# flippin



## Teetorbilt (Feb 12, 2004)

This should be discussed here.

I do it and help others.


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## ProWallGuy (Oct 17, 2003)

My boy likes to flip too.


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## Humble Abode (Mar 19, 2005)

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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## Teetorbilt (Feb 12, 2004)

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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## mdshunk (Mar 13, 2005)

I think that Flip Wilson was before my time.


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## Cubevan (Nov 24, 2004)

Does anybody here remember the old TV show Flipper?



They call him Flipper, Flipper... :cheesygri


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## Humble Abode (Mar 19, 2005)

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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## Teetorbilt (Feb 12, 2004)

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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## Humble Abode (Mar 19, 2005)

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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## mdshunk (Mar 13, 2005)

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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## Teetorbilt (Feb 12, 2004)

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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## Jason (Apr 29, 2005)

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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## ProWallGuy (Oct 17, 2003)

Any of you catch that news series on TV called 'Property Ladder'?


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## Nathan (Jul 21, 2003)

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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## Bob Kovacs (May 4, 2005)

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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## Teetorbilt (Feb 12, 2004)

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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## Humble Abode (Mar 19, 2005)

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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## J2Jonner (May 24, 2005)

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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## Longacre (Jun 7, 2005)

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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## Bob Kovacs (May 4, 2005)

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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## J2Jonner (May 24, 2005)

Bob, 
Thanks for the analysis, it's very logical. I think the house size to start flipping came from a concern of starting to big and finding myself carrying a house that was not selling as fast as I thought. I'm going to take this advise into consideration though and see what properties I find.

Cheers,
Jon


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## Humble Abode (Mar 19, 2005)

Longacre said:


> 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.....


LOL sounds like you have been to Milwaukee! Yea you could buy a whole block of apartment buildings around 60th and Locust for less than $100k but that doesn't mean you would want to. The murder rate in Milwaukee has just reached a five year high and we are only 8 months into the year. We are actually looking into buying in some of the northern suburbs and bedroom communities, i/e West Bend, Mequon etc.

P.S. Don't let this thread die we havn't even scratched the surface. What has been your experience with Realtors? I would like to get to a place where I didn't need to go through a buyers agent, I don't trust them one bit. Is this all but required these days? Obviously knowledge is key when dealing with someone who is trying to screw you. I blame realtors for the skyrocketing price of homes these days.


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## Teetorbilt (Feb 12, 2004)

A Real Estate Attorney charges by the hour, knows more than a realtor and costs much less than a realtor's commision.

Humble, No one has even mentioned the tax situation, so I don't think that this thread will go bye-bye soon. There was an excellent article on this in the paper the other day and ol'#2 pitched it.


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## Longacre (Jun 7, 2005)

Oh yeah Humble, I've spent enough time driving through some of Milwaukees nastier neighborhoods.....you know when plywood is an adequate replacement for window glass, there isnt an orifice on the building without bars on it, and all the aluminum siding is gone up as high as arms reach....yer in the WRONG neighborhood 

Dunno how many bargain flippers you are likely to encounter in the northern burbs as theres plenty of money out there, but you might be able to look south in the communities outlying with quick access to I-94 or I-43 and cash in on the commuters. Perhaps maybe the Mukwonago, Big Bend area or out towards western Waukesha County. I know out by me in Genesee Depot the property values are jumping quite nicely and you might be able to score a good fix'er up'er outside Milwaukee County.

School districts might be another point of notice as many home buyers have kids so do some homework on the caliber of the local schools as that can be a selling point. I know my wife and I are glad as hell to have been able to get our kids into the Kettle Moraine district as its one of the best in the state, Im sure other parents looking to buy a home might find something like that worth some extra money in the asking price as well.


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## Jason (Apr 29, 2005)

I've been working slowly on a model for fix-flip. My business partner and I have been working over the past year learning different features of trades and attempting to perfect our ability to spot out houses.

I do weekly searches on housing costs, buy-to sell rates, and everything else you would assume anyone would do before getting into this endevor. As part of my plan, I will be setting aside a significant amount of money to repairs, fixes, etc. so as to document the reasoning behind my price increase.

On average, I found that from your purchase price to sell price you will have to increase your price by close to 100k. So if you purchase a house at 100k, you would need to sell at 200k. Therefore, the neighborhood is essential. If in the above scenerio we were to sell at 200k, the medium value of the average home in that neighborhood must be 10-30% higher.

