Why rehabbers buy from flippers? - Posted by Dmitry_PA

Posted by JT - IN on June 11, 2001 at 17:28:57:

.

Why rehabbers buy from flippers? - Posted by Dmitry_PA

Posted by Dmitry_PA on June 08, 2001 at 16:27:28:

Hi,
I have a question to people with some experience in flipping and rehabbing properties. When you are buying a house with a purpose of a quick flip to a rehabber, you estimate the price you are willing to pay by figuring in the profit you expect to make, and among other things, the profit you think the buyer/rehabber will be interested in, right? One of the many ways you buy a property is through MLS, right? Here is my question…
What is stopping the buyer/rehabber from going through MLS himself and finding the deals on his own? Why does he need you to hand you the deals? All the work is done by a realtor anyway…
You, as a flipper, are in business because the rehabbers are lazy and do not want to pick up a phone and call a realtor? I dont’ get it…
The reason I am asking is because in my city there are lots of properties for sale in the MLS that are clearly fixer-uppers and are being sold at $4K-$12K, whereas the ARV seems to be around $40K-$50K. These are older raw townhouse-type houses with 4-5 bedrooms, 1 bath, built in 1920s. They are definitely not located in the hottest areas, but not in warzones either. At the same time there are lots of people that are interested in making money by rehabbing properties… Can’t they buy these junkers themselves? Why do they need an middle-man to resell these very houses to them with a $5K markup? Is it because they know something I don’t know about the area, the properties, their FMVs and ARVs, or it’s just because they are lazy?
I am new to flipping, that’s why I can not believe it’s so easy. At the same time I heard many local investors say that our city is a goldmine if you know how to work it right… That’s what I am trying to find out. How to work it right.

Thanks.

Dmitry_PA

Re: Why rehabbers buy from flippers? - Posted by Tom

Posted by Tom on June 09, 2001 at 01:06:12:

Steve and JDC are both right, and they’re both wrong.

This thing is simple. The Flipper performs a lot of work locating properties and getting them bought for a reasonable price. The Rehabber just comes into your store and buys a house(s), and goes through the checkout counter.
Here’s the simple part. You are performing a service, and the Rehabber NEEDS that service. He doesn’t want to scout houses, he wants to rehab houses. So he pays you a small profit margin to perform that service for him.
In our current economy, good service is hard to find. Merchandise is easy to find. If you provide good service at a reasonable price, the rehabbers will beat a path to your door.

The real answer… - Posted by SCook85

Posted by SCook85 on June 08, 2001 at 23:53:43:

Dmitry,

The bottom line is this. Rehabbing is a full time business for many people. They spend all their time fixing and marketing and they do not have the time to find properties.

As you progress in this business it becomes simply that “business”. If the numbers are right you do it! Wholesalers such as myself make many offers on the MLS. I do not know what homes I am going to get. If a rehabber needs a home. They can spend months trying to get one by making offers on one home at a time off of the MLS. If they come to me, they just ask what I have and take there pick.

It is a very rare instance when I can go to the MLS and say I want this home, make an offer that works for me and get that home. I usually have to make 7-8 offers and I get one of them. If I make 30 offers I might get 0 and I might get 9. If the rehabber got 9 of them that could be seriously detrimental to there business if they are not equipped to wholesale them.

Just look at it this way. Why does a True Value hardware store buy all of there items that they sell from a warehouse known as Cotter and Co. instead of going to all of the manufacturers themselves and buying direct. They do it because it is more convenient to go to a source that has already put the deals together, and has done all the work for them. They don’t have to go to multiple sources to get there inventory.

A wholesaler serves the same purpose. They go out negotiate the deals from all different sources and serve as a one stop shop for rehabbers.

I hope this helps.

Steve

The Answer… - Posted by JDC

Posted by JDC on June 08, 2001 at 18:38:43:

I had the same Q as you but from what I learned from the pro’s here :

Flippers don’t usually get their properties from MLS listing. I have heard that it’s not easy to find a flip-deal from an MLS listing since those cunning realtors probably buy it themselves first.

Flippers buy it at a steep discount from motivated sellers who may or may not have even bothered to list their property through a listing agent.

Flippers also incorporate the rehabber’s profit into the purchase price, so all the work of finding a property/assessing fixup costs have already been done for the rehabber.

All that the rehabber has to do is check if Flipper 's calculations are correct, the comps are what he says it is, and recheck fixup costs (plus a few more). Rehabbers sometimes buy from flippers since it still is a good income opportunity for them.

Might want to see Steve Cook’s course on wholesaling…

Right? Wrong? - Posted by Vernon(Tx)

Posted by Vernon(Tx) on June 09, 2001 at 09:08:25:

Tom,

I am a little confused. I understand the flipper and rehabber relationship as I have been on both sides of that.

What I am trying to figure out is, what in the heck did you say that Steve didn’t say in his post that makes him wrong?

‘Seasoning’? - Posted by JDC

Posted by JDC on June 10, 2001 at 11:54:29:

I’ve read somewhere below that one needs to own the property for 12 months or something before a buyer can finance it.
If this is true, do all your rehabbers buy it with cash or they rehab it and hold for 12 months?

