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Discussion Starter #1
This should be discussed here.

I do it and help others.
 

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ProWallGuy said:
My boy likes to flip too.

LOL


Teetor,

Are we talking flippin houses for profit? If so I think it should definantly be discussed. I am currently searching for my first house to flip and would love to hear what some of your experiences are. What do you look for? Single family two bedrooms or multi-family homes? Least amount of work in the shortest amount of time or complete overhauls? Where is the money?
 

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Discussion Starter #4
Here, prop. values are rising 30-40% a year whether you fix the place or not. In my case it is trying to find homes prior to the realtors getting them or taking on the ones that they don't want to be bothered with. They don't like projects, they want to paint, tile, carpet, landscape and go. I'll take on the projects with rot, new soffit, fixtures, kitchen, baths, etc.

As with real estate, you have to know the market for your area, how far you can go with the project and always location, location, location.

3/2's are the American Dream home.
 

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Teetorbilt said:
Here, prop. values are rising 30-40% a year whether you fix the place or not.
Same here. I think I read recently 16-25% is the national trend.

What about condemned properties? That seems like a project and a half. You can get them for a 1/4 the price but have to put in more time and money... also the neighborhoods are not always the best to work in.

I have also been hearing advertisements lately for companies that sell bank forclosure lists. Anyone have any experience with a company like that?
 

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Discussion Starter #8
I'd stay away from condemned properties. They often have schedules and inside agendas attached to them.

You can work with your local bank(s) on foreclosures. No need to bring in a middleman. It will take a little while to build a working relationship but once you get familiar with people they may call you with deals. Some will also be looking for 'birddogs' which you can negotiate to a percentage at time of sale, middlemen will take theirs larger and up front.
 

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Teetorbilt said:
You can work with your local bank(s) on foreclosures. No need to bring in a middleman.
I suspected as much. From what I understand the people who sell those lists basically just collect the data from banks who have it on display or as a matter of public record.
 

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Teetorbilt said:
I'd stay away from condemned properties. They often have schedules and inside agendas attached to them.
A big amen on that one, brother. Every officially condemned property has an unknown list of pissed off people attached to it, each with their own axe to grind. The only successful condemned property rehabs that I've seen happen were by developers who bought entire blocks or sections of neighborhoods and did something spectacular ($$$) with the land. You can find properties with similar prices which should rightly be officially condemned, but never have been. Those are the ones that appeal to me.
 

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Discussion Starter #11
For my personal residence, I have always bought the worst house on the best street. It takes a while to bring it up to the best house on the street but it also raises property values. The neighbors will do their best to keep up to your example and the property value just keeps going up.

Flippin examples.
1st house. $27K purchase, $86K sold, time <3yrs.
2nd. $105K, $525K, 5yrs.
3rd. $660K, $2.3, 4yrs. (waterfront)
Same approx. time. 10 unit apt. $325K, $650K, 6yrs. + income (waterfront)
flippers, $95-150K, $300-400K, a year or two. Average investment $35-50K.

NC house in boonies with 5.3 acres, $64K, 7.3 bordering acres 12K, 6 acres bordering the 7.3 parcel $600.00. Current value, about the same as I paid for it 25 yrs. ago. Location,...........
 

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My business plan for the last year was to build up my credit and my partners so that we can start investing in properties to fix and flip. Our goal is to be ready by December or January.

I'm in the midwest so the realty market really slows down during this season, we hope to get one of those vacant houses thats just sitting there.

I wanted to know on your projects about how much money did you set asside for material costs and how long did you take to fix each house?

We were hoping to be in and out in 1 month, but are setting aside enough cash for 6 months. Also what kind of profit percent did you shoot for? Were looking at 20%.

We are setting aside 20k for just materials, another 6k for appliances.
 

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I love that show. I watch it all the time although they are in repeats now.

Personally, I would love to flip houses but now is NOT the time to do it. The housing boom is at its peak and its going to either level off or drop. Real Estate investing is not the thing to do right now IMO unless you find a REALLY good deal.

That goes for most things though. When everyone is going after something its best to stand back and let the dust settle. You can always come back later and clean up the mess.
 

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Jason-

Something in your logic doesn't make sense.

1. Unless you're planning on doing all the work yourself, you've got to set aside money for labor and subs as well as materials.

2. If you plan on being "in and out in a month", either $20k is a lot of material if you're putting it all in yourself, or there's no way you'll be doing all that work in a month.

3. Why $6,000 for appliances? Is this some McMansion with stainless steel Viking ranges and Subzero refrigerators? Most properties that you may end up flipping only need a stove, dishwasher, and maybe a hood/microwave. You should be able to buy those three for less than a grand.

4. If this is a house that deserves $6k in appliances, you're not going to be able to do very much to it with only $20k in materials. A house like that could eat up $20k just in flooring very easily.

