How to Find Profitable Flip Deals in DFW | Jessica Buchanan on Rehab Costs, ARV, and Investor Strategy

Jessica Buchanan (00:00)
You know, we’ll give them those exit strategies. You can do this as is. You can do this a minor rehab or you can do this a major rehab. And here’s your sales for those price points. It depends on how much money you want to make and how much you want to put in. I don’t typically ask them their numbers because every investor is different too. You know, some investors are like fine with a 20k spread, but some of them like, no, it’s got to be 50k. That’s their business. You decide what you need to make and I’ll just, but I will tell you what we can sell it for at these price, you know, at these, at these strategies.

Dylan Silver (01:37)
Hey folks, welcome back to the show. Today’s guest, Jessica Buchanan is an investor focused real estate strategist and a lead agent who works hands on with both homeowners and real estate investors. She specializes in front end deal evaluation, walking properties with a project manager to assess rehab scope and costs before purchase. Welcome to the show, Jessica.

Jessica Buchanan (01:54)
Thank

you. Thank you very much.

Dylan Silver (01:59)
Now, when we talk about the ability to walk properties and to assess rehab, this is a skill that is very much needed and that also, I’d say, is a niche skill in that not that many people outside of general contractors really seem to focus on this or possess it.

Jessica Buchanan (02:21)
It’s critical for especially a lot of new investors that want to get involved in the business because it’s you can make a lot of money at, but those first time investors, I think they get a little deep sometimes and they don’t realize what they’re looking at. There’s a lot of unexperienced wholesalers out there, unfortunately, whose ARV is

really not accurate or their rehab costs is not accurate. So for an investor who really doesn’t know what they’re doing, but wants to get involved, I think it’s important to find that agent or that team that can basically help you from beginning to end and just give you some transparency on what you’re dealing with.

Dylan Silver (03:05)
Now, one of the criticisms, and I’m an agent myself, we’re both with the EXP, but I came from a background of wholesale. One of the criticisms that I’ve seen from the real estate agent community is that working with investors is over here and then working with people looking for their homestead is over here, right? But I do feel like…

especially when markets are changing, that it’s good to be able to understand the lingo in both.

Jessica Buchanan (03:36)
It is, it is. And I’ll tell you, have a buyer’s agent on my team who understands the flip side as well and works with investors as well. And so it helps her, especially for her first time home buyers who are looking at homes, when she can go in and go, this is a 1968 and it’s got cast iron plumbing. I just need you to know, you you obviously don’t have a fat savings account, but if you purchase this home, you can absolutely look forward to replacing your plumbing in the next five to 10 years.

Just know that that’s a cost you need to save for. Or we need to negotiate that in the contract upfront. So it helps to know all of that, whether you’re representing a homestead buyer or the investor.

Dylan Silver (04:21)
I mean, you mentioned the year of the home, right? I’ve worked with some investors who specifically will say like, hey, if it’s made between this and this year, we know it’s gonna have this problems in the city that they’re in. It gets that specific and into the weeds, right?

Jessica Buchanan (04:31)
Mm-hmm.

Yeah. Yes,

yes, yes. So that just comes with experience though. I mean, if you’re, if you’re a brand new agent, you’re not going to know all that. So it’s, I would say to an agent, just find a team or a mentor who does know all that. Just don’t assume.

Dylan Silver (04:52)
When we talk rehab estimates, one of the tricky things is that everyone’s gonna have their own vision of the degree that they want the property flipped or rehabbed to, whether it’s something that’s more rental grade or as I say, HGTV level, like the highest grade flip that you could have.

when people are coming in, especially with maybe less experience, they might be looking at something that could be this huge undertaking, everything from the roof to the studs, But then you’re also looking at, maybe I should do something that maybe higher acquisition costs, so I may be paying, you know, something that may feel like more market value for the home, but that will be less of a huge undertaking for me to flip the property or to rehab.

Jessica Buchanan (06:27)
Yeah, it’s just important to know their whole budget and it’s important to educate them that I find a lot of new investors want to put their personal taste into a home and that’s fine. But what you need to do is show them these are the homes in the area that are selling and kind of what they look like. You don’t want to over improve for the area because you’re not going to get your ROI on that. You know, you just if you are in it to make money, make the money. If you’re not in it to make the money and you’re in it for the art, then maybe this is not for you.

⁓ because that’s a different, that’s a different deal. If you just want to go make homes look pretty, you should probably open a staging business or, you know, remodeling business or something that caters to an individual. If you want to get involved in that part of it so much that you take it personally, when a realtor tells you don’t, don’t go for that backsplash because it’s not going to sell in this market here, you know, so it’s just important to know their goals and then to steer them the right way.

Dylan Silver (07:05)
Yeah, that’s right.

Now, when we talk about working with investors, right? Investors are gonna have so many different strategies, everything from fix and flip to long-term rentals to short-term rentals, right? To, maybe I’m gonna rent this out for, I forget what the term is, but I’ll rent this out for, slow flip. I’ll rent this out for a year two and then I’ll go ahead and sell it. Each of these strategies requires a different approach, right? And it doesn’t always necessarily go according to plan as you,

Jessica Buchanan (07:42)
Yeah. Two years.

