Fixer upper investment house situation

[Senator]

I have done some flipping, and have done many remodels on my rentals. All were foreclosures, and almost all were dumps when I purchased them. They have went up at least 50% in price. I may do a few when I 'retire' as well.

Make sure you do not chase the purchase price. If you are off by just a little bit, (10%) you could lose.

Make an offer on your numbers, not what your realtor tells you. If it's within 30 days of listing, offer full price. After 30 days, all bets are off. Most banks lower prices every month or so until it sells. They may wait on your offer, rather than jump at it.

Negotiate a selling commission with the agent BEFORE you buy. You are buying a house through them now, get a negotiated commission when you sell now.

There has NEVER been a problem selling homes, the problem was pricing them right.

It's too bad you did not do the research and get the home in a pre-foreclosure status. That is where the real money is to be made.

You likely will need 30% down to get a non-owner occupied mortgage. An FHA mortgage may not be available. Use a cash offer to sweeten the pot.

Insurance on a vacant home is expensive. Look into it.

Remove all contingencies from your offer. No inspections after the price is approved, no HOA doc reviews, no financing or appraisal contingencies.

Do not forget your holding costs. Every month costs you in taxes, utilities and opportunity costs in the market or C/D.

 

[ivinsfan]

I'd use this particular house to try and educate myself about flipping in Florida since you have such a long timeline. Maybe do a walk thru with your agent and have them tell you exactly what would be needed to update and sell the house for a good price. Of course this doesn't tell you about any plumbing, wiring and or code violations.

Pencil out a rehab budget/timeline.... and see how you feel about the risk/reward ratio. There will always be houses for sale and anything you learn now will helpful in the future.You might check out the rental market as well, the figure you used suggest the house might cash flow as a rental and provide some extra tax savings and a little cash flow. It sounds as if you are looking for some new challenges in retirement,since you have mentioned several times that you don't really need the money.

 

[utrecht]

I have done some flipping, and have done many remodels on my rentals. All were foreclosures, and almost all were dumps when I purchased them. They have went up at least 50% in price. I may do a few when I 'retire' as well.

Make sure you do not chase the purchase price. If you are off by just a little bit, (10%) you could lose.

Make an offer on your numbers, not what your realtor tells you. If it's within 30 days of listing, offer full price. After 30 days, all bets are off. Most banks lower prices every month or so until it sells. They may wait on your offer, rather than jump at it.

Negotiate a selling commission with the agent BEFORE you buy. You are buying a house through them now, get a negotiated commission when you sell now.

There has NEVER been a problem selling homes, the problem was pricing them right.

It's too bad you did not do the research and get the home in a pre-foreclosure status. That is where the real money is to be made.

You likely will need 30% down to get a non-owner occupied mortgage. An FHA mortgage may not be available. Use a cash offer to sweeten the pot.

Insurance on a vacant home is expensive. Look into it.

Remove all contingencies from your offer. No inspections after the price is approved, no HOA doc reviews, no financing or appraisal contingencies.

Do not forget your holding costs. Every month costs you in taxes, utilities and opportunity costs in the market or C/D.

That's very helpful. Thx.
I believe the house IS in pre-forclosure because its not listed on the MLS yet.

 

[utrecht]

I'd use this particular house to try and educate myself about flipping in Florida since you have such a long timeline. Maybe do a walk thru with your agent and have them tell you exactly what would be needed to update and sell the house for a good price. Of course this doesn't tell you about any plumbing, wiring and or code violations.

Pencil out a rehab budget/timeline.... and see how you feel about the risk/reward ratio. There will always be houses for sale and anything you learn now will helpful in the future.You might check out the rental market as well, the figure you used suggest the house might cash flow as a rental and provide some extra tax savings and a little cash flow. It sounds as if you are looking for some new challenges in retirement,since you have mentioned several times that you don't really need the money.

That's basically what I'm doing now. I'm working on a detailed spreadsheet and working with the agent to get me into the house.

I went for a walk this morning and ran into a guy power washing a roof. In Texas, houses have asphalt shingles but here they are Mediterranean style barrel or S tile roofs. You don't power wash asphalt shingles obviously. The roof on the house behind me looks horrible and I was wondering if it could be power washed. So I got some good info there. Its pretty cheap too. The guy is also a painter and he quoted me about $2000 cheaper than I estimated to paint the exterior so that was also good.

 

[Moemg]

IMO You just moved to Florida and now you want to try home flipping . You really know nothing about Florida insurance & tax costs which will really run up the price of your flip . Plus Florida has flippers everywhere and if they did not grab this house there must be a reason. Turn off HGTV and head to the beach .