5. If the house is "just sitting there vacant", there's probably some major issues to be dealt with (requiring far more than $20k to resolve)- in most areas of the country, anything that only needs $20k in repairs sells within a week for the same price as a house that needs nothing. If that's not the case where you are, you may have to re-think your numbers.

I hope your 20% number is pure "net" profit after closing costs in and out, realtor commissions, interest, and carry costs. Otherwise, your 20% will quickly end up being "0"%. Also take into consideration that of you're splitting profits with your "partners", your share will be less than 20%. Assuming that's the case, I'm hoping that you're looking at big homes that will sell for $600k to $1mil minimum- otherwise that 20% isn't worth the risk, and your portion of it won't be worth the time, effort and aggravation involved in the flipping process.

Bob
 

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Discussion Starter #16
An article in today's paper stated that the demand in the southern counties had flattened.
Some pundits are saying that the boom is over, others are calling for a recession. Where I am, I don't see either.
One of the nice things about property is that you can rent it. If you had to go for a mortgage, the rent should cover that and all other expenses so at least you aren't losing anything.
 

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Nathan said:
That goes for most things though. When everyone is going after something its best to stand back and let the dust settle. You can always come back later and clean up the mess.
I agree espessially considering all the near shady lending practices these low interest rates are creating. Interest only lones, 0% lones etc. A lot of people out there who bought homes in the last 1-5 years won't be able to afford them once the bubble bursts. They can't afford them now they just don't know it yet....
 

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Bob Kovacs said:
Jason-
I hope your 20% number is pure "net" profit after closing costs in and out, realtor commissions, interest, and carry costs. Otherwise, your 20% will quickly end up being "0"%.
Bob
20% is the number I am shooting for on my first flop. I'm trying to decide where to focus my attention on finding the right candidate for purchase, hence the inquiries here. I'm thinking that narrowing my focus to neighborhoods that I'm familiar with near my own home may be a good start. There are a good number of homes in the surrounding neighborhood of the starter family size, 3 BR - 2 Bath Ranches. Values for these range from $140-$180, but the neighborhood has a number of homes that have had little done to them since their debut in the 70-80's. So I'm looking for value properties in the area in the $100-$110 range, and get ready for sale in around 2 months. I'm interested in hearing how people prepared for their first flop financially, saved up the "improvements" cost, financed it all, etc?

Cheers,
Jon
 

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Humble Abode said:
Same here. I think I read recently 16-25% is the national trend.

What about condemned properties? That seems like a project and a half. You can get them for a 1/4 the price but have to put in more time and money... also the neighborhoods are not always the best to work in.

I have also been hearing advertisements lately for companies that sell bank forclosure lists. Anyone have any experience with a company like that?

Heh, neighborhood is an essential consideration I would think.

Humble, Im sure you could get a place down on 33dr and Brown for about 4 grand and after fixing it up and selling it you would only be out 100 grand after replacing your stolen truck, tools, wallet, credit cards, any cash you were carrying, medical bills from the ER..... ;)
 

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Jon-

Let's look at this closer:

You are looking at houses that will sell for $140-180K cleaned up. If you want a 20% profit on a $150k sale, you want to net $25k. That leaves you $125k to work with. If the house is sold thru a realtor, you pay 6%, which is $9k. Your closing costs in and out will probably be around $5k. That leaves you with $111k. Unless you're paying for this out of your pocket, you're going to probably spend $3-5k in interest and points (more if you go with hard moeny loans). We're now down at around $108k. Assuming you can find a house for $100k that only needs $8k in improvements to bring it out of the 70's, you're upside down already. That's a tight reno budget for anything but the slightest cosmetic upgrades.

We haven't even mentioned carry costs- even if you do prep the house for sale in 2 months, it may not sell day one, and even if it did, you'll probably be carrying it for around 2 months just to get to the closing. Those carry costs will now come out of your profits.

You've also got no contingency to work with. What if you find mold, rot, termites, bad electrical, and any of a host of other items you didn't consider? That $25k could quickly erode to nothing.

You have to start at the end, and work backwards to calculate all of your costs before determining what's left to pay for the house. Most of the time, it'll be far below what the house is listed at (like probably $70-75k for you example house). If the house is already "listed", it's probably priced to cover potential costs for the buyer to upgrade it, but not enough for you to cover your costs and turn a good profit. You'll have a hard time finding good flips in the MLS or ads- you've gotta sniff out the houses that aren't really "for sale", and where the owners need to get out quickly and cheaply.

If I were you, I'd look at something in a higher price range- there's more room there in case of cost overruns. Running $15k over on a house that's going to hopefully net $25k makes it a waste of time and money. If the house is supposed to net $50k, that same $15k bust isn't so hard to take- it still sucks, but it's easier to swallow.

Good luck,

Bob
 
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