Dylan Silver (07:54)
Well, no, right? When folks are looking at identifying their buy box and their strategy, what would you generally say as like, if you’re starting out, this is what I might be looking at, or this is maybe what might be more challenging.

Jessica Buchanan (08:08)
I if they’re just now getting started out, depends on how basically, how much money do they have to start with? And you don’t want them to use it all or, know, do they have a hard money lender that they can work with? I know a lot of hard money lenders don’t necessarily want to work with a brand new investor unless they know they have a good team that’s going to advise them well. But yeah, I think you just have to get to.

What is their long-term goal? What are they wanting out of life? I mean, do they want to rent? If they do want to buy a rental, is that something they want to manage themselves or do they need property management? Especially when it comes to rentals, you need to make sure that they understand the responsibility of that long-term commitment and what that means. And then if they want to do the short-term flip, you know, just prepare them for, you know, here’s our basic estimate on a rehab. However, just know

A, B, and C could occur, so leave some cushion there. I think a lot of people just think, I got 20K, I can go in there and flip this house. And that’s not usually the way that works. But it can. It can.

Dylan Silver (09:11)
No, mean, yeah,

it’s come up, right? You take down a wall, you take up the floor and you realize there’s issues behind the wall, there’s issues underneath the floor, right? And so that’s how these things happen. I would like to pivot a bit here and you you’re in DFW, I lived in Denton for about a year. What’s unbelievable, and I tell this to people is like Denton, especially where I was living near Sanger, it was closer to Oklahoma than it was to Dallas, but it’s still.

Jessica Buchanan (09:37)
Yes.

Dylan Silver (09:38)
DFW and so we’re seeing the urban sprawl of, you know, the Dallas Fort Worth Metro just grow and grow and grow and grow. Are there any areas ⁓ in that urban sprawl that you’re particularly bullish on or if you were investing, you might be looking at some of those areas. Are there any areas in particular?

Jessica Buchanan (09:56)
I love Ellis County right now. I just think there’s hardly anything there you can’t sell. Any flip that our investors have bought, my investors are going to be like, tell everybody. But I think Ellis County is great right now and ⁓ that’s a growing community. There’s still plenty of space out there. There’s still a lot of people with land. And you know, the craziest thing is Johnson County always sells to always the taxes are lower. So

It’s easier for buyers to afford. So if you are fixing and flipping, you can get the FHA buyer, you can get the VA buyer, because they can afford it. Those taxes are not going to price them out of that house payment. Whereas Dallas County or some of those other counties are, they’re not as affordable. Once you get that house payment, that’s great, but then the taxes get added and then it prices them out for their financing.

Dylan Silver (11:22)
Let’s, if we can, without giving away all of the gold, if we take a look at a deal in Ellis County, if someone wanted to do something that they could take, let’s say, from ⁓ outdated, it’s maybe livable, but outdated, and they wanted to do an off-market acquisition, just go direct to seller, and they wanted to flip the property, what do you think, and I know it’s gonna be a range, but what do you think would be a reasonable acquisition price for a smaller single-family home?

And then what do think they could flip it for?

Jessica Buchanan (11:53)
So a reasonable acquisition price, I’m going to guess is probably about 80 on the top side. And then you can turn around and flip that for usually 250, depending on the lot size it’s on. But it’s not impossible to do that out there. And the same with Johnson County. It’s not impossible to do that there.

Dylan Silver (12:13)
What’s amazing about these conversations is I think especially people outside of Texas, if they’re listening in, will hear this and be like, wait, so you’re buying a livable home. I mean, sure, it could be outdated. It might need some TLC, but for 80 grand and then you’re flipping it for above 200, like that’s, where is this? How do I get involved in this? Right? And Texas is really incredible in that regard because you do have this opportunity that exists for mom and pop investors, for folks that are.

wanting to get into real estate investing and then for folks who are established and doing this at volume, where it feels like we’re in a little bit of a, I think gold rush might be in a little bit of an exaggeration, but it does feel like there’s this huge opportunity for people to get involved that may not be available in other areas of the country.

Jessica Buchanan (12:43)
Yeah.

You know, there’s just a lot of pre-owned homes that were family homestead homes that they didn’t pass that down to their kids and they’re sitting there and they’re, you know, tax delinquent in there, or maybe they’re tied up with there’s 20, you know, heirs that they don’t even know that uncle so-and-so passed away in Texas because they’re in New York and there’s this property sitting here. So, you know, the people that have to go and do these acquisitions, it’s sometimes not easy, but that’s why you get that price. You know, the work is, somebody has to that work in.

And our team, you know, we recently partnered with, I think he’s in acquisition, like, holy moly, he is amazing. He will go drive these people to go get the death certificates and he will go hunt down the heirs. He’s not a typical wholesaler. Like he does the whole job. So by the time our investors get the property, it’s ready to close. There’s no, it’s not going to get tied up in title anymore because he’s already done that part. So he definitely earns his fee. We love him. And then, then it goes to our investor who evaluates the deal.

Dylan Silver (13:28)
Yeah.

