Ask Me Anything - House Flipper

[rc08234]

Hey guys,

I've been away from the forum for quite a while and recently logged back on because I am looking for some new ideas to leave my current gig. Not sure if anyone is even interested but I figured the best way to give back would be to share my experience flipping houses. My partner has done about 500 flips, I've been involved in about 50 and have split about 10 with him. Any questions fire away and I will do my best to answer them!

Age :32
Market: South Jersey

 

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[FactaNonVerba]

Hey guys,

I've been away from the forum for quite a while and recently logged back on because I am looking for some new ideas to leave my current gig. Not sure if anyone is even interested but I figured the best way to give back would be to share my experience flipping houses. My partner has done about 500 flips, I've been involved in about 50 and have split about 10 with him. Any questions fire away and I will do my best to answer them!

Age :32
Market: South Jersey

You do strictly all flips? Any rentals or wholesaling?

How did you get into it?

If you could give yourself advice on Day 1 what would it be?

 

[Guest-5ty5s4]

Hey guys,

I've been away from the forum for quite a while and recently logged back on because I am looking for some new ideas to leave my current gig. Not sure if anyone is even interested but I figured the best way to give back would be to share my experience flipping houses. My partner has done about 500 flips, I've been involved in about 50 and have split about 10 with him. Any questions fire away and I will do my best to answer them!

Age :32
Market: South Jersey

What sort of loans would you use for house flipping if you don’t have enough to pay all cash?

 

[rc08234]

You do strictly all flips? Any rentals or wholesaling?

How did you get into it?

If you could give yourself advice on Day 1 what would it be?

I started off wholesaling and that is how I found my current partner. I strictly do flips, my partner had around 100 SF rentals and sold them all this year.

When I first started wholesaling I sent out a mailer to cash buyers, he responded and was a dick lol. I got him a smoking deal and he saw my potential so he was like "listen I have an office, come work out of it and I won't charge you rent I just want first look at everything" For the first year I did bitch work for him and wholesaled to him. Filled out dropped off permits, for free, cleaned and loaded houses with materials, for free, went around paying employees and getting coffee for free lol. It paid off though because once I got enough money he would split flips with me.

Advice would be, find the biggest dudes in your market and add value to their life. If it didn't work out with my current partner at first I actually had another dude that wanted me to work with him. If you can add value they will want you around.

Also it depends where you want to be, I wish I skipped SF and went straight to multifamily I would be lightyears ahead of where I am now.

 

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[rc08234]

What sort of loans would you use for house flipping if you don’t have enough to pay all cash?

Do you have any assets at all? A local bank will usually give you like a line of credit against a house or rentals etc. Do you have a track record? The deal with my partner is we split it 50/50 so I usually run out of cash quickly. I did a mailing to "raise money" and I use that term loosely bc the SEC likes to stick their nose in shit. I had a few guys respond and I showed them some of our flips and they handed out the money. It's all about trust, the terms we give them they wish they we had 10000 houses for them to fund lol.

 

[Guest-5ty5s4]

Do you have any assets at all? A local bank will usually give you like a line of credit against a house or rentals etc. Do you have a track record? The deal with my partner is we split it 50/50 so I usually run out of cash quickly. I did a mailing to "raise money" and I use that term loosely bc the SEC likes to stick their nose in shit. I had a few guys respond and I showed them some of our flips and they handed out the money. It's all about trust, the terms we give them they wish they we had 10000 houses for them to fund lol.

Yes but my credit line wouldn’t be enough to pay cash for a house, handle repairs, and float the 6 months or so needed.

I have spoken to an uncle about doing a deal 50/50. I’ve renovated 2 homes, sold 1, living in the second.

 

[rc08234]

Yes but my credit line wouldn’t be enough to pay cash for a house, handle repairs, and float the 6 months or so needed.

I have spoken to an uncle about doing a deal 50/50. I’ve renovated 2 homes, sold 1, living in the second.

