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Flip Houses: The Numbers Involved

 
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Old 12-30-2015, 06:07 PM   #1
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Flip Houses: The Numbers Involved


As a Home Remodeler I aspire to start my own business. In the meantime I am working for General Contractors and other home flippers. A lot of the time these guys don't want to fork over even a decent hourly. This can be very frustrating to somebody who not only has to pay their bills, support their family, but ON TOP of that save up to attain Insurance, a work trailer, flat bed....etc (the basics for a remodeling business).

$10-15/hr is not enough for this type of work. That is not an opinion. It is a fact. That is enough for me to pay my rent. Not my bills....just my rent. Yet this is what is commonly offered.

I talked to one contractor today, he told me he can not pay more than $15/hr. He said he just couldn't. As if his business would somehow capsize.

First off, before I get into numbers, it is not uncommon for General Contractors to sub out all/some of the work. Tile, Flooring, some of these need to be done by a professional. Certainly HVAC, Electrical, Plumbing require licensed professionals. These trades charge a very premium hourly upwards of $50/hr plus. I've seen 2 electricians pull off a $1500 job in one day, and they were just the help.

Now my numbers will most certainly off, as I am inexperienced to the business aspects of the business. But let's say you have a home valued at $200,000. You get it for half of that on a reposession or even further discounted on Taxes.
So $100,000 is your budget.
I live in Texas, and when a house is sold they want %30 for taxes.
So you are left with $66,000 for materials, labor, and anything else leftover is profit.

Surely you can fix up a home, and improve upon the existing house with that budget and pay your help decently.
I understand that good help is hard to find and a lot of subs skip out on jobs or botch the work and it needs to be torn out and redone, but I'm talking about myself. I am a professional, and I do make mistakes, but for the most part I get professional results and in good time.

I've seen flip houses get new floors and cosmetic makeovers in 2 weeks. I don't think 45 days is an exaggeration for a estimated completion deadline. That's $4,800 for per $20/hr employee. A small crew of 3-4 reliable guys should be able to knock this out in under a month though easy costing only $3,200 per person.

Am I crazy?
Unless I can be convinced otherwise, I am assuming that these guys are on drugs or have some kind of addiction. It just doesn't seem like money is really that tight, but they can't fork anything over.

Maybe somebody can give me a more accurate breakdown, using a job they just did, or more realistic numbers. I would like to think that this is a very profitable venture and I can support my family when I begin flipping homes/remodeling on my own.
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Old 12-30-2015, 06:17 PM   #2
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Re: Flip Houses: The Numbers Involved


You work backwards on the pricing....

After repair value (conservative value) times .70 minus cost of project including taxes and investor's cut leaves you with the amount you should plan to spend when buying a flipper.

With the formula, and when you apply the .70 makes it so you are making a 30 profit margin on all the carrying and restoration costs.

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Old 12-30-2015, 06:21 PM   #3
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Re: Flip Houses: The Numbers Involved


I would assume that these particular guys are not as concerned about quality as they are the bottom line. They know they can lowball and claim that's all they can afford, and they find people to do the work.

If you've ever seen those irritating flipping shows on HGTV, they're kind of an exaggerated version of reality. The guys running the show are investors and their goal is to squeeze every cent out of the project.


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Old 12-30-2015, 06:28 PM   #4
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Re: Flip Houses: The Numbers Involved


There is nothing irritating with Christina


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Old 12-30-2015, 06:31 PM   #5
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Re: Flip Houses: The Numbers Involved


The problem with being labor on a flip house is the money is spread around so much above you:

Hard money guy or bank
flipper "GC"
realtors
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Old 12-30-2015, 06:37 PM   #6
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Re: Flip Houses: The Numbers Involved


Don't do hourly. Take your measurements and give them your price. Edit: And don't tell them the total l.f. you measured either...no free info....they can measure it themselves.

And try not to get suckered by the "how much for all of it" number. Then all sorts of unmentioned extras will be on you.

Last edited by MarkJames; 12-30-2015 at 06:53 PM.
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Old 12-30-2015, 06:48 PM   #7
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Re: Flip Houses: The Numbers Involved


That lady is in all kind of OSHA violations.
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Old 12-30-2015, 06:53 PM   #8
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Re: Flip Houses: The Numbers Involved


There are very few house flippers I would work for. Why do you? These days many markets are getting very competitive and there are less deals to be had. Some will take on deals with lower profit margins and then it becomes even harder to make a buck.
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Old 12-30-2015, 07:04 PM   #9
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Re: Flip Houses: The Numbers Involved


Quote:
Originally Posted by DiamondHouse View Post
As a Home Remodeler I aspire to start my own business. In the meantime I am working for General Contractors and other home flippers. A lot of the time these guys don't want to fork over even a decent hourly. This can be very frustrating to somebody who not only has to pay their bills, support their family, but ON TOP of that save up to attain Insurance, a work trailer, flat bed....etc (the basics for a remodeling business).

