To Fix or Flip? That, is the Question....

Bird Dogs, Wholesaling
1

So here’s the dilema:

I find old house, house has tenants, house is in bad shape. I contact seller, seller is landlord but i dont like his attitude, he’s not motivated enough. I leave the deal alone.

Month or so later seller calls me still tryin toi get rid of house *i figure there wasn’t a lot of interest) i wait another week, get some more comps and send letter of intent. I talk to seller and he seems completely different now, he’s really happy i’m considering buying it (i told him i have a partner who might be interested but was hesistant because of condition of house).

Here’s the numbers:

ARV: $95k-110k
My MAO: $51,000
My offer: $40,500 (he seemed happy with it now, although a few months ago he was holdin out for more, patience really is a virtue 8))
Repairs: He says 10k, I say 15k

Result: 40-55k in equity after repairs on a $100,000 house.

The problem: I looked at the house and the floor in the itchen was a little funy, possible foundation problems, possibly not (i’m still new at this and no handyman). Also i saw som stuff in the yard. The family said they were they’re to kill the termites!

The dilema: If i try to flip it i know termites could scare any investors away, of course i have a clause in the conract that is contigent upon inspection so im not to worried about that. The tenants are paying and want to stay.

Do I… try to flip and pick up a quick five to ten grand (or even as little as three, profit is profit!) or

Get a HML and buy the house, leave the tenants in and try to get some cash out at closing for repairs and my pocket. while keeping it as a rental or section8 or

Buy it and fix it then try to flip it. (then i’ll have to get rid of the tenants)

Sorry if its long winded, but any suggestions appreciated.

2

i say hold it…i love section 8 its guaranteed rent but!!!
you need to make sure that property is is in tip top shape because the section 8 inspectors do not play! :wink:

3

do the quick flip

4

To each their own but I say flip it to another buyer. Take your 5K and run.

Nate-WI

5

What are YOUR goals in REI?

Truthfully, this shouldn’t be a dilema for you at all, because you should have a plan together that tells you what you should do.

For instance, is your REI goal to be a landlord or to wholesale or to retail?

From your post, I don’t think that landlording is the best choice IF you have to get a HML to do the financing. Hard to cashflow with HML loans (btw, you don’t get ‘cash in your pocket’ with a HML either. Just FYI)

You don’t have to be a handyman (at least not in my book) to be a rehabber, but you do have to know the basic costs of repairs for things. No hard line number, but a $5K here, $5K there approach is necessary (and knowing that the repair will be $5K or less). Doesn’t really sound like that you’re at this point either.

Which really leaves wholesale/assign. Termites will NOT scare off a professional investor, so no big deal, especially with your inspection clause.

My suggestion, get the thing under contract with as long of a closing as you can reasonably get (30-60 days) and if you don’t have a investor’s buyer’s list yet, advertise that baby in the local papers as “Investor Special” Estimated value $100K, could use $15-20K in TLC to get it in ‘tip-top’ shape. Tenant in place already. Best cash offer by xx/xx/xxxx get’s it. Hurry before it’s gone!"

You’ll likely get offers from $50K-65K or so. Take the best one and go with it. You can collect it all as an assignment fee, or double close if high enough, or even set it up to work out a split with the seller.

BTW, did you ask the seller if he had any other properties that were for sale?

Raj

6

Thanks for the replies guys.
To answer Raj’s question…Actually this particular proerty was not my initial target. I sent a letter to what i thought was a vacant/run-down house. Apparently its occupied by some guy who either doesn’t care he has the ugliest houde on the block or is really lazy, who knows? At the end of the leetter i put $500 dollars for you if we sell a house you refer to us!

He had another property he was renting and directed me to see it. And he did give me the number of an out-of-state owner! I