 

[utrecht]

IMO You just moved to Florida and now you want to try home flipping . You really know nothing about Florida insurance & tax costs which will really run up the price of your flip . Plus Florida has flippers everywhere and if they did not grab this house there must be a reason. Turn off HGTV and head to the beach .

I'm not an idiot. I've researched insurance and taxes here already. Before I do anything I try to find all the negatives. If I still want to do it, I proceed. I know this is a tough crowd which is why I started this thread. I don't know if I will flip houses or not. I have no need for income so its not like I'm desperate to quickly find an income. I can take my time doing research and then decide....and we are going to the beach in about an hour,

I do get kind of tired of people here saying that things cant be done because if they could someone else would've already done it. This may sound harsh but in my experience I would say that 75% of people are morons. This includes a lot of my friends and family members who just cant figure life out. They cant balance a budget. They can't take care of their things. They go to gas stations and pay 2.89 when the station right across the street is $2.59 because they have their head up their ass and don't pay attention. They have no discipline in their lives. Most of the businesses that go belly-up do so because the owners are clueless. Watch Bar Rescue or Kitchen Nightmares or any of those shows and you see it again and again. I have a friend that has a small restaurant and makes a killing and its nothing fancy at all. Same thing with a show I think is called First time Flippers. Of course they are inexperienced just like I am so you expect mistakes but those people don't even know how to use a drill. How is someone like that going to flip a house? There is money to be made at just about anything if you are good at it and although I have no direct experience at flipping, I have lots of experience in most of the sub-areas of flipping (remodeling, budgeting, negotiating etc). There's no doubt in my mind I can do it profitably. I just have to decide if I want to because I'm having a great time just being retired.

I do a lot of day trading and everyone tells me I'll go bankrupt because the the experts and the high frequency traders wipe out any advantage a guy like me has. But yet I continue to trade my system very profitably. I have a 17% return in the past year and it has nothing to do with what the market is doing. I go long and short every day. Market swings have no effect with what I'm doing.

The point is that the argument that it wont work because if it would someone else would have already done it is bogus.

 

[MichaelB]

I'm not an idiot. I've researched insurance and taxes here already. Before I do anything I try to find all the negatives.
./.
The point is that the argument that it wont work because if it would someone else would have already done it is bogus.

You are getting the feedback you asked for in your first post.

This is a tough crowd who will find problems with any plan so I want to see what you guys come up with that I haven't thought of yet. What do you think of this idea?

 

[ivinsfan]

I have to say the very fact that you asked for feedback, particularly negative feedback puts you ahead of the game.I can't figure out if you are truly undecided about trying to do some flipping or are just using this thread to root out some problems that you might encounter. If it the latter, I can see where general comments aren't really what you had in mind.

 

[calmloki]

Taxes? Making $100 and giving $25 to the feds reduces the excitement of making the $75 you are left with. Effect of making money on your Medicare premiums? I know the tax tail shouldn't wag the dog, but it does have an effect.

BTW, the flipping shows are great stinky piles of horse pucky. This from someone who does apartment renovations/repairs over and over, loans to flippers and watches how they buy and polish, and has redone more than a dozen places myself. The part where the neophytes come in and do demo work just infuriates me. #@!* demo - there is no virtue in destruction - it is in seeing what can be saved and doing just the things that need doing that calls for skill.

Was tempted to do a flip early this summer - very cool place that is a time capsule from the mid50's. Would have been a fun project. Having watched successful flippers I knew that the biggest thing is the purchase price and that went to $120k when I wanted to pay $65-70.

 

[utrecht]

I'm getting lots of good feedback. Saying "you cant do it because if it was possible someone else would've already done it" is not good feedback. Its pretty dumb really. How about the flipper that supposedly would've bought this house already if money could be made on it? Did someone tell him when he started that he couldn't flip houses profitably or someone else would have already?

There are literally hundreds of foreclosures within 30 miles of me that need remodeled. There are plenty of buyers because real estate values are rising rapidly. There aren't enough flippers for every house. The house I'm renting right now was a foreclosure that someone bought, remodeled and rented out. It was bought as a foreclosure for $281,000 in 2013. I don't know how much money he put into it but I can make an educated guess based on what I can tell is new. Unless the house was completely trashed when he bought it, he could'nt have put more than $50,000 in it. Its worth $425,000ish now.

 

[utrecht]

Taxes? Making $100 and giving $25 to the feds reduces the excitement of making the $75 you are left with. Effect of making money on your Medicare premiums? I know the tax tail shouldn't wag the dog, but it does have an effect.

