cost.  So it isnt as simple as saying I pay X for Y....its I need to figure out a way to get the budget done at A price, because A is what other flippers can get it done at.  If I pay B price, Im going to think the property cant be flipped...then another flipper comes along and flips it.

Any property that is in a condition that can be flipped, realistically would not be able to get a contract with an inspection contingency accepted. Look at it from the listing side....why would a seller listing agent allow that to happen when an inspector or contractor can sum it up in 2 words, replace everything.

If you want to flip, your job is to understand renovations, whats needed, and what those costs are.....and to be able to get it done at the same prices and budgets other flippers are.