[etobia]

Hi, I'm a newbie on all of this, but have lots of friends to help me flip my first home for a profit. The question I have is how do you decide how much to pay for a house that needs to be renovated from an insurance claim that basically will involve replacing the kitchen, bathroom and hardwood floors throughout the house.

The homeowners will not be sharing the insurance settlement. They say they just need to let go of it. Real estate in the neighborhood goes for 90-125,000. So, how much should I offer to bring it up to habitable grade and still make money on my "flip"?:confused1:

 

[tribe_fan]

Let's see, pay as little as possible, the do as little as possible to rip off the person who eventually buys the property ?

 

[G-Mo]

Honestly, if you are asking, this is probably an endeavor you should not be getting in to. That said, you need to make your money with your purchase price, usually at least 30% below market value. You also have to consider what it's going to cost you in real estate fees and capital gains tax on the sale to determine if it's even worth while. Additionally, in order to get top dollar you have to have good quality finishings, if you can't provide that, you won't make your money.

 

[Ron6519]

Virgin flipper in a dead real estate market. What could go wrong?
Where is this property?

 

[Bud Cline]

Virgin flipper in a dead real estate market. What could go wrong?

Timing is everything, what is wrong with this picture? Paying cash throughout I hope.
Here's a few things that are going to kill your plan and turn this dream into a money pit from hell.

1. ...have lots of friends to help me
2. ...how do you decide how much to pay
3. ...replacing the kitchen, bathroom and hardwood floors throughout the house
4. ...Real estate in the neighborhood goes for 90-125,000

Maybe you should buy yourself a motorcycle and have some fun on the road and stop watching those phony get-rich-quick TV programs.:yes:

 

[etobia]

Where is the property

Virgin flipper in a dead real estate market. What could go wrong?
Where is this property?

Upstate NY has an active market In this price range. all the folks who were buying higher end places (200-800,000) are now looking for good old fashioned ranch houses. I've checked the neighborhood comparables for sales between 2006-2011. When I get a min. I'll send photos and more detail.

 

[Ron6519]

Upstate NY has an active market In this price range. all the folks who were buying higher end places (200-800,000) are now looking for good old fashioned ranch houses. I've checked the neighborhood comparables for sales between 2006-2011. When I get a min. I'll send photos and more detail.

You're correct about the upper end houses up there. I have a customer in Copake, NY(about 50 miles South of Albany) trying to sell a house. Price range in $330k. It's been on the market a month and no one has even seen the house.
Another house 300 yards away just dropped the price $149k to $450k.
Real Estate agents who saw the house while I was there described the market slower then they've seen yet. That includes all price ranges according to them.

 

[etobia]

I am way further north

Elmira-CORNING and Syracuse market. I have seen four houses on my street alone sell fast (1 month) prices between 85,000 for 2 bedrms and 150,000 for 4 bedrm three bath raised ranches.

 

[Allison1888]

You need to start with a spreadsheet of ALL your potential expenses- cost of every supply and worker, plus mortgage, insurance, real estate commission, etc. Add in 20 percent for overages and don't play the game of "well...I bet the plumber will only be $1,000"--get a real estimate. If you have friends working on it--what is their expertise--would you hire them if you had the money to pay them? Will the work be up to code? Otherwise you've got liability issues.

If you've never remodeled a house before, it is a very complex and involved process-even when doing the minimum to make it sell. I would start by helping someone else run such a project (where you don't have your money invested in the purchase) and watch how it goes. Very few people make money at it because they don't count all the costs. When you take out a mortgage, for example, that is money down the drain for the entire time you are working on the house. It is not tax deductible unless it's your primary residence.

Anyway...do your homework. Talk to people who have done it and ask to see their spreadsheets...If they don't have one, then don't believe them when they say they've made money.

 

[Jim F]

All the jobs are leaving Upstate NY. The taxes are out of control. It is a great buyers market. Sellers market? Not so much. I like your chances slightly more in the Elmira-Corning area. Syracuse is pretty much one big ghetto from what I've seen and read. In the 90-150K range there is not much room for markup.

I've looked at a few "flips" I can usually tell a flip before even walking into the house. Note to novice buyers aka property virgins. If you see a lot of wall to wall carpet, wall paper, new paint, especially textured paint RUN, don't walk away from that house flip ripoff.

 

[Wiscbldr]

From a cost perspective, determine the comparables for sale in that area. Then subtract at least 25K in order to undercut your competition to push for a quick sale. Then take that price and subtract the estimated costs of renovations, and also subtract your expected profit on the flip. The end result is how much you should offer.

Example: comparables=100K creates a starting list price of $75K; less 50K for renovations gets you to 25K; less your profit of 25K.. allows you to offer zero....

Seriously, if youve never flipped a house, if you've never done all that work yourself, you're probably in over your head. Realize that the cheaper the house, the harder it is to renovate and flip. Its all relative percentages based on current market trends, neighborhood pricing, etc, etc.