Jessica Buchanan (13:57)
You know, we’ll give them those exit strategies. You can do this as is. You can do this a minor rehab or you can do this a major rehab. And here’s your sales for those price points. It depends on how much money you want to make and how much you want to put in. I don’t typically ask them their numbers because every investor is different too. You know, some investors are like fine with a 20k spread, but some of them like, no, it’s got to be 50k. That’s their business. You decide what you need to make and I’ll just, but I will tell you what we can sell it for at these price, you know, at these, at these strategies.

Dylan Silver (14:28)
You mentioned the wholesaler like earning their assignment fee. And, you know, one of the things that people don’t understand or maybe underestimate is the level of efforts. It’s almost like being a triage coordinator. You’re having to go in, you’re having to potentially bring people together. You’re having to go through probate issues. I mean, in certain situations, there could be just issues within the family, right? And so in addition to the underlying real estate deal and to getting the contracts,

It’s a lot of moving pieces and a lot of interpersonal element which can go somewhat underestimated.

Jessica Buchanan (15:00)
It is.

Yeah. the problem is there’s so much like I did wholesaling for all of, you know, maybe not months before I decided to go get my license and be in realtor. But I think there’s so much education out there and not all the wholesalers go all in. They’re like, ⁓ this is going to be so easy. I’m just going to go do this and do this and make my money. And they don’t realize, you know, in order to be what I consider a professional, there’s a whole lot more to that job.

if you do it right. Because, I mean, there is an occasion where you can get a contract and you can make some money. You really didn’t have to do a lot of work, but that’s rare. And I think the ones who get in without the education or without a mentor, I mean, there are some dishonest wholesalers. They’re either dishonest or they’re not fully educated in the job. So it’s hard to find somebody who’s really good at acquisitions who understands the whole picture.

Dylan Silver (16:40)
Yeah, I think that there was this time period, is I think since past, but maybe some people would disagree with that assessment where you were just seeing all this marketing for buy homes with no money down, cash for keys, right?

Jessica Buchanan (16:52)
Do you

Dylan Silver (16:53)
specifically using the word wholesale. And as someone myself who comes from that background, I do feel like, you know, there was a lot of people who did really, really well for a time period. And everyone it felt like and their brother got into the business. And then you’re just having people tie up these properties under contract with like no investor network to back it up. And some of the sentiment I’m sure you’ve heard this is like, hey, if you get a good enough deal, investors will come and buy it.

Jessica Buchanan (17:05)
Yes.

Yeah.

Dylan Silver (17:18)
I’ve actually not found that to be true in my personal experience. You can get an incredible deal, right? But just have no ability to dispo that property. You’re not familiar with that process. You put it in like three groups on Facebook and now you’re stuck holding the bag on this contract that you just potentially told a seller that you’re gonna buy it on, right? And so that’s not completely transparent either. Cause you’re not buying that property. You’re really, you know, the middleman there.

Jessica Buchanan (17:38)
Yeah

Exactly, exactly. And I think, like you said, there was a time period where that was not conveyed to the people who are getting into the business. They didn’t realize the bigger picture, which is there are probably are errors. There’s a reason that property is sitting there. There probably is some sort of tax delinquency or something that you’re going to have to help clear up or the investor is going to have to clear up that you want to buy. And if you take a property that’s that messy to an investor, they’re likely to go.

Yeah, no, I don’t want to mess with that. No, I’m not going to spend a year trying to get that straight. Like when there’s this other property here ready to rock and roll, it just doesn’t make sense.

Dylan Silver (18:24)
⁓ 100%. We are coming up on time here, Jessica. Any new projects that you’re working on and then as well, what’s the best way for folks to reach out to you?

Jessica Buchanan (18:33)
Sure, sure. Our newest project really is just to branch out to more investors. ⁓ The new system that we have is basically, it’s a team. I mean, everybody’s individuals, but we work together. We call it the property plug. ⁓ But there is like, we’ve just added acquisitions to our team, office with the project manager. And then we have, you know, probably about three or four investors that we work closely with. But it’s a whole system. He gives us the property.

my project manager and I, the investor will lock up the property for, you know, the three day option. go walk it. We will give you the full property evaluation, the rehab costs, and then I’ll give you the three exit strategies. And if they’re interested, then they go ahead and they close on the deal. And then the project manager gets his crew. They start the rehab, hand it off to me. We get it listed. it’s a great, it’s a great synergy as far as that goes. I mean, and they’re still like, I’m still going to help my friends buy and sell their houses if they want, you know.

or I’ll hand them off to one of my network partners, agents or whatever referral. And same thing with the project manager. He can do other projects or the acquisitions guy. If our investors can’t buy it, they hand them off to somebody else. Cause he’s got a pretty big list of investors, but it’s just, I think that especially for the newer investors or investors that are out of state, that don’t have boots on the ground. I think that we offer a really good product in a package. And I think that’s what we’d like to do is just to kind of expand on that.

Dylan Silver (19:57)
Jessica, thank you so much for joining us today.

Jessica Buchanan (19:59)
Thank you for having me. I appreciate it very much.