Along with my price plan, I've set aside money for 6 months of morgage and insurance, 12 months of taxes, and 8k for wages. That is our minimum earnings per month (but we will work many/MANY more hours). It will be my partner and I doing the work over a month period. Along with that set aside cash, we are allowing 2k for subcontract costs. These will include an electrician and plumber to sign off on our work (We already have these two positions filled by close family/friends). We've set aside around 25k for materials.

When walking into a house we have four key factors (at this point), which include; Foundation, Lot Side, Mold/Fungas, Neighborhood. If anyone of these features is not up to par, we walk. ***I would love to hear some other persons 'do not touch list'***

After paying out materials, labor, realtor, taxes, insurance, closing costs, advertisement, we expect to make a minimum of 4k (our wages said above) and approximately 12k in that 2 months (1 month of labor + 1-2 weeks prospecting + 1-2 weeks selling/new prospecting). Again, as per our buying totals, we will make sure to be able to pay 6 months of sitting time if necessary.

What do you folks think? I was a bit concerned about posting this much detail, but persons who have done this in the past, I would really appreciate some remarks.


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## mdshunk (Mar 13, 2005)

Jason said:


> When walking into a house we have four key factors (at this point), which include; Foundation, Lot Side, Mold/Fungas, Neighborhood. If anyone of these features is not up to par, we walk. ***I would love to hear some other persons 'do not touch list'***


My only "do not touch" item is bad neighborhoods. I did one that not only had some fire damage, but one wall of the basement was substantially cracked and bowed inwards almost to the point of a cave in. That unit netted 80K profit after the repairs. The more you get into this, and the greater your network of subs grows, the less of a big deal some items seems to be.


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## CogentRES (Apr 2, 2005)

Good points Bob. 

I think anytime people claim that "Now is not the time" to do something they are just looking for reasons to procrastinate.

If you really want to become a real estate investor, do it. Making excuses will accomplish absolutely nothing. 

You can make you own economy. Housing and food will always be the things for which there is the most demand. What better segment of the economy is there to do business in?

Rocky economic conditions may weed out the hacks who fail to research and learn this before they actually do it, but the knowledgable investor should see opportunity where others see danger.

Regarding condenmed houses:

I have one under contract right now (there is a title disaster the has recently surfaced). The contract price is 35k. The repair budget is 40k. ARV is 125K. Asking price will 115K.

Dealing with a condemned property is a PITA. But I think the extra work is worth it. With this one, I arranged a walkthrough with the city inspectors. They assembled the list of what they wanted completed. There were some items I did not agree with so I called a meeting with the city attorney and invited my financial backer. 

Money is the key. I showed up in a suit with my lender who loans between 1 and 2 million dollars a month. The city attorney realized I was serious. He agreed with my disputes and assured me that the city wants to work with me. 

I advise anyone who wants to become a real estate investor to read........ a lot. 

PM me if you want list of good books.

After you learn what you are doing, network. Find out where your local real estate investment club is and go to the meetings. Talk to as many other investors as you can. Ask them questions and listen. 

This is all very important but learning will only take you so far. I read, studied, networked ect for a year or so. It was not until I actually put my first few deals together that I really felt comfortable. 

Flipping a house is not easy in most markets.

I do not like Property Ladder. It always seems to feature a bumbling amateur investor who spends the first 15 minutes excited, the next 35 minutes worried and going over budget and then the final ten minutes selling the house during their first open house or within a week for their asking price.

In the real world if you go over budget there are consequences. 

To respond to some other points in this thread:

I hold an agent's license. So I list my homes. Yes this is more expensive than a cardboard sign but it works. I care about speed and since I budget for commissions before I ever buy a house it does not interfere with my profit.

If you really want to deal with foreclosures, subscribe to your local Legal News. All the Notice of Defaults and impending foreclosures are listed in there. The best deals never make it to foreclosure. When you call a bank and they give a list of foreclosures, these are properties that went to auction but did not receive a bid for more than what was owed. This does not mean that you cannot make money with these properties, it just means you are picking through leftovers.

It is better to deal with preforeclosures. This is a highly competitive,difficult market. Keep in mind that you are trying to get someone to sell you their home in a time of distress. There is money to be made doing this.

I charge for real estate investment consulting but I have learned so much from this forum, that I hope I have given someting back with this post.


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## Teetorbilt (Feb 12, 2004)

You can make you own economy. Housing and food will always be the things for which there is the most demand. What better segment of the economy is there to do business in?

The three most recessive free businesses are bars, hospitals and funeral homes. People can always find money for a drink, sickness and death can't be avoided.


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