Software Features

BROKERAGE SERVICES

Software Features

Property Data

Research properties and their owners, compile lists, and more.

MLS Comps

A multiple-listing service comparable tool.

Listings

List your properties with Propelio Realty for incredible savings.

Short Sales

If you have an underwater property, our experts can help.

For Education

Blog

Interesting and valuable articles from Propelio and the industry.

Academy

Real Estate education platform led by a team of professionals.

Propelio TV

A channel that gives daily updated archive of our live video.

Discover Propelio

About Us

Get to know Propelio better – explore our story and mission.

Map Coverage and Brokers

Shows MLS coverage and broker transactions in your state.

Referral Program

Share Propelio with friends and family to earn exciting rewards

Template is not defined.
Play Video

The Real Estate Fix and Flip Guide: Mastering Acquisitions

Hey folks, welcome to part six of our Real Estate Fix and Flip Training series. Today, we’re diving into acquisitions. This stage is crucial for your fix and flip projects. Getting it right can mean the difference between a profitable deal and a money pit.

Why Acquisitions Matter

When diving into acquisitions, you’re essentially buying the property. It’s not just about finding a property; it’s about finding the right one that fits your model. Here’s where many investors get it wrong: they force a property to fit their model. Don’t do that.

Stick to your acquisition criteria. Getting excited about a deal is normal, but don’t let that excitement blind you. A deal that doesn’t fit your model can end in financial disaster.

Considering Market Conditions

When looking at properties, focus on areas with low days on market or those that are highly competitive. These spots might offer opportunities that align with your strategy, particularly with techniques like “whole-tailing.” This involves buying a property and selling it quickly on the retail market, often in desirable areas where the structure is sound but cosmetic updates are needed.

Always have secondary exit strategies. You don’t want to be stuck with a property that you can’t unload. Make sure you have a backup plan.

Running Comparable Market Analysis (CMAs)

Your first step in acquisitions is running a CMA to understand the property’s value. A CMA, or Comparable Market Analysis, gives you a baseline for pricing. Various opinions exist on property value—from appraisers to brokers. Always compare similar properties within the same neighborhood, ideally within a 10-year build range and similar square footage.

Stay within 100-500 square feet when comparing properties. Different ranges can lead to different valuations.

Neighborhood Metrics

Stay within a half-mile radius of the property when comparing values. Avoid crossing major streets or highways. Neighborhood boundaries can drastically impact property values. Always keep your comparisons within the same subdivision for accuracy.

Seller Concessions and Special Features

Be mindful of seller concessions. These can impact the perceived value of a property. Concessions often include things like paying for the buyer’s closing costs, which effectively lowers the property’s sale price.

Converted garages usually lower the property’s value by $10,000 to $15,000. For high-end homes, unique features like home theaters or wine cellars complicate the valuation. You may need to bring in an appraiser for these properties.

Making Offers

The right offer can make or break your acquisition strategy. When making an offer:

  • Deduct 5% from the highest CMA price for your resale estimate.
  • Use 70-80% of that resale price, minus repair costs, to find your Maximum Allowable Offer (MAO).
  • Deduct another 5% for negotiation room.

Always make multiple offers. One cash offer, one with terms, and one combining both cash and terms. This flexibility meets the seller’s needs better and increases the chances of acceptance.

Inspection and Costs

Though full inspections aren’t always necessary, having a contractor assess the property can save you from unexpected costs. A good rule of thumb for estimating costs:

  • $6 per square foot for paint and carpet.
  • $3 per square foot for structural items.
  • $10-15 per square foot for total remodels, adjusting based on the area and required finishes.

Remember, you’ll need to adjust these costs based on your specific location and the consistency of your contractors’ bids.

Final Thoughts

Mastering the acquisition phase is pivotal to the success of your fix and flip projects. By adhering to your acquisition criteria, analyzing market conditions, running thorough Comparable Market Analyses (CMAs), and considering neighborhood metrics, you can make informed decisions that minimize risk and maximize profitability. 

Remember to account for seller concessions and special features that affect property values, and to craft offers that reflect a well-calculated Maximum Allowable Offer (MAO). Finally, always incorporate inspection costs and contractor assessments to avoid unexpected expenses. With these strategies, you’ll be well on your way to securing lucrative fix and flip deals and achieving your real estate investment goals. Happy flipping!

Get started with Propelio and unlock all the tools you need to succeed in real estate. Sign up now for a 14-day FREE trial: Start Free Trial

show less

Leave a Reply

Your email address will not be published. Required fields are marked *

Recent Episodes

Play Video
3 minutes

Many have asked how I climbed from wholesaling five years ago to flipping...

Play Video
45 minutes

Welcome to the Real Estate Business Mastery Show! In today’s episode, we recap...

Play Video
62 minutes

Welcome to another insightful episode of the Real Estate Power Hour. Today, we...

Play Video
49 minutes

Good morning, everyone! I’m Robert Kelley, and today I’ve got Kristen Gary Saad...

Play Video
47 minutes

Hey everyone, I’m Ryan from Propelio. Today, we talked with Lolita Shira, also...

Play Video
2 minutes

Do you remember the first time you tried to solve a complex problem?...

Play Video
50 minutes

Understanding the real estate market is crucial for investors looking to thrive and...

Play Video
5 minutes

Hey folks, Blade Johnson here from Finishing Touches in Fort Worth, Texas. Today,...

Play Video
28 minutes

In today’s fast-paced world, staying on top of your health can be a...

Play Video
44 minutes

Hey everyone, good morning! I’m Ryan with Propelio, and today in the studio,...

<span data-metadata=""><span data-buffer="">Propelio TV

Do you love learning from your favorite hosts? Subscribe and we will notify you when we release new shows.