$10-15/hr is not enough for this type of work. That is not an opinion. It is a fact. That is enough for me to pay my rent. Not my bills....just my rent. Yet this is what is commonly offered.

I talked to one contractor today, he told me he can not pay more than $15/hr. He said he just couldn't. As if his business would somehow capsize.

First off, before I get into numbers, it is not uncommon for General Contractors to sub out all/some of the work. Tile, Flooring, some of these need to be done by a professional. Certainly HVAC, Electrical, Plumbing require licensed professionals. These trades charge a very premium hourly upwards of $50/hr plus. I've seen 2 electricians pull off a $1500 job in one day, and they were just the help.

Now my numbers will most certainly off, as I am inexperienced to the business aspects of the business. But let's say you have a home valued at $200,000. You get it for half of that on a reposession or even further discounted on Taxes.
So $100,000 is your budget.
I live in Texas, and when a house is sold they want %30 for taxes.
So you are left with $66,000 for materials, labor, and anything else leftover is profit.

Surely you can fix up a home, and improve upon the existing house with that budget and pay your help decently.
I understand that good help is hard to find and a lot of subs skip out on jobs or botch the work and it needs to be torn out and redone, but I'm talking about myself. I am a professional, and I do make mistakes, but for the most part I get professional results and in good time.

I've seen flip houses get new floors and cosmetic makeovers in 2 weeks. I don't think 45 days is an exaggeration for a estimated completion deadline. That's $4,800 for per $20/hr employee. A small crew of 3-4 reliable guys should be able to knock this out in under a month though easy costing only $3,200 per person.

Am I crazy?
Unless I can be convinced otherwise, I am assuming that these guys are on drugs or have some kind of addiction. It just doesn't seem like money is really that tight, but they can't fork anything over.

Maybe somebody can give me a more accurate breakdown, using a job they just did, or more realistic numbers. I would like to think that this is a very profitable venture and I can support my family when I begin flipping homes/remodeling on my own.
Diamondhouse,

You are missing a lot in those numbers and assuming a lot... just to name a few...
  1. $200K may be what the ARV is after the remodel but doesn't necessary mean it will sell at that...
  2. Then you have to pay a Realtor on the whole $200K if you're not selling yourself, or the advertising costs to do it yourself...
  3. Then you have financing and holding costs which eat away at the profit as each month goes by... (initial points on a flip can range anywhere from 3-7 points... do the math just on that alone)... unless you are an established flipper, PM or HMB's now require a sizeable down payment as "skin in the game"... They're still out there, but gone are the hey days of no-out-of-pocket flips where they roll the closing costs, etc. into the loan...
  4. Then there is insurance...
  5. Then there is RE Taxes...
  6. Then there is a multitude of things that can go wrong with a flip, from foundations to mechanical's, etc...
  7. Oh, and then there is actually profiting from it, so you can go on to the next one...
  8. Not to mention the 30% you referenced...
  9. And then unless he 1033's the properties profit into the next one, he has to pay A LOT at tax time...
  10. This is just an overview...
That said, one of the quickest ways you can become and asset to flippers is by getting it done right and done quick, but this also means throwing per hour pricing out the window... price it based on the project... if he wants a discount, tell him the only way you can do that is if you get more of the projects...

No-one is forcing you to take $15/hour... you're projecting not only that is what you'll settle for but an employee mentality and not an owner mentality...

Talk to him as one business owner to another, and be willing to walk away... Let him know you are there if he can't find someone else but this is what it will cost... but realize, in the same way you are looking to profit while working with him, that is his goal as well, and his exposure is much greater than yours...

You may just have to come to the realization that he may not be your customer and that you may need to go out and find the customers who can support your business... things WILL NOT change unless you do so...


Best of luck... 8^)

Last edited by KAP; 12-30-2015 at 07:19 PM.
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Old 12-30-2015, 08:33 PM   #10
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Re: Flip Houses: The Numbers Involved


Flippers that have crews don't do contracts for the crews - it's hourly. If you're on a good crew, $17 an hour is attainable working 14 hour days. The lead gets more.

