June was another busy month on the fix and flip front with more purchases and a lot of work being done. I did not sell any fix and flips; I had one under contract, but the contract fall apart. I did buy a fix and flip that was a short sale and I got another fix and flip under contract. I know I said I would not buy any more fix and flips until I sold one in last month’s update, but I could not pass up this deal. It was my first purchase of any type from my direct marketing campaign. I mentioned last month that I thought I had my contractor issue taken care of, but I am looking for new contractors again! Sorry for the delay on getting this article out, but I was with the family in Disneyland last week and I did not do any work or writing!
New fix and flip purchase in June
I bought another fix and flip in June that I was not expecting to buy. The house was a short sale that I had made an offer on back in February and most of my short sale offers have not been working out lately. It was listed for $132,000 and there were multiple offers on the home. I made a cash offer of $140,403 and it was accepted! I never count on buying a short sale until the bank approves the short sale price. My last three short sale offers have been declined by the bank after they were accepted by the seller. I was pleasantly surprised when the bank approved this short sale.
The home is in a town about 15 miles away from me and this town rarely has any houses for sale under $150,000. Most of the houses under $150,000 are in need of major repairs, are very small and almost 100 years old. This house has almost 1,500 square feet, 3 bedrooms, 1 bath and was built in 1948. The home will need about $20,000 in work and should be worth close to $200,000 when it is repaired.
New fix and flip purchase under contract
I was not planning on buying any new flips until I sold at least one in my current inventory, but I couldn’t help myself. I told my wife I may be a house hoarder since I made an offer on a flip that was accepted. This purchase is completely different from my normal way of buying houses through the MLS. I have done direct marketing campaigns for over a year with mediocre results. A direct mail campaign is when you mail out letters to people who may be interested in selling their homes, but do not have their home for sale. I send my letters to absentee owners and probate owners. With direct marketing I send at least five different letters to each person. It takes a lot of effort and money to create a successful direct marketing campaign.
Since I am a real estate agent I have to disclose that I am an agent in the letters. I basically say I am a real estate agent, but I am not looking to list your house, but I will buy your house for cash with no costs or commissions to you. I get a lot of calls from my letters, but most owners are looking to sell their house at full retail value without paying a real estate commission.
Even though I say I am not interested in listing the house, I will still try to list it if it does not make sense for me to purchase. I listed and sold a house for an absentee owner this month, and last month I received a text from one of my probate letters. The text said they wanted to sell their house for $110,000 if I was serious about buying it. I looked up the house and it was a good deal, but I didn’t want another flip. I said I could list it for them, but I couldn’t buy it at 110,000. They replied and said they would sell it for $100,000.
At $100,000 I could not pass up this deal, because the house is worth $160,000 to $175,000 and needs about $20,000 in work (I am giving you the details, because I actually closed on this house already).
Trying to sell fix and flips in June
I have only one of my 9 fix and flips for sale and it went under contract in June. However, after the inspection, the buyers wanted a $17,500 price reduction because of what I saw as minor items that could be fixed! The real estate agent representing the buyers had already made unreasonable requests like asking for amend extends to be signed 2 hours after she sent them to me. I cancelled the contract, because I knew there were going to be more and more problems. Hopefully the house sells soon!
More issues with contractors on fix and flips
I started using two new contractors recently after having major problems with a contractor I had used for years. I thought I had a couple of great contractors lined up, but I am having issues again. The contractor who said he could fix homes very quickly is taking longer than he said he would and two of his recent bids have been super high. I asked him to reduce them or find things that don’t need to be done, but he wouldn’t budge much at all. My other contractor is still doing well thankfully.
I am looking to get new bids from new contractors to compare them to the bids my contractor is giving me. I signed up for Angie’s List today and I have found many possibilities for new contractors. The nice thing is people leave detailed reviews so I have an idea of what I am getting. This will delay my time getting fix and flips sold, but I would rather make sure I have solid contractors doing work for a reasonable price than not make any money on my flips.
I am very happy with where I am in my fix and flip business, even though I would love to be selling properties faster. The most difficult part with fix and flipping is finding great deals and I have been able to do that in a very competitive market. I am also working on a new fix and flip book that should be out this month!
Check out my book How to Buy Real Estate Below Market Value, which describes how I buy 10-15 fix and flips a year as well as multiple rental properties. The book is available as an 113 page E book on Amazon or as a PDF here.