I hear it about just about everyday, maybe five to ten times a week. “Brian, I’ve just emailed you a property I think you should take a look at. Looks like it could be a good deal.” I’ll typically ask if they’ve seen the property, do they have a pro-forma or any comps I could look through. I invariably get a negative response just about every time.
These are friends, brokers or agents we’ve never done business with before. They hear through the grapevine that there’s a potential deal but they’ve not done the correct due diligence to adequately determine if the property is a real deal or not.
We take our agents and partners through a thorough training system of how to evaluate a property in three steps. First, we start by comparing other properties in the area (before ever physically going to inspect the property) through the MLS to determine what properties have sold and what ones are active that are similar to the subject property. We check age, square footage of the house, square footage of the land, bedrooms and baths, along with any updates that have been done to the house. If we see that the subject property could potentially be a good deal after we go through step one, then we make the appointment.
Step two is physically looking at the property. We use a checklist that breaks down 40 areas of the home to inspect to see what needs work or if it’s in good condition.
The last step is to fill out a financial pro-forma. This breaks down every expense associated with the flip. Here are the ten expense categories we use:
Our partners go through a rigorous training program on building material and costs to determine if the flip is good for us or not. Once a pro-forma is evaluated, we can easily determine what price to offer on that will make us at least a 20%+ annual return. We make the offer and then move on to the next property. For every twenty properties we make offers on, we normally buy one.
Brian Kuzdas is the CEO and Founder of FlippingProperty.com, RE Management and RealEstateAuctions.com. For more information on Brian, you can review his LinkedIn profile at https://www.linkedin.com/in/briankuzdas/. You can reach Brian direct at 650-575-7025 or [email protected]