The market sure seems to be hot with a lot more buyers than inventory. We are search to buy at least two properties in April, so we identified 10 properties that looked like they would meet our criteria.
After spending three hours looking at them, I got home and ran some numbers. Four of them seemed like they could work, so I did my math using the MLS, Zillow, etc to get an estimated after repaired value on each them. I subtracted our rehab costs, fixed costs and desired profit. Here is what I came up with:
- House #1 – was listed at $142,800. It was built in 1991 and did not need very much work, maybe 5k-10k. We knew this one was going to get a ton of action, but I figured I’d call the agent and see what she would say to $120k ALL CASH. I get on the phone and talk to an assistant. She told me they had 18 offers. Curiosity got me and I asked what number I needed to bat at to get it. She said that would be unfair to the others divulge that info. So I said, my client was thinking of offering somewhere in the 160’s would that work? Apparently, she had a couple offers above that… NEXT
- House #2 – was our favorite. It was listed at $119,900. Built in 1971, in a good neighborhood. The comps in this area were very weird, the two houses next to this one where both for sale/in escrow. One was a short sale listed at 120k and the other one was listed at 125k, and pending. I assumed it had quite a few offers over asking price, but with the MLS you can’t tell. I figured we needed to be at 90-95k to make it work. Called the agent and he said, it is in escrow… NEXT
- House #3 – was the first one we looked at of the day. A little bit farther south than we normally work. It was listed at $119,900 as well. This neighborhood turned out to have some solid comps and fully fixed it is worth $180,000. It needs about 25k of work though. This one looked promising with a solid ARV, I could come in at around $100k if I needed too. I called the agent, apparently, he has 8 offers with over half of them above asking price… NEXT
- House #4 – was in a mediocre neighborhood, but it was listed at $89,900. So we figured it was worth a look. This house isn’t the greatest flip, as there is no master bathroom. It would make a great rental though, so this went on my wholesale list. At $70,000 or maybe a bit more this would work. I emailed the agent (per her request) and apparently she has 2 offers on it… one cash near full price… NEXT
For whatever reason the market is really hot right now, at least in our area. So that could mean a couple things, inventory has dropped and there are more buyers than sellers. Or, what I think, the moratoriums have affected the amount of properties on the market and people are paying too much in a panic.
That means, I am going to stay cheap. If prices flatten out or start to increase, I probably won’t end up with too many more flips (short-term). If a whole crap-load of inventory hits the market (which I think it will), I will buy cheaper than my competition and not get burned. Either way, by staying cheap, I can’t really lose money.
The good news, there is a property we had an accepted offer on in December. We had 4 other deals in escrow and after further inspection we did not really like how high our offer was. Three months later that property is on the market and I just asked my agent to offer 25% less than our accepted price earlier. I think we have a pretty decent chance of getting it. We will probably end up wholesaling it, if we do (as it makes a better rental) but we would probably make a bit flipping it.