Posted by Laure on January 17, 1999 at 14:46:15:
I am in central Illinois
Conflicting advice!!! - Posted by Kevin(OK)
Posted by Kevin(OK) on January 15, 1999 at 22:33:32:
How does one filter out conflicting advice? Some people say that $10K is the minimum profit for doing a deal. Other people say a few thousand is better than nothing (which is what I am making now). How do I decide who is right?
I recently posted a deal I have in the works that will make me a minimum of $7,700 and a maximum of $13,000. The replies were basically “to thin, will not work”. One person said to offer 30% of FMV. Does this person think that I have not tried the low ball approach, it will not work on a property unless that property needs major repair. I have talked to Realtors, Investors, heck even in Greg Perry’s book he states that he has to look ouside of Tulsa for deals because they are hard to come by here. There are not enough homes in this market for buyers, PERIOD! I have decided to lower my expectations and take what a deal will give me, the only other option is to keep making low ball offers and getting turned down every time.
“Brother could you spare a lead” is my new motto!
Re: Conflicting advice!!! - Posted by Cathryn
Posted by Cathryn on January 17, 1999 at 19:45:33:
I’m no expert, but here’s a thought…one good way to calculate if your return is enough is to figure how much you’re being paid for your time. If you put in 77 hours of work to earn that $7700, you are being “paid” $100…and that ain’t bad. If you put in 100 hours of work, your pay was $77 an hour…figure it out and then decide if it works for you. (You might also factor in how much time you waste doing lowball offers that don’t work…you put in the time and you get paid nothing!)
Re: Conflicting advice!!! - Posted by Laure
Posted by Laure on January 16, 1999 at 07:58:52:
My market is HOT HOT HOT> I have still “lucked out” and been getting 10-15k on re-habs. BUT I have a realtor bringing me tired Landlord’s properties… so I am not spending weeks finding the house. He does this because I re-list through him. He gets double commission because they are his listings. He gets to sell the house twice with me. My last three deals have had accepted offers within 10 days !! They are knocking down my door. I have buyers calling me wanting to know when my next house will be done. >>>>> I am getting tired… (yea right ! LOL) I am going to pursue “lesser” neighborhoods and see how I do there. The termite inspector gave me his card (doing inspection for closing in a week) and an address to look at. He owns this rental and wants OUT!!! Thinking about a L/O and a lowball price. Friends have told me it’s a rough neighborhood…but not a war zone. Anyway, my point is… get some deals under your belt and the next ones will find their way to you.
Re: Conflicting advice!!! - Posted by Irwin
Posted by Irwin on January 16, 1999 at 06:24:12:
There is no hard and fast rule on profit margins. You make whatever the market will bear. I can see operating on a $6-7,000 margin in a strong seller’s market, i.e. where buyers start beating down your door as soon as the property hits the market. And where I don’t have to
risk unknown conditions.
Re: Conflicting advice!!! - Posted by BR
Posted by BR on January 16, 1999 at 06:20:37:
Kevin, I would not be too concerned about profit margin at this point. You have nothing invested but a little time and a very small amout of money where flipping is concerned, besides you do have an escape clause right! Right now you just need to get a few deals under your belt. I don’t recommend leaning too heavily on the clause though, you should only sign up deals that you believe you can turn. That is the only thing that concerns me about flipping, the possibility of people abusing the escape clause.
P.S. Try the smaller towns surrounding the metro. area!
Re: Conflicting advice!!! - Posted by Bud Branstetter
Posted by Bud Branstetter on January 16, 1999 at 01:01:03:
I had an young investor call about a property I have. He asked what the price was. I related a range for the comps. He exclaimed, “Oh those houses will never bring that price”. He did not know I have several people already interested in the house at that price. He did not explore further whether I would owner finance or L/O. All he knew was to try and heavily discount the price. He could have been making several hundred a month off the property if he wanted it as a rental. I ended the the conversation with “Sorry, you missed out”
I do not have a problem settling for small profits if the risk is small. To me this means little of my money or a short time frame. No, I wouldn’t rehab a house that cost cash to buy, cash to fix up without a large return. There are just too many unknowns that can come up in a rehab. Pick the wrong house in the wrong area and you may have to sit on it till next summer.
Ultimately, you have to decide on your own risk versus reward. Get burnt once and you may change. In the mean time get it done and go on to the next one.