Is this the best strategy to flip a house? (mortgage, price, property)

[ocngypz]

$50K is not going to return $150K.

[oregonwoodsmoke]

I have no idea whether or not the figures are good since that is not my area where I work.

My experiences with partners has never been good. People want partners because they don't want to do all the work, or they don't know how to do the work. So my experience has been that my partners sit back and expect me to do all the work. They don't finish what they start, or they don't do it right, or they lie and say they did it when they didnt.

It's worked for my mother's family. Everyone puts in a couple of grand and everyone works hard. They can turn a wreck into a gleaming jewel in one weekend, but there are a lot of them and everybody has a specialty and everything is getting worked on all at the same time. Everyone makes a grand or two, which is a good return for one weekend of hard work. Not many people can work together like that, though.

[chet everett]

I would long and hard at what price points have shorter than average days on market.

I know about D.C. area real estate and the relative desirability of older homes is worse than in many other areas -- lots of shorter term transfers that have no illusions about "charm"...

Unless you find a rare foreclosure with easy fixes I doubt $50k yields $150k price improvements.

[oldtrader]

Any property that you can buy for $500,000 and sell for $650,000 is going to cost a lot more than $50,000 to bring up to where you can sell it.

[jghorton]

It sounds like each partner will invest $125K, plus $15K ($60K) for anticipated upgrades, plus $9K in closing (resale at 3% Realtor on $650 + doc stamps, etc) for an individual investment total of $149K each.

Then, all four partners, who agree on everything and have no problems with the renovation or resale, immediately sell the property an additional $125K at the full $650K (asking perhaps $700K?). Each will then have a return of about $13K or 9-percent on their $149K investment.

I suppose it could work, but, when you start buying/selling upscale houses in the $600K+ range (in most markets), people expect uncompromising quality, not quick-flip cover-ups designed to turn a quick profit. Having done some significant renovations of my own, it seems like a significant time and cost risk for a limited ROI 'potential.'

[SoCal25]

Originally Posted by midlifeman

P.S. His thought is that the risk on your initial capital is low because there will be no mortgage, so your equity is protected.

This is a speculative venture, the risk to your capital high. This is why flippers need high margins. Add in partners and a minimal profit IF everything goes exactly right and this really doesn't pencil out to a good deal unless this truly is money you wouldn't mind losing.

[sj08054]

Clearly your friend is trying to get "investor" who think they can get a quick return for their money. The scenario your friend is purposing seldom work out.

[StealthRabbit]

What is time frame? (renovation + transactions)
What are # days on market for that price point?\

Very optimistic..
1) you need to allocate 10% for 'transaction costs'
2) Whoever does renovation needs capital, pay, and incentive (risk / contributions is not same as other partners)
3) Plan B? (if it doesn't work out... a super fund is buried in back yard, foundation is broken...MANY other potential issues)
4) Location (x3)... you MUST only buy something that can be resold FAST (view / unique / pristine / good commute / lower value in neighborhood)


it is not as ez as it seems (BTDT). Doing 4 at the moment... ALL have very unique issues and potential land mines.

[parentologist]

Run away from this.

[tjarado]

How about THIS scenario?

Price: $400,000 (pay it with all cash between 4 partners)
fix up cost: $40,000
Sell for $$640,00 as FSBO
Profit of $200,000
Profit for each partner would be $50,000 a piece

..and don't tell the IRS or they will want a cut!

Ha Ha, this is fun!