JDC - Posted by Jim Kennedy - Houston, TX

Posted by Jim Kennedy - Houston, TX on June 09, 2001 at 15:17:06:

JDC,

Please don’t take what I’m about to say the wrong way. My comments are being offered with a sincere desire to be helpful to you as well as others who visit this news group.

Based on reading your prior posts since the end of April, I’m going to make a few assumptions. Please correct me if I’m wrong. It appears that you’re just getting started in the wonderful world of creative real estate investing. It also appears that you’ve purchased your first property; one which will serve as your personal residence and that you plan to rent out some of the rooms.

Apparently you’ve never wholesaled a property, nor have you ever rehabbed a property. If that’s indeed the case, I’d strongly suggest that you allow those with experience to answer questions concerning topics with which you’re unfamiliar.

If you haven’t already done so, read everything on this web site. Read all of the Success Stories, all of the How To Articles, all of the Money Making Ideas, and all of the articles on the various forums. Visit this news group every day and read, read, read. Learn everything you can. When you need help or advice, start by searching the archives. If your question isn’t answered there, post it here. As you’ve seen over these past few weeks, you will receive plenty of responses.

There will come a time when your EXPERIENCE will catch up with your desire to contribute. Until then, please allow those with actual experience to answer the questions posted here.

Again, please accept this post in the spirit it’s offered.

Best of Success to you in your real estate endeavors!!

Jim Kennedy,
Houston, TX

Re: ‘Seasoning’? - Posted by Jim Kennedy - Houston, TX

Posted by Jim Kennedy - Houston, TX on June 10, 2001 at 12:40:53:

Well, I’m sorry you decided to ignore my advice. Just yesterday, I wrote: “When you need help or advice, start by searching the archives. If your question isn’t answered there, post it here.” I just ran a quick search of the archives for “seasoning” and came up with 271 posts. This particular topic has recently been discussed at length. It’s a shame you choose to ignore the advice and resources available on this site.

Best of Success!!

Jim Kennedy,
Houston, TX

Accepted in the spirit you offered… - Posted by JDC

Posted by JDC on June 10, 2001 at 24:34:16:

For what it’s worth though… I’ve clearly wrote that I had the exact same questions before and that the experienced ppl here gave me similar answer as I’ve posted…

Nothing’s preventing the experts from supplementing correcting what I wrote based on their previous replies to the same question I had posted few months ago. It’s not like I was pretending I had experience in it. I was merely saying that “this is what the pro’s told me”.

The original poster has spent time writing up the question and most likely wanted a quick reply.

However, noone wrote a reply to him at the time I read his post so I figured that the experts must have either ignored him completely or taking a long nap.

God knows I’d want someone to reply back to me ASAP when I have a question I ask with multiple question marks --> (???).

I knew what I wrote was mostly correct since it’s exactly what many of the pro’s wrote to me last month, plus or minus.

In any case, sorry for jumping in if that offended you.

well… - Posted by JDC

Posted by JDC on June 10, 2001 at 19:24:34:

With all due respect, I’m rather curious why you are choosing me in particular to ‘pick on’ when I don’t see you saying the same to others who ask the exact same questions.

I was not ignoring your advice. True, you get two hundred something archives, but most were talking about Rehabbing. In my opinion, flipping a property to a rehabber for a $5000 profit is not a significant increase in purchase price. I wondered if seasoning issues still apply and how the experts handle it.

I am aware that the topic was discussed in length, and I don’t know if you noticed or not but Steve never responded to any of it. Correct me if I’m wrong but my search query says that keywords “seasoning scook85” returns nada, zilch, zip dating back to 1998.

Matter of fact I have read through nearly a hundred posts before posting. Maybe there is a post hidden somewhere (maybe there still isn’t): if so, I appologize for my choice of search-keywords.

I would of course understand perfectly if for some reason he does not wish to participate in ‘seasoning’ discussions.

However, all in all since I am about to flip a property and do not wish to be stuck with a big problem that may be difficult for a newbie to solve,
I believe I was asking a more-than-legitmate question.

Your reply would be welcomed,

JDC

Re: well… - Posted by Jim Kennedy - Houston, TX

Posted by Jim Kennedy - Houston, TX on June 11, 2001 at 09:21:22:

Jon,

It’s a shame that you feel I’m picking on you.

Rest assured, you won’t have to be concerned about me “picking on” you anymore.

I wish you luck in your real estate endeavors.

Best of Success!!

Jim Kennedy,
Houston, TX

Re: well… - Posted by JT - IN

Posted by JT - IN on June 11, 2001 at 09:29:26:

Jim:

I think that you have just arrived at the same conclusion, that most of the others on this site have. Your patience and willingness to help is admired, but there are limits.

JT - IN

Excuse me, but… - Posted by JDC

Posted by JDC on June 11, 2001 at 16:38:34:

speaking of patience good sir… I believe it was you who called me a “fool suitable for jerry springer show” in response to a ‘loud commercial’ message that I did not post.
I let it slide without making a mountain out of your insulting replies… what do you say?