Johnboy, Do I Flip or Retail? - Posted by Chicago Chris

Posted by SueC on April 26, 2001 at 06:28:24:

Chris, you’re probably on the right track to just flip. If you have no experience with rehabbing, you should have someone come in a take a look and give you an estimate. $10K for the work you’re talking about - kitchen, paint, floor removal and replace, possible wiring problems (which you dont’ know how severe), plus whatever minor fixes and cleanup - it doesn’t sound like a lot but it becomes a lot when you dont’ know what you’re doing. There could also be problems - like the wiring - that could be a MAJOR headache, and you wont know until you’re deep into it unless you get an estimate beforehand.

For example, what if you get estimates in the ballpark of $20K for repairs? You’d have to use that info to structure your offer. You won’t know the value of the property to a rehabber, or how much profit you’ll make, until you get a solid idea of the actual fixup costs.
Just my $.02.

Johnboy, Do I Flip or Retail? - Posted by Chicago Chris

Posted by Chicago Chris on April 25, 2001 at 19:15:27:

Hello, everyone.

I’ve finally got a couple of deals going since the convention and both of them seem pretty sweet. I need advice on how to sell the properties.

The one I’m thinking of today is a very ugly 2B/1Ba brick townhouse. I have it under contract for $12,000. It is a cookiecutter house for the neighborhood and the market comps for it are between $50,000-$60,000.

I feel as certain as I can be (having no rehab experience) that fixup will be no more than $10,000 max.

Most of what is wrong is cosmetic. It has linoleum on the living room floor. It needs painting. It needs new kitchen and bath fixtures. The walls need patching.

Some of the light switches don’t work though, and the outlets look old.

In any case, I was thinking simply flip it to a rehabber at 50% or less of after repaired value.

But then I began to wonder…if I got a hard money loan for 50% of value ($30k), I could pay the seller his $12k, the lender would escrow the $10k and I would still end up with maybe $5k in my pocket (after all those points, etc.).

Then, if I paid someone to do the work (when it comes to swinging a hammer, I’m not all thumbs, I’m all middle fingers!)I could list it with a broker and all told, maybe make $25,000.

Does this make sense to you for a first deal?

Would a hard money lender do a deal this small?

What other alternatives would you suggest?

I have resolved to not put under contract any property for more than 60% of value–is that enough room to allow me to flip easily? Even on high-end properties?

Thanks in advance!