<p>My trip was wonderful… three weeks in France and Italy staying in gorgeous apartments and villas. But, that’s another thread </p>
<p>The way that they changed the commission was they offered 2.5% in the original listing which expired. Then they created a new listing with 3.5% commission and then that expired. Final new listing had 3.0% commission. </p>
<p>It is technically against the Multiple Listing Service / Real Estate Agent rules to re-list unless the listing agreement is cancelled or expired and a new agent is hired. But, these guys do this so that they can come back out as a ‘new listing’ and it pushes it through to the agents who get ‘new listing’ automatic emails and to the external sites such as Trulia or Zillow.</p>
<p>I once had to play the game. We went ‘pending’ into contract but then the buyers fell out after 2 days. It was Christmas week and we knew we wouldn’t get any more action so we kept it pending and then marked it back to active about 8 days later. That way the listing would come out as ‘newly active’ and gather a lot more interest. It worked, we had a lot of interest and immediate offers after it came back onto the market.</p>
<p>Regarding profit… in our market margins are very tight. There just isn’t enough distressed/poor condition properties for the number of investors that are out there.</p>
<p>Generally, the target used to be 10% profit on the purchase price (in the Dale case it would have been about $35k profit). Now the big boys are targeting 7.5% profit margin ($25k on Dale). So, they made their 7.5% but things are getting even slimmer.</p>
<p>coralbrook, would you say this is due to massively increased competition on buying investment properties, thus driving up the price of a distressed property, or decreased interested in buying flipped properties, driving values down?</p>
<p>I know when we were looking at houses we avoided anything that looked flipped. Many of them were how you described. Minimal kitchens, poor worksmanship (some already had paint peeling even though it still smelled new!), and mostly just felt like a cash grab for whoever was flipping it.</p>
<p>The reason that profit margins are very slim now is that there is a flood of investors that have entered our marketplace in San Diego in the last year or so. So, for every property auctioned for foreclosure or in poor condition in regular sale, there are many investors trying to buy it. Some are trying to buy it, fix it minimally and rent, and others are trying to fix and flip. Thus, they are driving up the values of distressed property.</p>
<p>The interesting situation is that homes in really nice condition (newly renovated) are selling fast, as long as they aren’t priced too high. Homes in average condition with an average market asking price (traditional sale by homeowner) aren’t selling because investors won’t buy them and most first time home buyers want something really clean, modern and fixed up. Our largest buyer pool is cash investors and first time home buyers in the neighborhoods I work in.</p>
<p>Coralbrook, I am enjoying your thread. Investors are targeting 7.5 percent returns now. That seems a little tight. When are investors going to drop out of the market?</p>
<p>And what are the returns if the properties are rented?</p>
<p>Actually, in the Bay Area good neighborhoods prices are out of line, there is absolutely no margin for a flipper other than speculation. That is buy it with eyes closed and in hope to get better price later. Or they buy a perfectly good home and torn down to build a 3000sf mac-mansion to make profit. It is reverted back to the pre-2008 frenzy, in that, price of homes increase by 10k per MONTH.</p>
<p>However, flippers like me has to compromise and think out of the box to get into areas that are not desirable to make a buck. I have seen homes directly opposite of a foundry Or the gas station across the street was robbed under gun point! We have to make money with risks, not only financial risk, but also personal safety.</p>
<p>" I have seen homes directly opposite of a foundry Or the gas station across the street was robbed under gun point! We have to make money with risk, not financial risk, but personal safety."</p>
<p>But the money is good! I could rent it out for $3700/mo on a cost basis of about $220K, a 20% yearly gross profit, less tax and insurance and maintenance, it is a cash cow. Besides, all the residential renters are government guaranteed section 8. So there is little down side.</p>
<p>Nevertheless I do not wish to be a slum lord and risk my life to get paid, that is why I am selling.</p>
<p>A lot of the investors in our marketplace are doing the purchase and hold business plan. They are doing minimal repairs and renting for a couple of years, banking on appreciation. So, they will probably break even on costs (or minimal profit) for a couple of years and then hoping to sell in the future for a profit. This is similar to what a lot of investors were doing in the gold rush days.</p>
<p>Yes, flipping is a short lived business. You cannot always do flipping. In the go-go years, the only way to survive in a good neighborhood is to do buy and hold business or you have to buy in a “dodge the bullet” type of neighborhood. After the 2008 crash, opportunities for flippers became apparent and so flippers like CB’s business thrives on it. Now, after Feb. 2013, the flipping business is going to be harder and harder, as market turned around.</p>
<p>There are still opportunities around for flippers even in today’s market, but you must cast a larger net, such as, going out of the state, that requires large capital and different expertise. I know a lot of companies they are still flipping one house per DAY, or 300 houses per YEAR. They travel up and down the pacific coast or even into the midwest. It is out of the reach for small investors.</p>
<p>btw, I know few large flippers are still looking for capital, but that is a kind of investing most investors shy away from.</p>
<p>We passed inspection this morning!!! Full plumbing and electrical!!! </p>
<p>Now I just have to rebuild front overhang same size as before (absolute bummer, have materials already for gorgeous craftsman front porch). City guy is going to call me with some ideas on what to do with garage.</p>