KAP has a good basic list of the costs. A lot of people don't understand the fact that these are gambles. You MUST run a good profit margin (more than 20%)or risk going out of business in the long term.

A couple other things. The longer the time frame, the more risk is involved. Feds raise rates, value goes down or buyers dry up. Some unforseen neighborhood project comes up that impacts the value, a new neighbor moves in and he'll scare off potential buyers. TYhere are a ton of ways one of these can go sour. The money guy is taking all the risks - he has no guarantee of making money. You get a guaranteed pay check.
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Old 12-30-2015, 08:46 PM   #11
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Re: Flip Houses: The Numbers Involved


Quote:
Originally Posted by NYgutterguy View Post
There is nothing irritating with Christina


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There is only one reason I can think of for a woman to have her feet pointed like that.
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Old 12-30-2015, 08:57 PM   #12
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Re: Flip Houses: The Numbers Involved


Looks like some done big head mode like you used to do on the sega mega drive console lol.
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Old 12-30-2015, 09:02 PM   #13
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Re: Flip Houses: The Numbers Involved


Quote:
Originally Posted by cleveman View Post
There is only one reason I can think of for a woman to have her feet pointed like that.

I'd like to hear this one...


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Old 12-30-2015, 09:35 PM   #14
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Re: Flip Houses: The Numbers Involved


Lets talk numbers. As in how many houses you would have to flip before you realized how much was wrong with your line of thinking. The answer is 1.
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Old 12-30-2015, 10:03 PM   #15
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Re: Flip Houses: The Numbers Involved


Maybe they worked for the last twenty years. Losing at first, the winning some and losing some, now they mostly win. Mostly because they lost tens of thousands of dollars learning how to run trades, choose properties, market, reduce risk and make a profit. Perhaps they looked the op in the eye, and using their shrewd judgment of character, they figured he was one of those millenials who want it all RIGHT NOW because they deserve a piece of everybody elses pie... well because they want it not because they can actually help the other party make more money... and decided that he was worth 15$ an hour at an absolute max.
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Old 12-30-2015, 10:31 PM   #16
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Re: Flip Houses: The Numbers Involved


Ive found that working or even bidding work for house flippers is a waste of time. Most of the ones in my area don't use properly licensed trades or do much of anything above board. They are outraged when they see the estimate from a real contractor.

Ive made the mistake of breaking down a couple of estimates for them in an effort to get the job. I used it as a learning experience. None of them could understand why I marked up my material and thought 75/hr was a little too high and if i was willing to do the job for less they would have lots more work coming up.

Still haven't done any work for a house flipper. 😄

Won't go near them anymore. Bunch of lowballer scumbags if you ask me. Let the bottom feeders have 'em, I'll make my money fixing all the half-assed flips out there.

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Old 12-30-2015, 10:56 PM   #17
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Re: Flip Houses: The Numbers Involved


Try and get on a legit crew, austin is booming. Learn from pros, not wanna be flippers. 15 an hour 1099 is worse than minimum wage imo. Not being offensive, just my take.

If your saving for your own gig, work for someone after hours, maybe doing work on weekends mowing or pick up work with another crew whos doing evenings.

I do know guys who do quality flips on occasion and do it the right way, paying subs and hands normal rates.
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Old 12-30-2015, 11:40 PM   #18
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Re: Flip Houses: The Numbers Involved


Quote:
Originally Posted by cleveman View Post
There is only one reason I can think of for a woman to have her feet pointed like that.
Does it minimize camel toe?
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Old 12-30-2015, 11:46 PM   #19
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Re: Flip Houses: The Numbers Involved


Quote:
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Lets talk numbers. As in how many houses you would have to flip before you realized how much was wrong with your line of thinking. The answer is almost1.
FIFY
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Old 12-31-2015, 12:14 AM   #20
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Re: Flip Houses: The Numbers Involved


I appreciate the comments. This was actually my first post. Big fan of this site, I have used it for years. My initial post was a little immature because I wanted to rile somebody up enough to create a response and the result is plenty of professional opinions.

Knaveman. I agree with your comments.
And several others.

Jaws, totally. But it's been difficult to find a "legit" crew. I didn't grow up here, so it's all Craigslisting gigs. Lots of guys are on drugs, or don't pay at all. I just worked for JW Construction, found out that guy was on the KVUE news!!! For fraud and investigating his unfinished projects and unpaid workers.

Austin is booming, it's true that houses will sell after being on the market for 2 days!!!
This is where it's at, but that 30% Capital Gains is a whopper.

Unfortunately I cannot obtain a mortgage on my own, but that's something to work on.

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