BTW, the flipping shows are great stinky piles of horse pucky. This from someone who does apartment renovations/repairs over and over, loans to flippers and watches how they buy and polish, and has redone more than a dozen places myself. The part where the neophytes come in and do demo work just infuriates me. #@!* demo - there is no virtue in destruction - it is in seeing what can be saved and doing just the things that need doing that calls for skill.

Was tempted to do a flip early this summer - very cool place that is a time capsule from the mid50's. Would have been a fun project. Having watched successful flippers I knew that the biggest thing is the purchase price and that went to $120k when I wanted to pay $65-70.

How could you possibly renovate a house and make money yourself? Someone else would've already don't it if it was possible, right?

 

[bld999]

"There are literally hundreds of foreclosures within 30 miles of me that need remodeled. There are plenty of buyers because real estate values are rising rapidly. There aren't enough flippers for every house."

How long will the imbalance last? [Why is it there?] You make it sound like arbitrage, and usually markets close those gates fairly fast. Can you get to market fast enough?
I guess it doesn't matter if you are willing to live in it.

 

[utrecht]

"There are literally hundreds of foreclosures within 30 miles of me that need remodeled. There are plenty of buyers because real estate values are rising rapidly. There aren't enough flippers for every house."

How long will the imbalance last? [Why is it there?] You make it sound like arbitrage, and usually markets close those gates fairly fast. Can you get to market fast enough?
I guess it doesn't matter if you are willing to live in it.

That was my whole point of the thread. Right now, remodeled houses are selling quickly. Twice I asked if people thought the fact that we could live in the house with very little disruption to our lives significantly mitigated our risk if we couldn't sell the house quickly when it was done.

 

[calmloki]

That was my whole point of the thread. Right now, remodeled houses are selling quickly. Twice I asked if people thought the fact that we could live in the house with very little disruption to our lives significantly mitigated our risk if we couldn't sell the house quickly when it was done.

Actually, I considered that you might "live there" for 2 or more years, having it as your primary residence while fixing it and then vacationing afterwards - thus setting up to take any gains tax free

 

[utrecht]

Actually, I considered that you might "live there" for 2 or more years, having it as your primary residence while fixing it and then vacationing afterwards - thus setting up to take any gains tax free

That could definitely be a possibility also. I think I'm going to look elsewhere though. The mold on this house scares me as a beginner.

 

[target2019]

That was my whole point of the thread. Right now, remodeled houses are selling quickly. Twice I asked if people thought the fact that we could live in the house with very little disruption to our lives significantly mitigated our risk if we couldn't sell the house quickly when it was done.

I believe you can do this, if you're willing to accept a longer time-frame. I watched the house next door go from nuisance to new family in about 3 months. The previous owner did not live there, but did come to take care of certain things.

A team of contractors, who work together (one told me the story) several times a year, did the job in two months. HVAC, siding, kitchen and flooring contractors worked on the house. A shifty individual with the cash to pay them performed as the GC. They had an inside track with R.E. agents.

GC or someone bought the home for $194. Paid the previous owner some additional amount of cash that wasn't recorded. A couple purchased the home for $324, but the sale has not shown up yet on public records. The asking price was a little higher.

I think this would take an inexperienced flipper about a year.

 

[Texas Proud]

I am not one who would say that someone else would have done it... because from what you say it is not on the market...


I just wonder WHY you would want to do this... unless one of your hobbies is painting walls... or hanging cabinets... or laying floors (which you say you DW will do).... or all the other items that have to be done... then it is work..

Now, I am doing some work on my house... doing the deck.... but I have not touched it in the last 3 weeks as the temp is over 100 almost every day... I am waiting for it to get cool... I have the luxury of time... in a flip you do not... well, at least not for free...

IMO, this is either going to be a hobby for you.... and you have to figure out if there is a black hole possibility or it is work... it seems you know more about flipping than most... and if you have watched all those shows (even if staged) they tell you enough for you to know the big gottchas....

The one thing I would look into is the permits... some places are really bad... at the end of my career with mega I was in the real estate group that did construction all of the country.... there were some places that took a year to get a permit to build... and others were VERY strict in what you put down.... we had one place that required 4 inch trees... the contractor put in 3.5 inch.... we were told to take out the 40 to 50 trees and put in the right size... cost 10s of thousands....

 

[bld999]

With Florida being a judicial foreclosure state, I guess the backlog has taken some time to process and release properties for sale. They are apparently trying to speed it up, if you are located here:
http://www.dailybusinessreview.com/...h-Foreclosure-Backlog?slreturn=20150710143400

This foreclosed inventory would find it's way on the market faster in a non judicial state, assuming the lenders wanted to move. That would weaken prices some. I would guess the courts are the bottleneck instead of a lack of flippers. Or maybe bank financing is hard to obtain for rehabs. That would clear the deck for some cash buyers.

