Ryan Pineda - 3 House Flips: Honest Profits, Problems & Secrets! | Day With Ryan
The speaker takes viewers through three different house flips at various stages: one just purchased, one under construction, and one on the market. He explains how deals are sourced from the MLS, wholesalers, and direct sellers, emphasizing the importance of relationships and timing in acquiring properties. The speaker outlines the financial breakdown of a flip, including purchase price, renovation costs, holding costs, and potential profits. He stresses the importance of conservative estimates to mitigate risks such as unexpected renovation costs or longer holding periods. Practical advice includes budgeting for holding costs at 1% of the total investment per month and planning for a six-month timeline to account for market fluctuations. The speaker also discusses the challenges of dealing with tenants and the benefits of direct-to-seller deals for better profit margins. He highlights the importance of understanding the local market and buyer demographics to avoid over-renovating properties.
Key Points:
- Source deals from MLS, wholesalers, and direct sellers for diverse opportunities.
- Budget conservatively for renovations and holding costs to mitigate risks.
- Plan for a six-month timeline to accommodate market fluctuations.
- Understand local market and buyer demographics to avoid over-renovating.
- Direct-to-seller deals often yield better profit margins due to no middleman.
Details:
1. Eviction Precaution 🚨
- The segment begins with a safety notice due to a recent eviction, stressing the importance of safety for both YouTube viewers and individuals present at the location.
- The video provides a tour of three house flips at different stages: newly purchased, under construction, and on the market, offering detailed insights into each stage.
- Key topics include deal sourcing, renovation processes, and profit potential, providing practical, actionable insights into the house flipping business.
- This segment is part of 'Day with Ryan,' an initiative to educate students through direct, real-world experience in house flipping.
2. Exploring House Flipping Opportunities 🏘️
- The speaker emphasizes that profitability in house flipping is prioritized over the condition or location of properties, as investment value is not tied to personal living standards.
- Their extensive experience includes flipping properties in less desirable neighborhoods, underscoring a keen understanding of market opportunities despite location challenges.
- Various sourcing strategies are utilized, with the majority of properties acquired through the MLS or from other wholesalers, showcasing flexibility and market adaptability.
- Direct seller marketing is specifically targeted towards wholesaling or innovation deals, demonstrating a nuanced approach to different segments of the real estate market.
- Examples of acquisition diversity include purchasing one house directly from a seller, another from a wholesaler, and a third from the MLS, highlighting strategic sourcing.
- The speaker's adaptable strategies include flipping a wide range of property types, from Main Street locations to small or rundown houses, emphasizing versatility in investment approaches.
3. Financial Planning and Budgeting Strategies 💰
3.1. Property Purchase and Rehabilitation Costs
3.2. Holding Costs and Financial Strategy
4. Profit Projections and Risk Management 📊
4.1. Profit Projections
4.2. Risk Management Strategies
5. Deciding Between Flipping and Renting 🏠
- If a remodeling deal doesn't yield the expected 50k profit and instead only generates 20k, it's often better to sell rather than rent, especially if the area isn't favorable for rentals.
- Holding properties that don't sell can be beneficial in the long run, but requires financial resilience to handle potential losses during the holding period.
- In a case where the total investment is 300k and the expected rent is below the $2,200 monthly mortgage, renting would result in a $500 monthly loss, making selling a more viable option.
- Even if a flip only breaks even, it may be advantageous to sell and reinvest in other projects to avoid prolonged financial strain and opportunity cost.
- When calculating property expenses, consider unexpected supplementary property taxes that could arise 6 months to a year later, impacting profitability.
- A typical cost estimate should include a 1% allowance for property taxes and utilities, acknowledging that actual expenses might be slightly higher.
6. Navigating Project Complexities and Renovations 🔨
- A minimum profit of $50k is targeted, with maximum renovations capped to avoid excessive risk, highlighting the importance of precise project budgeting.
- Renovations budgeted at $100k often risk increasing to $150k, illustrating the unpredictability and need for contingency planning in renovation costs.
- For entry-level homes, maintaining a maximum renovation budget of $50k to $70k is crucial to ensure a manageable risk-reward balance, suggesting strategic budgeting tailored to market segments.
- Luxury flips involving renovations costing hundreds of thousands are deemed too risky due to frequent budget overruns, underscoring the need for risk assessment and strategic alignment with investor goals.
- Budget overruns are common, emphasizing the necessity for conservative budgeting and potentially incorporating buffer funds to manage unexpected costs.
- In lower-income neighborhoods, minimal renovations align with price-sensitive buyer expectations, avoiding unnecessary upscale improvements and ensuring market fit, highlighting the importance of understanding buyer segments.
