All Forum Posts by: William Harvey

That sounds like a tough situation with lots of learning lessons. I would probably list it as-is to see if anyone can take it off your hands, and simultaneously continue working on it so progress continues. Most likely no one will end up wanting it and you'll be better off taking it the distance. 

The only way an investor would want it is if the numbers work. If you can knock down the price to dump it, and it still makes sense for an investor, then that'll work. Otherwise, why would someone want to get into the same situation you're in? 

We had an investor reach out about a year ago and they were super nice. Got into a tough situation similar to what you described and they were trying to dump the property half completed. They wanted to sell it for what they had put into it, which would've put us in the exact same situation they were in, since they clearly overpaid. 

I think taking it the distance is your best option. Best of luck, praying for an outcome that won't hurt you for too long after!

@Michael Furey Congrats! Sounds like an exciting lead. I completely agree with @John O'Leary. His post is gold! 

I would focus in on the ARV and making sure you get the property for a good price. You make money when you buy, not when you sell. For my first flip, we made every mistake you could make, but the one thing we did well is buy the property right. This made all our other mistakes not really impactful. This is especially true in today's market where the days on market is much longer and prices are lower. We are being ultra conservative on our ARV calcs for this reason.

As far as plumbing and electric, I would just look for signs that there are issues. Like you mentioned, you can't see these things so you have to look for evidence of leaks, old electrical panel, and things of that nature. When in doubt, I would budget for these things needing some attention. Especially if the house was built in the 1940's. Best of luck!!

@Grey Goodman I have no clue about the market you are looking in, but the 70% is sort of antiquated, in my opinion. I'm in a competitive market (Northern Virginia) just like Florida and if we used the 70% rule to dictate how much we offer, we would never get any deals done. Sellers would tell us to never contact them again haha. It is simply way too competitive here to use the 70% rule and end up offering someone 50-55 cents on the dollar for their home. 

If you're a wholesaler, why don't you analyze the deal like a flipper would, and then just bake in your wholesale fee? For instance, we shoot for 10% profit based on ARV or $40k, whichever is higher. You could analyze the deal along those lines and just add your wholesale fee on top of that. Better yet, you could talk to some buyers on your list in the FL area to see what kind of returns they look for and then analyze your deals accordingly. Just a thought!

I have no clue of the specific rules in MA but nothing you are describing seems like you would need a permit pulled for anyways. Am I missing something? 

@Dan White what do you think? 

@Katlynn Teague The short answer is that there are a lot of things we will not know since we aren't doing a home inspection. And I want to note that the reason we don't do one is so we can approach a seller and make them an offer that is 100% rock solid with a non-refundable EMD. We don't do it arbitrarily just to take on more risk haha.

In exchange for this we can generally get the property at a lower price than if we had contingencies and hoops to jump through. We still walk the properties and take lots of pictures, so it isn't like we are doing this site unseen. We just forego the home inspection to make our offer more competitive. 

Back to how we find out the things needing fixed.....we will have a "fudge factor" in our analysis where we budget for surprises. HVAC is pretty easy....if it looks 15-20 years or older, it likely needs replacing. Even if it works properly, a first time buyer we are selling the house to once flipped will be freaked out when their inspector notes the HVAC is old. So, likely makes sense to just budget for replacing it anyways. The roof is visual too and you can tell if a roof needs replaced or not.

Plumbing and electrical are hidden (unless you tear open the walls) but even if both need fully replaced, which is highly unlikely, you're only looking at $10k or so depending on the size of the house. For our first flip we had to redo all the wiring and most of the plumbing and I believe it was well below $10k.  

So even if all surprises amount to $10-15k, the deal should be able to absorb this in my opinion, especially if you have a bit budgeted for it. If the deal can't support it then the deal is probably too thin to begin with. 

The only exception here is well/septic. We still will usually get inspections done on these because that is something we deal with less frequently, and can be a much larger expense. 

When you walk a property, focus on the obvious stuff like age of roof, water heater, HVAC, and everything else you can see, and then just ask good questions of the seller to try to find out if there is anything underlying. We've never really seen people intentionally covering things up, it is actually the opposite where most sellers give way more info than we needed. Hope this helps!

@Steve Wilson I would still look to secure a HELOC on your primary residence. I have one on my house and when I'm not using it, there is nothing I pay on it. And the HELOC rate....while they've certainly risen, I'm almost 100% certain it would be way cheaper than hard money. My HELOC is around 6-7% currently and there are obviously no points. For hard money, we pay 1 point and 12%. HELOC is wayyyy cheaper and access to cash as an investor is paramount. I'd highly recommend looking into this.

As far as your question, I've always used hard money from private individuals and think this is a great option. 100% financing plus reno costs is what we get every time. So, it is certainly not a fantasy. Once you do a deal or two and they go well, you have way more leverage with HML's. The reason I say private individuals is because going with a big lender like Kiavi or Fund That Flip will be a much more rigid process, with more hoops to jump through, and you most likely won't get 100% financing.

With private investors, this is very possible as long as you buy the deal right! Hope this helps!

 I agree with this completely. I would probably have a conversation with the contractor (they seem to be a lot more responsive when money is owed to them) and just ask him about all the things that went wrong, the lost rent from the delay, etc. and try to get him to come down on his price and meet somewhere in the middle. If he's completely irrational and illogical then this likely won't work. 

I think 2 things are true at once; he did a horrible job and doesn't deserve the full $8k, and nothing in the contract was really broken. It sucks but this is probably a learning lesson to add verbiage into your contract moving forward to prevent this from happening with future contractors. 

I had a similar issue where I used these attorneys years ago for something and they sent me a bill that was about 4x what I thought it would be, and some things they charged me for were ridiculous. It ruined my day, I yelled and screamed, but then I paid it, moved on and forgot about it. In hindsight, that was a way better decision than if I decided to fight it and get into a mud wrestling match with them. Same likely applies here too. Best of luck to you!

If we used the 70% rule in our market (Northern VA) sellers would tell us to get bent. Figure out how much you want to make and use a good deal analyzer and that is a way better/precise way to do it in my opinion. 70% rule is more a lender's number as @Crystal Smith noted. 

@Jesse Bruce I completely agree with @Chris Webb. I would bet if you Googled "REIA meetings in Memphis" you'd find tons of groups to check out. Talk to some other flippers in those meetings to see who they use, and there are likely contractors that will be there as well.

@Michael Furey Since flipping is an arbitrage play, where you are looking to buy a property and sell where you can make a spread, there really isn't a good or bad time to flip. Every property is a deal at the right price. I would just focus heavily on your ARV calculation. When in doubt at all, lower it.

I agree with @Eliott Elias. We have seen a lot less competition in recent months because lots of wholesalers and investors have disappeared. In that regard, it is a great time to flip houses. Just be cautious about the ARV and make sure you are buying the house right!