 

[DannyT]

we both got laid off in california and my wife eventually found a job in ohio. she looked at one house that from our info was a foreclosure. we found out someone had bought it and was going to flip it. they installed new cheap carpet and had it painted. was a really sloppy paint job. they were looking to make a quick 38,000.00 on it. we decided on a house 2 blocks awaythat was 32,000.00 cheaper. eventually they had to rent it or move into it and over a year later its still for sale. my uncle bought a 3200 sq foot house for 131,000.00. it needed painting and new floors. 6 months later a 2800 sq fthouse 2 blocks from him with all new floors and a new kitchen, cabinets and appliances was going for 119,000.00. i would say you are taking a chance doing it at this time. i dont know why people are even building new houses with all the new ones sitting there for sale and all the existing pre owned houses that are for sale at really good prices. if you arent careful you can price your house right out of what the neighborhood will take.

 

[Mike Swearingen]

I've been a fulltime real estate broker for more than 24 years in Northeastern Coastal North Carolina, and I have never seen the market this bad.
A virgin flip at this point in time is a good way just to lose your virginity IMHO.
You have missed that safe "flip" market period, and if you do not know far more than it seems, DO NOT DO IT!!!
Fact: The United States has lost more real estate value (adjusted for inflation) in the past four years than in the worst 10 years of the Great Depression!
Don't believe what you hear from Washington about this "recession" being over. It isn't over by a long shot.
There are some areas that have hit bottom, but most have not. I don't see things beginning to turn for at least five years in many areas of the country, but there are exceptions of course.. There are just far too many homes on the market with a couple of million more waiting on foreclosure to join them.
Keep your cash in a FDIC insured bank account and save yourself the get-rich-quick-too-good-to-be-true experience.
Mike

 

[user1007]

I would get a thorough inspection on the property whether buying it for a flip or for any sort of rehab to it. In my opinion, most flippers rank right up there with the slumlords and the rest of nature's bottom feeders. They don't care about the property, fixing it up right, or who ultimately gets stuck with their compromises at every corner. They feed the American dream with a high lustre no substance diet.

I hope I heard it wrong and was not paying attention but think I heard a recent study showed 60-70 percent of people with mortgages owe more on the mortgage than the home or property will ever be worth again. All it takes to really bring property values down further than perhaps those in a completely foreclosed or otherwise abandoned neighborhood is silly assed flippers with cute tool belts and cheap stuff doing rehabs and renovations.

 

[user1007]

I've looked at a few "flips" I can usually tell a flip before even walking into the house. Note to novice buyers aka property virgins. If you see a lot of wall to wall carpet, wall paper, new paint, especially textured paint RUN, don't walk away from that house flip ripoff.

:thumbsup:Great advice!!!

 

[linuxrunner]

We had the property next to us flipped recently.

To my surprise everything was done right, complete new roof with new plywood sheeting, total gut and new sub floors with new hard wood floors, all bathrooms completely gutted and rebuilt. Complete kitchen remodel, new siding new driveway pored new stone veneer on front. Everything was hired out to professionals that did a great job!

it was only for sale for about 2 months before it was purchased, talked to the guy who did the flip. he said after all the work he put in and the fee's and tax he only made about 8k on the house and his average is less than 10k per property, he strategy was to have 3 or 4 houses going at the same time, sounds like he was able to bring in about 45k a year, in this area that's not exactly the overnight wealth some would lead you to believe flipping houses can get you.

 

[justinae]

My wife and I are also getting into our first flip property. I'm a general contractor so pricing things is a little easier and making a quick assessment is also a little easier, but there is still a lot of honest homework that has to be done.

I think it's easy to start kidding ourselves about how great a home could be without keeping our eyes wide open to the realities of cost.

We are planning on doing several slow owner occupied flips as a way to avoid taxes, though you can use a 1031 to postpone your capital gains if you plan to do more than one. Just remember that it will catch up with you at some point.

Flips can get a bad rap, so don't be one of those flippers who uses cheap materials and cheap methods, do it right.

A little discouraging to hear about the $8K profit for the flip in the Portland market as that's where we are. But with a lot of patience for the house with the right kind of value I think more can be had.

Good luck.

 

[jonathan wood]

http://personalmoneynetwork.com/moneyblog/2012/10/17/flipping-houses/Thanks for the great advice, flipping a home can be risky. However, the ultimate goal of any house flipping project is to make money. You should always have an idea or how much money you want to make on your house flipping project. Flipping properties was a big pattern for a while there, until the housing industry crashed. However, the number of people doing it has begun to boost.

 

[paintdrying]

My youngest son, out there in Cleveland, makes more than he could ever make flipping houses. He is basically spreading out mulch, trimming bushes, easy stuff like that. He does very well for himself. He does not want the headache of being a landlord. Flipping a house in Cleveland is hard to justify the big risk. I ran all the numbers for him and he is better off spreading mulch than flipping a house.

 

[md2lgyk]

I second the earlier advice to just buy yourself a motorcycle and have some fun. Believe me, house flipping is nothing like what you see on television. And having personally done both, rehabbing an existing house can be more work and headaches than building a new one. If you step back and carefully think through your plan, you'll see it is doomed to failure.