Questions About getting started

thehebrewhero · #1 03-07-2011, 04:50 AM

Hey guys getting ready to start my own house flipping co. I own a few propertys and have been a landlord for about 5 years. Mostley duplexs. I've also owned bars and curently own a marketing firm. Some family members and associates of mine have had sucess in house flipping. o heres what I have in place. 1) A good realtor 2) Financing 3) Contractors I've worked with and like 4) A LLC My question is really this

1) Should I by homes in a 150K neighborhood for as close to 75K or less and sell for 140K-150K?

2) Or should I buy 50K homes in a 100K neighborhood and make it worth 150K and sell for 140K

Im not sure if I should buy ok houses in good neighborhoods and make a minor facelift then sell for a ok profit by getting them up to speed with the neighborhood? Or should I buy homes in so so or poor neighborhoods and make them the best house on the block?
In a nut shell whats a good thing to look for when getting started? What should a decent ROI be?

Lady Flipper · #2 03-07-2011, 11:27 AM

Re. the ROI - that totally depends on where you are planning to do this. Local markets vary greatly. It also depends on your knowledge of the neighborhood, what the market will bear and whether your remodel costs are properly estimated. Too many times people run into unforseen structural issues.

The rule of thumb is to buy a bad house in a good neighborhood.
Just how bad depends on your resources.

Never make a house the best in a neighborhood unless you are out in the country side, the house comes with attractive land, and you are targeting either retirees or wealthy people. You can have a huge ROI this way, but the sale will be slow because you are targeting a niche market. Be aware exactly what that niche is - do you need fencing? A place for horses? Water features?

In urban environments you want to buy a house that has no structural repairs pending but looks like a time capsule from decades earlier.

Of course we are all looking for that gem of a house that has been well maintained but hasn't been updated in decades, while the neighborhood has updated. These require the least investment of time and money for the highest ROI. Often these turn up in estate sales. The heirs want cash in hand and don't want to invest time or money.

When you flip a house like that, you want to end up priced in the middle range of the neighborhood, with finishings as high end as that market will allow. Often it pays to pick either the master bathroom, kitchen or outdoor space and make it special. One space that is better than the rest of the neighborhood will sell the rest of the house.

Be aware that of you generate too much ROI in too short a time, the banks may be hesitant to lend the money to your buyer. They worry about a shoddy flip and a bad investment. It makes sense to check this with local banks before you even get started.

thehebrewhero · #3 03-07-2011, 04:39 PM

Thanks

The best deal I've seen so far is this

3BD 2BTH house in great neighborhood looks ok needs paint, applainces, wood floors, landscaping, paint.. I could probably buy it for 100K..The highest a similiar house got was 160K in that neighborhood.
Whats a good expectation for ROI on 100K ? Im thinking 50K but some have told me your avg proffit on a flip is 10-25K

Lady Flipper · #4 03-07-2011, 04:53 PM

You don't want to shoot for the highest possible price you can get if you invest properly, but you want to stay in the medium price range. Otherwise you will sit on the house with your cash tied up...

So how much can you expect for your $100k plus renovation money? What is the medium price there? You can shoot for the upper medium...

Do the houses in the neighborhood have wood floors? Or laminate? Try to imitate the standard, and pick one area (I am thinking kitchen since you need new appliances) and make it better than average for the area to make a quick sale.

Your first house is just that - the first. If you make 50k on it but it takes months to sell, are you not better off making 25k but selling in weeks and flipping more houses sooner?

thehebrewhero · #5 03-07-2011, 06:31 PM

I like your style move fast instead of high proffit. 25x3 is better then 50

Yeah Im looking to spend about 100k on house and a budget of 25K for repair and other costs.. I could buy that house for 90 if they take cash and lower price.. If I redid kitchen and painted it I think it would easily go for 140K its the best school district in KC.. Im not sure if the other use wood or laminate I think would but I'll check it out. Thanks for the 411.. How long do houses usually sit? Im thinking if it appraises for 160 and its for sale for 150 or 140 not long right?

Lady Flipper · #6 03-07-2011, 10:06 PM

I really couldn't tell you how long - it's regional. Your agent can tell you.

Laminate versus wood makes a big difference financially, if everyone has laminate, don't spend the money on wood. Get a nice up-scale counter top instead. On the other hand, if you use laminate when everyone has wood, your house will be worth a lot less. These things influence buyers.

flip_it_fast · #7 03-08-2011, 03:39 AM

Lady Flipper hit it right on. You basically just want to make your house a little better than what is in the area. Make yours the best but not outlandishly so. A $25,000 profit is nothing to sneeze at thats for sure!

thehebrewhero · #8 03-08-2011, 03:45 PM

You mean laminate counters vs granite right? I think most places have wood floors not the fake wood floors I'll go check out some stuff for sale in the neighborhood to be sure

Lady Flipper · #9 03-09-2011, 02:09 AM

No I mean laminate floors. They are actually wood, compressed, look like wood and a LOT of places use them instead. They cost less and wear longer, much longer. Look here: http://www.google.com/images?q=lamin...w=1115&bih=704

Laminate countertops - don't do that unless you are in a down trodden neighborhood. And especially not if the kitchen is your show piece.

Try the man-made stones. Quartz is the upper end of these, less expensive, looks and feels like granite and is actually also better, no maintenance whatsoever. There are also less expensive man made stones, they beat laminate counters out by miles, all of them. Look here: http://www.google.com/images?um=1&hl...qi=g10&aql=&oq=

thehebrewhero · #10 03-09-2011, 03:36 PM

Does the laminate go down like sticky tile? Its not like the real wood that goes in slots like a puzzle I take it.. That quartz looks nice thanks for the heads up I thought everyone used granite only..Yeah I'll definatly look into that the neighborhoods Im looking at are mostly 3bd 2bth middle class homes\ starter homes