patrick.net

They are the primary reason that as soon as the tax incentive dries up come tax day, "ALL" real estate is going to fall %20 or more across the board, by August. Yes even the 22?K houses I'm looking at and either may or may not purchase by then.

That's why I'm shopping for best sq footage to dollar ratio I can find, and I'm bidding under that.

These flipper Clowns are only fooling them selves. The hundreds of 35, 40 and 50K crap hole ranches they've been buying up in mass quantities, to stave off March '09 falling prices. Then listed them back as 180K-225K are now listing for 70K-90K, seems people aren't as dumb as they thought. As it turns out, these new batch of flippers have been taking the mini bus.

So back the question:

What profit margin at the min are these flippers looking to make on their investment?

Anyone have experience buying from these types of sellers?

I've just started watching certain homes on Redfin so I'll have a better understanding on their final sales prices soon.

Thanks

Not sure about the %'s but if you are a flipper that requires a rep, then you're looking at probably 6-9% in realtors fees, and the carrying cost of holding these places for several months (100% interest payments essentially). Not including the reno costs.

I'm guessing the 15-25% range seems reasonable.

Take a look at the purchase history of this property.

http://www.redfin.com/VA/Alexandria/6547-Riefton-Ct-22310/home/9782680

Interesting, isn't it?
This certainly is a flipper, and very interesting one in very strange loaction.

I'm guessing some flippers are like mechanics who sell used cars. When they don't have work to perform for others, they buy cars that need work and then resell them once they've been fixed. For a contractor, it's probably much the same, if they've got no jobs, but time to burn, why not pick up a place where they can add value with their work.

the REwhore flippers are the ones that pushed for the removal of the time between sales that FHA used to want to see. They got their wish, so now they can flip to FHA buyers.

But, here in central mexifornia, the new bubble support tool is the USDA 0% down loan for hispanics. It's a real gem. Welcome to Bubble 2.0, the flat spot before the next drop.

"we have multiple buyers, all cash, and above asking" is what they are saying.
"we need these gov handout programs to help buyers" is also what they are saying.
lol ... REwhores is sooo stuuupid.

Seaside, that's a very similar post to what I'm seeing in the BayArea and in Sacramento.

So the question I have for this board is the flipper bought at $280K and is listing at $424K, a 51% profit on his investment.

The guy has put in:

New appliances
New hardwood
New Carpet
Granite Counter tops
New Paint

I'm going to guess (PLEASE correct me) that they put $35,000 into the home to satisfy all the upgrades and work done.

Total commitment: $315K, listed at $424K, profit of 34%.

What sort of profit % is this guy looking to make on his investment at a MINIMUM?

The board seems to think that at a min he is looking to make between 10% and 15%.

So an offer like $354,375 (12.5% over cost) would most likely be this guys floor price.

*Note I didn't take into consideration comps, holding time, etc., just trying to see what sort of min % profit flippers are looking to take on average. I know every flipper is different.

Thanks

I think holding time, and general closing costs should be considered in there, as they could chew through quite a few % points in your estimates. If they end up with the place on the market for 2-4 months, the holding costs could be significant for them.

I think a minimum holding time of 1 month to reno, 1 month to sell would be minimum to add in there.

If the reno includes replacing cabinets and what not in the kitchen, the reno number could be significantly higher.

if the purchase was not all cash, then the loan will have stout interest due to not-owner-occupied (or, someone had to fib)
None of the work in the example required permits, so the amount of increased value will only be 90% of materials + 50% of labor with demo having no net gain, and any new buyer will have to really like the choice made by the flipper to pay any markup on any detailed interrior choice ... since they could have made the choice themselves and got exactly what they wanted had the flipper just left everything as it was.

I have been on the buy/fix/sell side of things as the craftsman for the buyer. In my opinion they look at net gains more in dollars and less in percentages. If the deal was $5M and the profit was only 0.5% there was still lots of smiles, where as if you buy some $20K pile of trash in South San Jose, you had better have 300% profit over cost, or it was a loser. Does that make sence? I know my writing skills suck.

As far as "holding time", the only time it was acceptable was if the flipper lived in the house while it was marketed. If it was a job done for market, it was a 30 day sale or the price dropped (and the RE lady was always pissed)

My experience with this stuff was circa 1987 - 1995 Monterey/Carmel/Pacific Grove/Pebble Beach

I'm guessing you are correct on $ vs %, but in the end, % and $ probably work out pretty close to the same thing on an average selling priced house. Of course when comparing, we prefer %'s in general. When you reno a 300K house or a 600K house, the cost of materials probably goes up depending on quality of materials needed. The 600K house probably needs slightly more upgrades to get the $ they want, and thus the % remains about the same once everything is done.

