When I fix and flip houses I usually buy properties from $50,000 to $150,000. Once in a while I will spend $200,000 on a house if I think it is a smoking deal and I can make at least $50,000. I came across a deal that I could not pass up that is a high-end flip. Normally I would not even look at a high-end flip, because of the increased carrying costs, repair costs and selling costs. However, this was a deal I could not pass up and hopefully it turns into a home run. I have not bought this property yet, but it is under contract and set to close in about 25 days. The price of this home is $500,000 plus and the after repaired value is over $800,000.
Update: I bought this home in November of 2015 and it was vacated by the tenant on 8/1/2016. I have possession of the home and hope to get it sold in the fall of 2016! I have a video of the home below.
Why do I shy away from high-end flips?
I stay away from high-end flips for a number of reasons.
- The carrying costs, repair costs, maintenance costs and unexpected costs are all more on more expensive properties.
- Because the costs are more on high-end flips you must have more profit potential. The 70 percent rule is a great way to judge what a good flip is. With the 70 percent rule you can only buy an $800,000 house for $560,000 minus the repair costs.
The reason I stay away from high-end flips is not that I think they are a bad business decision, but because it is almost impossible to find those deals in my area. I see many more properties that meet my profit criteria in the low-end than I do on the high-end. Finding houses that are $200,000 below market value are tough to find anywhere. But, it does happen occasionally and if I can find those properties I am perfectly happy doing a high-end flip. For the most part it is much easier to find a deal with enough profit in lower priced properties.
Below is a video of the home after it was vacated.
How was I able to find a home that was such a great deal?
Houses like this are not available on the MLS at any given time just waiting for an investor to buy it. It takes some work, some risk and a business that is set up well to buy high-end flips. This house has a couple of problems that include occupants who may or may not want to leave the home in a peaceful manner. The house is in great shape, but there are some very interesting circumstances involving the occupants that I can’t discuss at the moment. These occupants have scared off just about anyone who was interested in the home. We will see how smart or dumb I am for taking on this property in the next few months!
How I am able to buy such a high dollar flip?
I have 9 flips going right now. That is a lot of flips and it is taking a lot of resources from me. Luckily two of my flips are under contract and set to close in a couple of weeks. One of those flips I was able to sell to an investor without doing any work at all and I will make close to $15,000 on it. I also have a couple of other flips that are on the market or just about on the market and ready to sell.
Even with these flips on the market, I don’t have the financial resources to pay cash for a $500,000 plus property. This property can only be bought for cash, which is another reason it is such a great deal. Luckily I have found a new private money lender who is willing to lend me the money to buy this flip and he has lent me some money on other flips as well. I still love using my portfolio lender to buy flips, but having a private money lender as well gives me a much greater ability to buy house.
With the private money lender I am able to finance much of the purchase. Private money rates are usually higher than bank rates and it will cost me more in loan costs and interest rates to use private money. On a $500,000 deal those costs can add up very quickly and that is another reason you have to get amazing deals on high-end flips.
If you are interested in seeing some of the flips in my inventory that I will consider offers on check out the properties here. These are off-market properties that I own, that are not on the MLS.
I know a lot of you are waiting for more details, but I have not bought this house yet. When I buy it I will write another article with more information and when we get the occupant situation sorted out, I will give out even more information, but for you will have to be patient!