Flipping - Posted by Elizabeth

Posted by RRSmith on October 09, 1999 at 17:24:57:

You us the long term net net because the month is not (by definition) long term. This is by the book, a very good book about just apprasials (targeting builders and professional appras.). Is cap short for capitalization? Sorry I don’t speak bankerize yet. Lets see P/E LTV FMV maybe there is something where it (the 1% rule) does not work with commerical real estate but, I haven’t seen the exception yet. If one or the out is greatly out of wack (the net net income, or the FMV) the (free market) system works (through you and me) to correct it.

Flipping - Posted by Elizabeth

Posted by Elizabeth on October 08, 1999 at 12:27:05:

Okay suppose you find a six unit apartment that a owner is selling. All apartments are rented out except two. Good neighborhood. needs mostley cosmetic repairs. He wants 139,000.00. I think its a good price because fixed up would probably go for 200,000.00 or more. Two subway stations in walking distance , plus bus stops surrounds the area. I was thinking of a flip deal. I want to call some of the ads like cash for all houses, ect. I have one person I have been in contact and said he would be interested in buying houses, he wasn,t home but will talk to him later. Is this what you do when flipping a house.I would only go up maybe 3000.00 to 6000.00 at the most need some feed back fast. Before I talk to invested this evening.

Thanks ahead

Re: Do’s and Don’t’s - Posted by Millie I.

Posted by Millie I. on October 08, 1999 at 22:29:47:

There are many things you need to know about a 6 unit:

1)It is a commercial property. When financing, your required down-payment may be as high as 30%, unless you have excellent credit history, good income, and a fat bank account. If you do a double close, make sure your buyer has the financing or resources to close.

2)Never buy a property because you “think” the price is good, or the resale price will “probably” be… You are asking for trouble. If you want to be in this business, you don’t just ‘think’, you verify, confirm, you do a ‘comp’, get an appraisal. You have to “know” that you are buying below market value in order to make room for profit when you flip, or you’re setting yourself up for a big disappointment.

3)What are the rents per unit? Are they at market value? Can they support the building and still provide positive cashflow? Why are there 2 vacancies? Are there problems? Will the deal be good enough to attract your buyer, and still give you some walking money? You make sure of that or you have no deal.

4)Did the seller show you all the expenses? Taxes, insurance, utilities, management, advertising, maintenance, repairs, vacancy, etc. You have to consider all these even though you just want to flip. You have to calculate your buyer’s potential profit/loss before you know whether you should buy or pass. If your buyer don’t make a profit, he won’t buy, and you don’t have a deal.

  1. Have you considered what to do if your buyer fall through right before closing? Do you have a plan B to prevent your seller from suing you for performance? Do you have a sufficient out-clause? Do your homework first.

6)You could just assign your contract to your buyer, and collect $2000 for bird-dog fee, provided that your buyer do not circumvent you, and buy it behind your back. Things like that happen everyday.

7)Investors that post signs out that say ‘I buy houses with cash’ are mostly wholesale buyers looking for a very good deal. If you ask for $150K, they’ll want to pay $80K. They also want you to owner-finance them, or sell it to them with no money down. Such investors do not pay retail, and definately not at full price.

8)My experience with selling retail is to the common folks that wants everything in perfect condition, they will pay full price for ‘full occupancy’ and ‘easy management’. They just want to collect rent. These people are everywhere, but a lot of them go to realtors because they do not know how to buy a house, and they don’t trust you. Experienced investors usually have a list of buyers that they have established a rapport with, and know what the buyers are looking for before they buy the houses to flip to them.

Don’t mean to discourage you, if you want to do this, you might as well know the pros and cons. If Flipping is new to you, maybe you should do single family homes first. They are cheaper to buy, lower risk, and sellfaster.

Good Luck,
Millie I.

Re: Flipping - Posted by tarun_md

Posted by tarun_md on October 08, 1999 at 19:31:40:

If you are just getting into wholesaling, start with single family homes. They have a high demand and most rehab investors like them.
Just my opinion!

High Vacancy Rate Apartment & the 1% Rule - Posted by Ramsey R. Smith

Posted by Ramsey R. Smith on October 08, 1999 at 13:14:49:

This is a high vacany apartment, worst case scern. what is the value unfixed up??
Use the 1% of income method.
Take one per cent of the net net income over one month(after taxes and MANTENANCE and util. and etc. )
(ask for tax records of above) AT PRESENT OCCUP. RATES! and multiply by 1000 , that is what the property is worth. Be careful the owner has not inflated the rents in the last 6 months artifically.

Good Hunting!!

Re: High Vacancy Rate Apartment & the 1% Rule - Posted by JPiper

Posted by JPiper on October 09, 1999 at 14:17:42:

This is rarely a good way to value a property. In essence what you’re saying is that income properties are all worth a 12 cap. This statement is not true.

But if you believe in it…let me know. I have some property I’d like to sell you.


Re: High Vacancy Rate Apartment & the 1% Rule - Posted by JoeKaiser

Posted by JoeKaiser on October 09, 1999 at 13:44:38:

For your formula, why don’t you just multiply the net by 10?

When would you actually use such a number for anything?