Looks like I got one - Posted by Rich Hyams

Posted by Tom-FL on July 02, 2003 at 24:41:38:

Mentor in S FL? JB?

Looks like I got one - Posted by Rich Hyams

Posted by Rich Hyams on June 26, 2003 at 19:35:48:

Came up quick. Saw it yesterday as a drive by, had offer accepted today.

38,500 price
95-105,000 ARV
20-35,000 repair costs.

Roof is old, don’t leak, exterior is nasty, broken absteos shingles. Interior has been mostly tiled by an investor, an older, English woman, her daughter and family. It has been going on for a year and she can’t get anyone to finish and is going back to the UK in a week. She was asking 45,000, I offered 36,500, she came back with 42, I came back with 37, we settled at 38,500.

I am thinking two ways, I would like to do the work, I am really looking forward to breaking out my dusty tools and doing some work.

I have such a huge varience in repair costs because the roof does not leak, looks old, but seems fine, the exterior could get vynyl siding or mesh and stucco.

Going with a new roof and stucco and some nice little things, gets the cost closer to 35k and the ARV nearer 105k+.

No roof, vinyl siding, cheap kitchen and windows, get the rehab closer to 20k and the ARV 90-95k.

At first blush, it looks like the extra repair costs won’t justify the mildly higher ARV,

Or, flip it for 55k ??? to a rehabber.

Re: Looks like I got one - Posted by Sean

Posted by Sean on June 27, 2003 at 19:01:28:

55k for a house needing 35k in repairs worth 100k or so after fix up? Not going to happen, at least not with an experienced rehabber. 30k is a MAJOR rehab!

I know I wouldn’t even think of doing a 35k repair for less than 30-40k MINIMAL spread after repair… your market may be different, but that’s a hard sell for me to bite on.

I think you bought it low enough for you to justify a rehab and get a 20k payday, (38+35 =73, figure at least 7 for holding and marketing and sales side of equation and there is a 20k payday, rather skimpy for such a major rehab, but not a bad payday.) but you didn’t buy it anywhere near low enough for a 17k mark-up for wholesale.

Lets use the generic formula (ARV * .7 ) - repairs, that puts the absolute top end price for this property with 35k in repairs right at, or slightly above your purchase price.

I know you say you can put it to 20k rehab if you go cheap, but I am telling you right now, any rehabber looking to flip it isn’t going to skimp on an old roof, or go super cheap on the kitches, or skip on the windows if they are old single pain etc… Those are absolute MUST DO if you are going to flip.

If you are going to hold and rent you can skimp on some of them, but you better work of that higher amount if you are going to try to convince a rehabber to touch it.

I would say you did ok for your first deal to get a property you could rehab, as a wholesale, probably not in cheap enough to justify more than a few K tops.

30-35k is a MAJOR rehab on a 100k house, if you are going to try to flip, more than low to mid 40s is going to be tough… personally given the extent of rehab needed and this is your first deal, I would take the few K payday wholesale and move on… an 30-35k rehab is a MAJOR undertaking for first attempt.

But get that fantasy of a 17k profit on a wholesale flip out of your head now, you didn’t get in NEARLY light enough for that to happen. take the 5k max and move on. Anything greater and you are hoping for a greater fool to come along… and you might get lucky, then again…

Just my advice.

Re: Looks like I got one - Posted by Len

Posted by Len on June 27, 2003 at 11:12:06:

Hey Rich,

Way to go on getting the deal. Sounds like it could be a good one.

Let me suggest, though, that a flip at $55K is a little steep for most rehabbers. If your numbers are correct, the rehabber pays 55K, plus 30 more for fix up. That’s 85K. When you add in holding costs (any payments on the loan, taxes, insurance, closing costs, etc) that’s another $5K or more. Your rehabber then has $90K or more into the deal. Depending on how firm your comps are, they will make $0-$15K before the cost of selling. Not a great return for all that work, especially when you’d be making $17K for flipping.

If you are assigning your contract, I’d say that $5 K isn’t a bad pay day on a deal like this. Otherwise, you might not find a lot of willing buyers.

Of course, if you were getting it for $18K, that’d be another matter…

Keep us posted on this one!


Re: Looks like I got one - Posted by Jay (MI)

Posted by Jay (MI) on June 27, 2003 at 07:36:31:

I am all for flipping it. If you are not a “pro” rehabber, it will most likely take longer, and cost more than you anticipated. Good luck.

Re: Looks like I got one - Posted by Rich Hyams

Posted by Rich Hyams on June 29, 2003 at 09:52:39:

Yes, yes, you are right, and again, yes.

Flip in the low 40’s, 5k or less, vs 20k after a pretty major reno, permits, etc.

Skinny either way, but I will come out ahead one way or another here.

I am not sure which way I will go here, it is very, very competitive here in So Fl, there is a list that gets to LOTS of investors, re-habbers, etc, that I can get it on for 3%, nothing upfront. Whenever I visit a property on this list, there are other investors looking at it. The first property I bid on was on this list and went for 68k, the ask was 64,900, I offered 60k.

I want to make it fair, I will probably ask 48, take 43-44 and do the reno if I don’t get that…I am pretty sure I will get that…hey, it would pay the money I spent on signs, cards, mentor, etc, etc.

We have agreed to terms and price, I have signed the contract, basically a farbar, its at her attourney’s, he left early Friday.