The comment about making things "better" or in "taste" to what others want, is probably why the flipper chose the house in the first place. The place was ugly as sin, and thus fewer buyers willing to go for it. They could get a deal on it, due to this. They upgrade to some semi-neutral fittings, which brings in a lot more buyers and commands the higher asking price.

Trying to upgrade a place while living in it for most is unbearable. Espcially if you aren't used to construction, construction problems and handling permits (even if the flippers ignore permits) home owners will probably have to deal with them. The cost, headaches and general lack of knowledge push many people to buying a place that is exactly the way they want.

If they tried to do the 35K in upgrades talked about here, they would probably end up with a 150K bill by the time every contractor ripped them off. By the time they did everything "exactly" the way they wanted, putting in the best materials possible. And of course, coming home after working a long day to a house without a kitchen, and no where to sit for months on end while everything gets dragged out.

Here's a classical example of a flip. You can read between the lines the story. Ok, that's not the end of it. After the flipper sold it to "Liu Ying", Liu put it on the rental market for $1100 a month. Then dropped his price down to $1050 (and probably took something less than that). Craiglist ad said: "New paint, kitchen renovated, new floors!" So apparently "Mack Investments" got $52K out of a four month flip...

@OnTheFence.

I think your calcuation is about right. On top of that, they may have to add the cost of financing, and time comsumed. My pick on their bottom line is somewhere in b/w 340~370K.

But for the forementioned property, I'd say Meh~ to the 429K listing price or even at 370K.

The reason is that... The property's location. 2 inch thick fense at the backyard is what seperates two subdivisions. The home right below the the property has different zipcode, and is considered as a good home in "hot" subdivision while the property is located at the deepest end of "boring" subdivision. Major amenities (groceries, walmart, theater etc) are located in another side of the lake near there. When you zoom out the map and take a look at the way the roads tangled arround there, you can see what I mean. :)

So, if the home 2 inches away from the property is on the market arround 450K, it's sweet deal. 429K for the property above mentioned, I can let someone else take it. It's not year 2006 or something.

FYI...

12/14/2009 $280,000 DEUTSCHE BANK VIRGINIA MID-ATLANTIC PROPERTIES LLC
09/28/2009 $266,000 *owner* DEUTSCHE BANK
10/30/1997 $157,000 ----------- *owner*
07/26/1990 $167,500

@PolishKnight.

Whoa, how can you find that condo? 127K home did exist in fairfax. What a surpise.
Somewhere b/w graham road and route 29... is not exactly the place I want to live, so I didn't pay a single drop worth of attention in that location. But the property history alone is kind of dramatic. :)

Seaside, we rather liked the area. There are two shopping centers within walking distance with grocery stores and restaurants and a bus that can take you to the metro in 20 minutes. (Granted, you can hear the bus brakes!) It's 10 minutes away from route 495. Not the greatest location in the world, of course, when it comes to real estate my motto is: compromise, compromise, compromise!

Bap33 says

the REwhore flippers are the ones that pushed for the removal of the time between sales that FHA used to want to see. They got their wish, so now they can flip to FHA buyers.

Sounds good and plays to the typical emotions vented on this site, i.e. "we hate all agents, etc." The real reason for changing FHA rules is that HUD (FHA) has an incredible amount of foreclosed homes in their inventory, a fact that for some reason isn't getting much play in the mainstream media. Buying a HUD home in the past has been a very cumbersome process which has driven most savvy investors away. HUD has made some half hearted moves to correct this perception and this is one of them. If you are an investor, you don't need HUD, they need YOU. Dealing with bank owned properties (provided you have cash) is far better than HUD. The real estate market will not recover until the millions of foreclosed properties are off the books. Contrary to the emotions on this site, investors are not the enemy and neither are their agents.

OnTheFence says

So the question I have for this board is the flipper bought at $280K and is listing at $424K, a 51% profit on his investment.
The guy has put in:
New appliances
New hardwood
New Carpet
Granite Counter tops
New Paint
I’m going to guess (PLEASE correct me) that they put $35,000 into the home to satisfy all the upgrades and work done.
Total commitment: $315K, listed at $424K, profit of 34%.

The profit an investor makes is either supported by the market or it isn't. True market value is defined by a seller able to sell and a willing and able buyer agreeing to buy. If the buyer is satisfied with the purchase price, it shouldn’t matter to anyone the amount of profit the seller makes. Keep in mind that along with the time, money invested, etc. there is a great deal of risk involved for the investor. During the renovation, these homes are vacant and are susceptible to vandalism, etc. During the investor’s ownership of the property, there are numerous economic situations that might occur that would have a direct impact on the ability to sell (terrorist attack, stock market crash, interest rate increases, etc.).