I’m a newbie who has a potential flip deal. Here are the particulars.
Condo
1 Bedroom, 1 Bath
550 square feet (small, I know)
ARV $210,000
Reo listed at $129,000
my offer $100,000
Repairs needed =
Install wood flooring
new kitchen (cabinets, flooring, countertops, applicances)
Painting
New windows (maybe)
HOA - $255 a month
taxes $1,140
After repairs, put on the market for $199,000
reno costs $25,000
2 months to repair
2 months on market
There’s a lien on the property of $4,800? Will the bank pay that off when they sell it to me? Does this sound like a viable flip to you experts? Am I missing something? Thanks in advance for your advice.
Are you sure of the ARV ? If so then it is a good deal… I personally never buy a 1 bedroom because of the limited market for them. Do you have a buyer in mind? These days I never do a flip without a buyer locked in on the front end. It is too risky to get stuck with it until it sells. Many flippers went out of business for this reason. Get buyer 1st, then double check the ARV, double check the repair cost and timing, then have fun.
redhawk
Perhaps it is a tax lein - those never go away, even if it’s an REO.
Sounds like a plan - did the ARV come as a result of an appraisal? If so, you’re good. But like redhawk said, your best bet is to have a prospective tenant (or investor looking for cashflow) up front, locked it to the purchase.
As a backup, you might want to run the numbers on how much the property could rent for in your area, in the event that you find it hard to sell, and after a couple months you can decide to rent it out to at least get the renters paying the bills for you. Or your can Lease-Option the property. Either way, you need to be prepared in the event that your investment doesn’t sell quickly.
"Sounds like a plan - did the ARV come as a result of an appraisal? If so, you’re good. "
Sorry but I have to disagree.
The last REO I bid on, the bank had an appraisal of $204K… I told them they might want to get their money back… I bid $120K. The property has been sitting over a year. I rebid a few weeks ago again for $120K, the bank has come down to $169K, practically a 20% decline but still almost $50K over priced.
Appraisals are useless unless you did it yourself… You need to know the market.
I’ve spoken with several realtors and I’m pretty sure of the ARV. I’ve done comparables on several properties in the area and I’m sure the property, once renovated, will go for at the least $190,000. There is one condo that is exactly like the one I’m flipping that is on the market for $230,000. Over priced in my opinion. That’s why I would put mine on the market for $199,000, maybe even $195,000 to generate a quick sale.
I have already started looking for potential buyers as suggested.
The lien on the property is a tax lien.
I can rent the apartment, should push come to shove, for about $1,250 per month.
I will investigate lease-option or rent to own scenarios. Thanks for the idea.
My potential flip has hit a snag. The bank wouldn’t take my offer of $100,000 and came back with $120,000 as a counter. Is the deal still good at that price, or is there not enough margin?
Also, my financing has hit a snag. The money person has balked at the now $145,000 cash outlay. Is it likely I can get a hard money loan? Most of the hard money lenders I’ve come across won’t loan under $250,000.
Try checking Craigslist under “Financial services” to expand your database of hard money lenders who lend smaller amounts. Also check out Investor resourses on this site. Good luck!
One of the most important thing for making sure you buy right is find out whats selling TODAY.
Yesterdays comps are old news…(figuratively speaking) you must must must find out what has sold and is selling now.
Ask an agent to pull up recent sales, pendings, and solds in the last 3 months.
You can also ask a place like first american title co to put together a title and comp account to pull info from. this way you can really see whats moving in the market (and see the private non-MLS deals) and get an accurate idea of your worst case if you had to wait 4 months to sell it.