7. Building Contractor Relationships 🤝
- The Las Vegas flip is projected to yield a profit of $50,000. It was acquired at no cost through a wholesaler relationship, highlighting the value of strategic partnerships in reducing acquisition costs.
- The speaker emphasizes the importance of evaluating property comps to determine the potential value increase of making a house a 3-bedroom, 2-bathroom (3-2) versus a 3-bedroom, 1.5-bathroom (3-1.5). For instance, if a 3-2 is worth $400,000 and the cost to upgrade is $10,000, the extra $10,000 investment could potentially result in an additional $20,000 profit.
- The strategy includes balancing quick financial returns with long-term investments. Quick returns are achieved through wholesaling and novation, while properties acquired at no cost (e.g., from wholesalers) are held longer for potentially greater profits.
- Challenges in property flipping include structural limitations, such as difficulty in adding a shower to a bathroom due to space constraints, which require creative solutions or may impact the decision to modify the property.
- Strategic contractor relationships enable the acquisition of properties at reduced costs, such as through wholesaler partnerships, and enhance the ability to make profitable upgrades by leveraging cost-effective solutions and expertise.
- Cultivating relationships with contractors can also assist in overcoming renovation challenges by accessing innovative solutions to structural limitations, thereby maintaining or increasing property value.
8. Contractor Payments and Licensing Considerations 💼
8.1. Contractor Payment Strategies
8.2. Contractor Licensing and Risk Considerations
9. Market Timing and Property Tours ⏳
- Flippers often avoid obtaining permits, making necessary repairs known through an SRPD form, ensuring transparency while minimizing costs.
- It's strategic to buy properties in fall and winter to prepare for selling during the lucrative spring and summer markets, maximizing exposure and profit potential.
- A property was purchased at $415k with additional costs for tenant removal ($20k) and renovation ($20k), totaling $475k. The ARV is $575k, with a listing price of $590k, projecting a potential profit of $60k to $80k.
- Flipping strategy emphasizes minimal renovation to match comparable market properties, avoiding unnecessary upgrades unless they provide significant value appreciation.
- Cash-for-keys was used to negotiate tenant departure, a cost-effective strategy to expedite renovations and prepare the property for sale.
- Strategic renovations focus on cost-effectiveness, ensuring any additional investment significantly increases the property's market value.
- Wholesalers may sell without viewing the property, leaving inspection responsibilities to buyers, contrasting with flippers who inspect beforehand to understand necessary improvements.
10. Adjusting Pricing Strategies and Buyer Negotiations 💼
10.1. Refined Pricing Strategies
10.2. Buyer Negotiation Tactics
11. Managing Holding Costs and Property Investments 📈
- Holding 20 properties at any given moment results in $8 million of debt and $80,000 in monthly payments.
- Flipping at scale previously involved holding over $20 million in real estate, resulting in $200,000 monthly interest payments.
- Wholesaling becomes attractive as it offsets holding costs, with potential to earn $200,000 monthly, covering $80,000 interest expenses and generating profit upon property sales.
- Combining wholesaling and flipping provides cash flow stability, reducing financial strain from holding costs.
- Wholesaling involves quickly selling properties to other investors, minimizing the time properties are held and reducing associated costs.
- Flipping typically requires holding properties longer, but strategic planning can mitigate financial risks.
- Effective cash flow management through these strategies can significantly enhance profitability in property investments.
12. Handling Challenging Properties and Evictions 🚪
12.1. Challenges of Handling Properties Post-Eviction
12.2. Financial Aspects and Projected Returns
13. Renovation Cost Estimation and Execution 💦
- The total estimated cost for the entire pool renovation project is at least $20,000, encompassing all necessary tasks.
- Trash removal is a significant portion of the renovation, with costs estimated around $10,000.
- Replastering the pool is projected to cost between $6,000 and $7,000, reflecting the materials and labor involved.
- Replacing old pool equipment is another crucial component of the renovation, with an estimated cost of $4,000 to $5,000 for new, efficient equipment.
- The overall renovation, including necessary deck repairs, is expected to cost approximately $15,000, ensuring the pool and surrounding area are fully refurbished.
14. Conclusion and Final Insights 🎬
- The project involves a cosmetic rehab without changing the layout of the house.
- Blowing out walls is part of the renovation plan and is not considered a significant cost, especially if they are non-loadbearing.
- Most of the houses in Vegas require simple demolition to open up spaces and enhance aesthetics.
- The renovation budget is set at $75,000.
- The focus on non-loadbearing walls allows for efficient space utilization without structural concerns.
- The $75,000 budget is allocated primarily for aesthetic improvements and minor structural changes, ensuring cost-effectiveness.
- Lessons learned include the importance of assessing wall types for cost management and the value of strategic planning in cosmetic rehabs.