I would do the 50/50 split with your unc and detail in depth the progress. Pics of every phase, budget etc. It's not as hard as you think to raise private money once you have a track record. You have some whale sitting on a few mill and doesn't know what do to with it. He gets a letter from me saying he will make 10-15% a year and it's backed my real estate. The first few deals with do with a new private money guy is purchase price only and sometimes we will sweeten that. So they are new to the lending game and nervous, we tell them you have first lien position and can foreclose if we default. Since it's out first time together we will give you instant equity. Purchase price is 100k and rehab is going to be 50k. We tell them bring 80k to the closing table and you will have first lien position. If we default next month, you foreclose and get the 100k property for 80k. And we always buy at a discount so you could probably list it on the mls for 130k and get it. I would never ever use hard money after seeing the fees they charge other than the 12/2.

 

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[Johnny boy]

What do you think is going to happen to the market and housing prices over the next year or so?

 

[FactaNonVerba]

my partner had around 100 SF rentals and sold them all this year.

Are they just cashing out cuz it’s super high right now and they’re retiring?

I wish I skipped SF and went straight to multifamily I would be lightyears ahead of where I am now.

Is this Just cuz of the higher price point or another reason too?

 

[rc08234]

What do you think is going to happen to the market and housing prices over the next year or so?

Was this question after 3 glasses of wine too ; )
At this point anyone predicting is 100% guessing. I'm in a mastermind with some of the top flippers across the country and no one has a clue lol. One guy in the group swears by the book called "The Secret Life of Real Estate and Banking: How It Moves and Why" it basically says the markets move in 18.6 year cycles.

 

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[rc08234]

Are they just cashing out cuz it’s super high right now and they’re retiring?


Is this Just cuz of the higher price point or another reason too?

Cashed out bc we thought the market peaked. He made a killing off them and we found someone to buy them in 20 block chunks. He still actively flips and we are starting a few new construction projects right now.

Single family honestly sucks, EVERYONE has their hand in your pocket trying to get a piece. Everyone is constantly chipping away at the profits. SF is bought and sold on emotions and multi is logical. It doesn't take that much more work to do a multi fam deal, the numbers just have extra zeros. I'll never achieve the financial success I want with single fam.

 

[Guest-5ty5s4]

Once you've made a solid amount of money from flipping single family homes, what's next?

Are you going to become a developer?

Flip commercial, like office buildings and stuff?

 

[rc08234]

Once you've made a solid amount of money from flipping single family homes, what's next?

Are you going to become a developer?

Flip commercial, like office buildings and stuff?

If I'm 1000% honest I would love to do something else but I don't really have the capacity to do so. I will never be the smartest guy in the room, I will never develop an app etc it just not in the cards for me. I like real estate bc dummies can do it lol.

I'm currently negotiating a 32 unit multi fam to wholesale. After that will probably be multi fam syndication and end goal is flipping/holding multi fam.

Commercial scares the hell out of me. When anyone looks at commercial their first though is "Can amazon replace this?" and you might think no but god knows. Take a nail salon for instance, brick and mortar amazon can't replace it right? Bezos gets a bug up his a$$ because his ex is sleeping with some nail salon mega king so he decides to open a fleet of nails on wheels that come to your house, in a luxury van and does it cheaper than you going to the local strip mall. That's an extreme example but I never thought I'd be able to order a package at 11PM and it be on my door step at 4 am either.

 

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[B.Cotter]

Are you flipping for cash or immediately investing all/most profits into the next flip to avoid short term cap gains taxes?

I almost got in with 2 friends that flip in Baltimore and DC, but didn’t have the money to throw it in currently and kiss it goodbye for years just reinvesting it. Needed mine to be relatively liquid at this point in time. Unfortunate.

 

[rc08234]

Are you flipping for cash or immediately investing all/most profits into the next flip to avoid short term cap gains taxes?

I almost got in with 2 friends that flip in Baltimore and DC, but didn’t have the money to throw it in currently and kiss it goodbye for years just reinvesting it. Needed mine to be relatively liquid at this point in time. Unfortunate.

We don't do 1031's if that is what your asking? We probably have 8 rehabs right now at some point in the system, like demo, rehabbin or on the market waiting to close and another 6 lots in the first phase of new construction so the money is constantly being turned. My partner opened his on construction business bc it's actually surprisingly easy to here in NJ so with the 6 full time employees money is constantly being spent. What was a huge eye opener when I first got aboard was the massive amount of money it takes to keep things going at scale. The AMEX bill alone is 6 figures every single month.

There is no real way to avoid short term cap gains but I do know when the original LLCs were set up they spent like 40k on a mega lawyer that showed them how to loan money back and forth to help minimize taxes.