<p>That was my intention until I got caught with an issue. When we finished, I called SDGE to turn gas on. They informed me that because we were red tagged and gas had been shut off, they need clearance from City inspection. </p>
<p>I put down the phone and just started crying, envisioning the worst! Tear open walls, get in all kinds of trouble, you name it. So I had to go down to the City and pull owner permit. I was too scared to call for inspection before I left in case we got a stop work order or something. </p>
<p>It was easy pie today, he pretended not to notice all the other work done (new windows, furnace, AC, new main, etc) and said we did a good job. In the end, the 1" separate gas line was required for tankless, or at least he was happy we put it in.</p>
<p>Now I can finally get gas turned on because my poor lead has been living here without hot water, stove or heat. He is a trooper.</p>
<p>The basis for the permit was ‘replacement’ of old gas line and new tankless water heater. Because it is not new construction, the lines are all run under the house. Gas line inspection consists of checking a pressure gauge on end of line at meter to make sure it is holding and no leaks. Water lines are all under the house. </p>
<p>I had discussed with City permit desk on what they were looking for and they only check pressure test and stick head into crawl space entry and check with flashlight for strapping and copper piping/gas lines. Since we were not doing new construction, they do not expect to see things inside of walls.</p>
<p>He did make one comment asking “I notice you used hard pipe and not the flex lines, that’s good”. I’m guessing that’s because we were an ‘owner’ permit and he would be leery of whether a homeowner can do the flex line stuff properly.</p>
<p>Also, I wanted to let you know that my local City permit (as compared to the big city permit a year ago) DID mention the one year clause prohibiting sale of property after owner construction. I asked the City permit supervisor “What if an owner gets re-located by company and has to move”… “I’m a little concerned about this clause”. He said “We just have to put that on the permit because it is required by the State, State Law. Noone can possibly ever check that stuff”</p>
<p>So, that portion of permit language on the owner permit application is State Law, not local law. There is no man power at the State level to ever check for this.</p>
<p>Good morning,
We are at interior completion and have the following tasks to complete:
Landscaping
Rebuild of front overhang
removal of garage (waiting for City to allow this, big stupid issue)</p>
<p>We have moved all of the staging stuff into the house and it’s crammed into the living room and all over the kitchen, so I cannot take pictures of the living room/kitchen right now. I did load some new pictures for the bedrooms, kitchen nook and bathroom. </p>
<p>You can see the risky selection of grey ash flooring that I put in. I will say that this grey ash flooring is absolutely forgiving!!! It does not show any dirt or mess that we are making and I’m loving it. May have to put some of this style/color into my own home. I would highly recommend it to everyone that wants low maintenance, hide dirt type of floor. It’s very thick and durable and easy to install. I paid about $2.39/sq ft for the laminate product (I get a large discount), then you need to add $.39/sq ft for the foam padding (medium grade - not the cheapest grade). I purchased through Simple Floors, in case they have locations in other areas that you might be interested in.</p>
<p>I have never put laminate flooring into a home but this coloring is the latest hot item and it really doesn’t come in solid wood or engineered wood. I investigated very carefully and this laminate was very thick and had nice wide planks (not cheesy fake pieces) with a really nice finish. So, I’ll see if it is popular with the buyers or not.</p>
<p>Do you know that owners permit will allow you to build a house from ground up? My neighbor has been doing that for about a year. His parcel is on a very steep slope, so from the get go he had to put deep pilers into the ground for foundation and he had passed all inspections. When I went there to look, the framing, plumbing, wiring and sub flooring were all up! Then he told me he ran out of the money and had to borrow from a private party. This “Bank” apparently knows about the one year law, so he kicked my neighbor out and hired a contractor to finish the dry walls and the interiors. They intended to sell it upon completion and split the profit. </p>
<p>So, the one year law IS there and it can be enforced. The State will never have the man power to check upon every building project, but it is the law. You could get into trouble if the buyer of a flip decide to take up on the case. Just like the lead base paint, when you sign the waiver you should know what are you signing, otherwise it could backfire on you and it can be costly.</p>
<p>I added up the numbers on the house we most recently did:</p>
<p>Bought for 134K, about 32K in cost (no labor costs as DH does all the work) by the time everything is done for total of 166K. Appraised at 153.5K. Way to make money Truthfully, we could have done it for much cheaper but DH likes to tinker, take his time, put in extra stuff just because etc.</p>
<p>Fortunately not a flip. We will conventional mortgage and hold for rental with >15% annual return on our capital. Good thing is this house now has new furnace, a/c, roof/trusses, windows, kitchen and bath. Should be low maintenance from our end I hope.</p>
<p>Looks like the one year rule you are talking about is you have to complete the work in one year. Then there is a rule you cant flip a house within a year?</p>
<p>Why are you renovating houses without permits? Is this ethical?</p>
<p>No disrespect intended; I know nothing about flipping houses. It seems if you are doing good quality work, you would have no problem getting permits/inspections. Seems like that would be a good selling feature, to show buyers that you have done everything up to code.</p>
</p>
Truthfully, we could have done it for much cheaper but DH likes to tinker, take his time, put in extra stuff just because etc.</p>