Should I be jumping on investor flips?? - Posted by Bill

Posted by Bill on October 02, 2003 at 23:31:28:


Should I be jumping on investor flips?? - Posted by Bill

Posted by Bill on October 02, 2003 at 22:09:50:

In my local newspaper I am finding no shortage of homes that investors are flipping or selling for wholesale. These are homes that are in 65-80K areas. I find them in the paper for 30-40K cash. These homes need 10-15K to fix up. I know these investors are getting these homes for about 20-25K. Some of the investors tell me right up front that they will be making 10-13K if I buy. I have been doing some marketing myself and have a hard time finding anyone that will sell homes to me as cheap as these other investors are able to secure. Plus, the time and effort that I am putting into finding the real deals is getting frustrating.

I know that my own greed factor is keeping me from buying anything from the other investors due to me thinking that I will come across a seller that will sell really cheap to me thus putting the extra 10-13K in my pocket. Should I just forget looking for homes myself and just focus on buying from other investors? With all the flips I have in my local paper I could be making good profits rather than spinning my wheels in the search. I have the money, backing, and suport from local lenders to get going tomorrow if I decide to.

My overall plans are to either buy, fix and sell or buy, fix and rent for a few years. I am thinking I just need to get over this greed thing and go make some money, even if it is not as much as I could have made if I found the really cheap deal myself. Like I said there are plenty of wholesale deals easily found by opening up the newspaper. Do any of you do the majority of your business from flips from other investors? Any comments appreciated. Thanks

Re: Should I be jumping on investor flips?? - Posted by Tom-FL

Posted by Tom-FL on October 03, 2003 at 20:34:08:

I think the other replies pretty much covered it, but your post got me thinking. If these houses were really sellable at the prices listed, why do they have to resort to newspaper advertising? You indicated that there were an abundance of them in the paper. Most houses by competent wholesalers around these parts never make it to the papers. Usually, they’re gone in a few hours, never enough time to advertise in the paper. Occasionally a newbie will advertise in the paper to build a buyer list, but after a few (good) deals, they just market to their list. Think about it.

Re: Should I be jumping on investor flips?? - Posted by Brenda Whittaker

Posted by Brenda Whittaker on October 03, 2003 at 01:08:05:

Looks like you could be making $20,000 after fix up, which is actually pretty good. I find nothing in my area like that, but in the nearest city, 150 miles away, there is a group of wholesalers that sells foreclosures to rehabbers. They advertise with comps that the spreads are $20,000, but they don’t tell you that the comps are in good condition and you have to still put money into the houses you buy from them to get them habitable - plus, they have a HML that charges 18%! and, there’s their extra fees, (unbelievable), and then the realtor’s commission for selling it on the back end, then capital gains. What they’ve made look like $20,000 potential profit is actually more like $5000 to $3000. And people are buying up these houses from this group. So, if you are finding a potential $20,000 profit in most of these, it seems like a good thing, as long as you do your comps right and get a good idea of their actual value.

Re: Should I be jumping on investor flips?? - Posted by roger

Posted by roger on October 02, 2003 at 23:09:30:

why not do both ,while you wait for the right property to come along you can make a profit off these flips.
good luck on your r,e,i,

BE CAREFUL!!! - Posted by jimbo

Posted by jimbo on October 03, 2003 at 07:35:37:

Be extremely careful with these wholesalers/investors. Most investors that strictly wholesale properties that I have dealt with in the past are salesman. They typically underestimate the rehab costs and over-estimate the comps, making it sound like an extremely good deal. Then, when you go out to the property, the rehab costs are twice as much and the comps they gave you are really poor comps because they are on the next street over.

Some wholesalers are good though. You need to find them, there are very few. When you do find them, call them all the time, a couple times a week. They want cash buyers who can close quickly, if you have that, you will both do well working together.

And, most of these properties need work. If you are new to rehabing, you must educate yourself and find an excellent general contractor. Contractors will make or break you in this business. When you find a good contractor, stick with him and stay loyal to him. If you can keep him busy year a round, and pay him on time, he will be loyal to you and you both can build an empire.

In this business, just like all others, you must build a team. The top investors have teams: realtors, lawyer, accountant, contractors, lenders,etc.

One last thing, a lot of the wholesalers are newbies. There is no risk wholesaling properties, therefore it is the easiest way to begin in real estate investing. They thrive on selling these properties to other newbies who have no idea what they are getting themselves into. Then, they are upset, they used the numbers the wholesaler gave them and they had a terrible experiece. Now, lets be logical here, this is not smart on the wholesaler’s end. As a wholesaler, you want to keep your investors hungry, so when you get a house, you can sell it quickly to them. If the wholesaler misleads them, they will not be in this business for too long because they will have no repeat business from other investors.

So many investors think backwards. They want that big deal to go through, even if it means screwing someone over. This is plain stupid. The investor that does this will not last. You must establish relationships with other investors and be true to them, therefore you expose yourself to great deals in the future from them. For example, a wholesaler tried flipping me a property. He got this house under contract for $46,000. I offered him $63,000 and he declined. The house needed about $25,000 with me doing the work (I am a contractor) and it would sell for $105,000. He kept it for himself, had tons of problems with his contractors, had the house for atleast 7 months and his rehab costs were definately higher than mine because he had to hire the work out. He was looking for the one big deal, and it backfired on him. I will never do business again with him and he is losing out on a lot of future deals because of him being greedy.

I hope you understand what I am saying. Do your research on every deal and get out there and network with other investors. They are not your competition, look at them as teamates. You will come across a lot that are greedy, money hungry, and will look at you as competition. Turn away from these people, they will not last in this business, you don’t want to associate with them.

Good Luck,