 

[wolf]

A property with an estimate of $40k flip profit is not enough to bother with IMHO. You might look for properties with more potential upside ($100k or more). Otherwise the downside risk is too great.

+1, agree. $40K flip not enough.

You should ask a friend who has done flips for advice. You should know in
advance, What it will cost to fix up, What house will sell for, and your net
profit.

Break even, and figuring your labor is "free", is bad business.

 

[Texas Proud]

A property with an estimate of $40k flip profit is not enough to bother with IMHO. You might look for properties with more potential upside ($100k or more). Otherwise the downside risk is too great.

Wow... missed this when reading earlier... saw it in a quote...

Do you do flips? I just do not see a bank leaving that much meat on the bone for a flipper... I would be in the 'someone else will do it' camp if there were that much upside to a flip...

The guy who bought my mom's house (the we buy ugly houses) planned a $10K to $15K profit... showed me his numbers... he had done many of them... now, the house after work sold for less than the profit you want...


I think $40K is a good profit... I also think that personal time and effort should be factored in... HOWEVER, I have a sister who knows someone who loves upgrading houses and then selling them.... they buy a house that is not bad.... do the upgrades while living in it... after a few years of projects they sell and move somewhere else... she loves doing it and does not factor in any of her time... it is her hobby...

 

[Senator]

The best way to get in on flips, is to understand the foreclosure process. Know how to get a lien on a property, know what lien priority is. Know how to extinguish liens. Know how to redeem property.

Join a RE investment club. Get educated. Get to know bird doggers. Get on RE investor mailing lists.

I just did a flip in 2014. Here are some brief detail.

New construction in 2005 price was $245K (the owner had a 80/20 loan)

Redeem from Sheriff in Nov 2013 - $128K Cash
Sold to new owner in Jan 2014 - $200K Cash

Total expenses were ~$15K and some labor, which included giving the owner $4K to make the deal. Total hours, 80. New paint, carpet and some appliances. Fixed a bunch of small items and cleaned like crazy. Total holding time, less than 3 months. Purchase to MLS time was ~3 weeks.

Profit ~$57K. If I would have waited for the MLS (or a realtor), it would not have been a deal. Or if the second mortgage get their $60K+ lien extinguished, it would not have been worthwhile. If I could not get a third lien position, it would not have possible.


Another one, that i still own. I purchased the mortgage from the foreclosing bank.
Purchase price was 197K cash (4-plex)
Fix up costs ~$60K, plus lots of labor
Annual rents are $53,340 with room to grow (of course no mortgage)
One similar that just sold, with less amenities, $355K (cash deal, 2 days on market)

There are lots of ways to make money with flips and RE, retail (i.e. MLS) is generally not one of the best.

 

[Another Reader]

In 2009, picking up deals on the MLS was easy. The banks were dumping properties as fast as they could. I bought four houses between 2009 and 2012 for $65-$74,000, all short sales that had fallen through at the last minute or foreclosures. They were in good shape, needing minimal repairs. They rent for $900-$950 and would now sell to first time homebuyers for $150,000.


Inventory on the Maricopa County (Phoenix) MLS is less than a third of what it was in late 2009 through 2010. What few foreclosures appear on the MLS are priced at market value and banks won't deal. Fannie puts in paint and carpet at their properties and prices them high. There are bogus "auctions" where the properties sell to unknowledgeable buyers at or close to market with the premiums added in.


I get solicitations every day from graduates of the classes given by the latest guru passing through town. Wall Street grads have gotten into the flipping business via Opendoor.com. Their solicitations are just a little more sophisticated.


There has never been a more efficient real estate market that the current one, at least in Phoenix.

 

[Throwdownmyaceinthehole]

Building Detroit - Neighbors Wanted

There is always Detroit to pick up a few fixer uppers.

 

[rodi]

My understanding (which could be out of date) is that Florida is a judicial foreclosure state - so the time to foreclose is longer than in other states.... Every foreclosure goes to court and a judge.

Here in CA it's usually an auction - have cash on the courthouse steps and you can walk away with a house for a decent price (unless other flippers have deeper cash pockets.)

 

[Texas Proud]

My understanding (which could be out of date) is that Florida is a judicial foreclosure state - so the time to foreclose is longer than in other states.... Every foreclosure goes to court and a judge.

Here in CA it's usually an auction - have cash on the courthouse steps and you can walk away with a house for a decent price (unless other flippers have deeper cash pockets.)

Unless there is a good sized mtg.... most banks will bid up to the loan amt...