No Flops for this Flipper
July 1, 2022
Laura Kelly Mance, CRB President, Long Realty
Seeing him for the first time, you wouldn’t think this impeccably dressed man knew much about soffits and lintels or anything that involved plumbing. You would be wrong. Tyler Lopez and his wife Tana lead a very successful real estate team in and around Tucson, and Tyler has completed 84 flips on his own and an additional 75 with partners, since 2012. Tyler was very generous with his interview. He believes that secrets inspire and inspiration causes motivation. Prepare to be inspired.
Laura: What would you say to an agent considering getting into flipping right now?
Tyler: Know the business of selling homes first. Assess the risk and attitude of conventional sellers well before you do your own. Understand what Buyers are looking for when buying and pay attention to what other Sellers like most about their homes to get an idea of what you’ll need to do other than the functional (big ticket) items. Follow other house flippers and estimate what they typically spend on a house by reverse engineering when you can. I kept a log of the flippers in town and what they bought the houses for, what they sold for, and estimated what they spent, in order to learn from the collective rather than just my own deals.
If you really want to flip houses, do as much as you can for free for someone else willing to let you follow and listen. Doing something for “free” to learn is absolutely better than losing money trying to experiment.
Laura: Is there an optimum price range?
Tyler: It varies based on your risk tolerance. The higher the price range the bigger and more complicated the house. As long as the risk factor is taken into account in your formula, price shouldn’t make a difference. That being said, a purchase price between $200,000 & $300,000 with a potential resale value between $300,000 & $400,000 is ideal with expected entry projections of 10-15% ROI, 5-10% contingency (something always goes wrong) to net 8-10% profit.
Laura: Have you made any mistakes along the way?
Tyler: First, competing with emotion instead of math. I’ve only lost money on one house ever. It was an oversight on a pool remodel. It wasn’t a big hit and tax wise it ended up being a wash.
Second, trying to save or reclaim anything in a home rather than just doing the remodel the way you originally intended. I found out many times that trying to save money is stepping over dollars to pick up dimes. I’ve never made more money by trying to save money on a flip. Just do the work.
Third, trusting contractor’s prices and timelines. I was taught that it’s ideal to pay for 50% of the materials up front, 50% of materials to finish the job and all of the labor after completion and walk through to verify the work order. I’ve yet to find a contractor that will abide by per diems and my expectations. It will always cost 10% more with change orders and take you 10% longer than expected.
Laura: What is your best flipping strategy?
Tyler: As a high-volume real estate agent, I’ve learned its best during listing appointments to show Sellers the calculator I’ve built and the three options that have given me a competitive advantage.
- How much do we need to spend and what do we need to do to hit the top of the market. I show them the net number with timelines.
- How much can we sell for and how long will it take to sell “as is” with the same cost analysis.
- How much will a cash investor (me) buy for and how much will I net at the end of the day.
This helps the Seller realize that they probably aren’t going to sell to anyone else for more they can get from me.
I was given great advice when I first started buying houses. First, you never lose if you don’t sell. Second, buy prepared to keep the home as a rental. Third, be sure that if the first two fail you’ll be okay living there yourself.
Laura: Have there been times when you felt you just “got lucky?”
Tyler: My luck has come from paying close attention to pricing, costs, trends and market influence. Plus, everything is well calculated in advance so this has become a business rather than a risky investment.
Laura: Have you ever felt unlucky?
Tyler I’m careful with my expectations. I always know that SOMETHING is going to defy you and go wrong at some point. Something will come up that “never happened before.” My job is to solve the problem.
Laura: Finally, what are your thoughts on disclosure? Are you the “I never lived there” guy or do you take a different approach?
Tyler: I, as well as my team and partners believe that the more everyone knows the better and this goes for renovated houses as well. Intense and thorough disclosure gives the Buyer the opportunity to investigate anything they want to and it gives me peace of mind that they won’t come back on me later. We disclose what we know.
As I said, Tyler was very generous with information and guidance. I wish there was room to share all I learned. I will add one final fact for those who may be wondering. Tyler uses licensed trades and general contractors for all of his flips. He says, “no one deal is worth my license and livelihood.” He added “Our team credo is Do it. Do it right. Do it right NOW! That has served us well.”
Tyler Lopez is an associate with Long Realty in Tucson Arizona