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I know their is an equation they go buy. I believe they figure what the ARV on the market would be by similar comps in the area and take off 70% and get their budget. I could be wrong. I know on homes here in Washington State that sell for $135-155K most all flippers by homes between $45-80k. Sometimes the homes that are being sold for the $135k were bought on the higher end of their budget for 80K if they know the home wont need as much work. So it really just comes down to the condition the home was in prior and the costs of renovations. What they paid really does not matter as long as the flipper does not cut any corners and has a good reputation in the area. I would find some info on the flipper/investor your buying from and always get a home inspection from an inspector who also is licensed to do pest and dry, sewer line/plumbing inspection, and any other major red flags that come up in your home inspection. Flippers have an advantage of knowing how to better cover up problems in a home because home inspectors are not allowed to rip open walls, and flooring. I would try to look past how beautiful the home looks and take a close look at the bones of the home. I would turn on all the faucets to check water pressure, look under kitchen sink to look at pipes, check out the electrical box and water heater. I would also take a close look at the foundation to see if their is any major cracks or bowing/uneven flooring. I would also make sure to check for water damage and water in basement or crawl space. I am in the process of buying a home myself and I have recently learned all this information. If it was not for the lender required pest and dry rot inspection we would have bought a home with at least $10,000 worth of dry rot/termite/beetle damage. We even paid almost $500 had a home inspection from a highly recommenderecommend home inspector and he did not catch all this dry rot damage. He found several other issues but not the major one. So I learned to make sure higher an inspector who includes pest and dry rot inspection. If we would had known that we would not have had to pay the extra $150 a couple weeks before closing. We would have known this back when we got our home inspection and have not wasted our time and inspection money on a home we needed to run away from. Do not fully trust your real estate agent or home inspector. You must do your own buyer due diligence. At the end of the day if you buy a home needing thousands of dollars in repairs you will be the one stuck living with it and having to pay for all of it if your home insurance cover it. All your real estate agent can tell you Is sorry they had no idea and they feel bad for you. I am so thankful for our lender requiring this dry rot and pest inspection. Our realtor even suggested us switching lenders to one he works with because our loan was a conventional loan from a big bank and are picker. I am so glad we refused to switch because the lender was not the problem. The home was the problem. The more inspections the better for me. I want to be sure the home I buy is a good one.
If a investor purchased a home for $43,000 and completely gutted and renovated it with new electrical, plumbing, cabinets, granite countertops, appliances, new roof, paint, and so on...they most likely put in more $$ then they paid for the home. They typically look for good deals on homes that are bank owned foreclosures and pay all cash. That is how they are able to sell newly renovated homes at market value and make a profit. I think they average about $20,000 per flip. Sometimes they make more or less. On some occasions they only break even or lose money in a flip. That is usually why they do more than one at a time and tend to pick the same kind of houses to flip. It's less risk for them.
Quote:
Originally Posted by pandaamanda1983
I know their is an equation they go buy. I believe they figure what the ARV on the market would be by similar comps in the area and take off 70% and get their budget. I could be wrong. I know on homes here in Washington State that sell for $135-155K most all flippers by homes between $45-80k. Sometimes the homes that are being sold for the $135k were bought on the higher end of their budget for 80K if they know the home wont need as much work. So it really just comes down to the condition the home was in prior and the costs of renovations. What they paid really does not matter as long as the flipper does not cut any corners and has a good reputation in the area. I would find some info on the flipper/investor your buying from and always get a home inspection from an inspector who also is licensed to do pest and dry, sewer line/plumbing inspection, and any other major red flags that come up in your home inspection. Flippers have an advantage of knowing how to better cover up problems in a home because home inspectors are not allowed to rip open walls, and flooring. I would try to look past how beautiful the home looks and take a close look at the bones of the home. I would turn on all the faucets to check water pressure, look under kitchen sink to look at pipes, check out the electrical box and water heater. I would also take a close look at the foundation to see if their is any major cracks or bowing/uneven flooring. I would also make sure to check for water damage and water in basement or crawl space. I am in the process of buying a home myself and I have recently learned all this information. If it was not for the lender required pest and dry rot inspection we would have bought a home with at least $10,000 worth of dry rot/termite/beetle damage. We even paid almost $500 had a home inspection from a highly recommenderecommend home inspector and he did not catch all this dry rot damage. He found several other issues but not the major one. So I learned to make sure higher an inspector who includes pest and dry rot inspection. If we would had known that we would not have had to pay the extra $150 a couple weeks before closing. We would have known this back when we got our home inspection and have not wasted our time and inspection money on a home we needed to run away from. Do not fully trust your real estate agent or home inspector. You must do your own buyer due diligence. At the end of the day if you buy a home needing thousands of dollars in repairs you will be the one stuck living with it and having to pay for all of it if your home insurance cover it. All your real estate agent can tell you Is sorry they had no idea and they feel bad for you. I am so thankful for our lender requiring this dry rot and pest inspection. Our realtor even suggested us switching lenders to one he works with because our loan was a conventional loan from a big bank and are picker. I am so glad we refused to switch because the lender was not the problem. The home was the problem. The more inspections the better for me. I want to be sure the home I buy is a good one.
Again, this thread is 5 years old. I'm guessing that the OP has moved on. And they haven't logged onto CD for over 3 years.
And, again, City-Data itself WANTS people to comment on old threads and even put this on the bottom of every old thread on C-D.
And yet again, it makes since with discussion threads. This was an advice thread. OP has been gone for years. Markets have changed drastically in these years. Current poster is new and may not realize the thread is old. I was trying to point that out. Continuing an advice thread with a specific question after 5 years is pointless.
I know their is an equation they go buy. .........
Your knowledge is incorrect. They look at the price that houses are selling for in the area. Then they look at the purchase price of the house they want to buy and they go through and add up all the expenses for all the things that need to be fixed and see if there is any room to make a profit.
There is no formula for fixing a house because each house needs something different fixed.
When you are buying, you take the amount that you want to spend and you look at what you can buy with that money, and if the flipped house is the best house that you can get for your money, you buy the flipped house. What the flipper paid for it is not a consideration and it is really none of your business.
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