How to Price Fix and Flip Deals for Investors Using Rehab Costs, ARV, and Profit Margins

Eddie Ruettiger (00:00)
So I’ve always worked with investors and it’s just been something I’ve done. But a couple years ago, I had a client look to sell one of the units that she was holding onto. It was a vacant property. She…

got it by her spouse passing away. They did nothing for it. It sat vacant for five years. And she was like, well, I hope I get like 50 grand. And I looked at the numbers, ran the numbers, did everything I normally did. And we ran that backwards. And not only did we get above list price, and this is where the pricing comes in key.

Dylan Silver (02:12)
Hey, folks, welcome back to the show. Today we’re joined by Eddie Ruettiger a managing broker with Exit Real Estate Specialists in the Joliet, Illinois market in the greater Chicago area. Eddie, thanks for taking the time today.

Eddie Ruettiger (02:27)
No, thanks for having me. I’m happy to be here.

Dylan Silver (02:29)
Now you mentioned in the green room working with investors and having compiled an investor list to send prospective deals to. What are the main things that agents have to get right when working with investors?

Eddie Ruettiger (02:43)
you got to know your numbers. It’s a numbers game. You got to be able to price that house correctly. So I built this list like I talked about, and I have a good 30 to 40 investors when I get, because I seem to get listings that are very, very…

attractive to investors. They need work, they need rehab, they need things. And you have to price that house correctly. So by pricing that house correctly, you got to know what your rehabbing costs are. All right. So let’s say in my market, my average house is selling for about 350, 375. And with that being said, I have to turn around and going, okay, well, I can sell this for 350, but it’s going to turn around and cost me

100 grand to repair. right. Well, that’s great But you also have to put in a profit margin whether it’s a buy or hold investor or it’s a flipper They’re still going to want some kind of profit margin

to either sit on the buyer hold or they’re going to want a profit margin to sell. And that margin usually is around 20 to 30 % from what I’ve seen. And I usually see an 8 % to 10 % carrying costs. So, you know, that’s just the numbers game and you’ve got to know those numbers.

Dylan Silver (04:05)
Now, when you’re evaluating a property to send to investors, are you also doing a little bit of back of the napkin math to identify rehab estimates, or are you leaving that entirely to the investors to determine themselves?

Eddie Ruettiger (04:19)
do some back of the napkin math. I also use some of the AI to use and do some back of the napkin math because I can walk through and you can have, mean there’s so many, take your favorite one.

and you can say, all right, here I need new flooring. I need this. The house is 2000 square feet. It needs a new bathroom. It needs a new kitchen and it’s located in Joliet, Illinois. So that’s a key thing because now with AI, not only is it going to look at costs of materials, but it can look out and really quick like, well,

The average plumber costs this and the average electrician in that area costs this. And it can really zone in on those numbers. So now instead of me going in and guessing, right, I need a hundred grand to flip this, it’s gonna come back. Well, do you want a low quality? Are you looking mid or are you looking luxury? That’s gonna depend on the area.

If you’re in a luxury neighborhood, you’re going to need to put luxury product in. So then you know exactly what you need to do and then calculate that number out. the AI has helped me a lot in these factors when figuring this stuff out. And it’s all right on the spot because you can put a lot of these AIs on your phone.

Dylan Silver (06:25)
One of the more challenging things for flippers is they will, in many cases, have somewhat of a cookie cutter approach to flipping. And you mentioned you could potentially value add beyond what a market will allow. And so if your sole approach is super high finishes for a more luxury clientele, then that of course won’t work because the comps won’t be there.

in a market that may be more entry level. And so when you’re finding prospective properties, do you generally send the same properties to like everyone on the list or do you curate, okay, these are the folks that are looking for something more entry level. These are the folks that are looking for something more lux.

Eddie Ruettiger (07:08)
I have not got into curating ⁓ this list to individuals because not all the individuals are my personal client. Some of them are customers. Some of them are other real estate agents that work with investors. Some are real estate agents that are investors. And some are just investors that are rogue on their own.

or they have their own real estate agent. And we can get into whether you shouldn’t or shouldn’t be licensed as an investor. There’s a lot of factors there that come into play. But I just send it out to everybody because I don’t know what they’re looking for in their next project. They may be an investor that was doing the small little flips and now they’re like they built up a nest egg. Because let’s be honest,

When you’re doing a flip, the hardest flip is always the first one. Second one’s a little easier. And then the third. And then once you get to the fourth or fifth, now they’re really starting to flow and they’re really starting to get easier and easier to do. You know your numbers, you know where you’re at, you know how to target. So that is a key aspect to keep in mind. So I send it out to everybody because in this case, they’re my customer and I’m serving my client.

by marketing the property.

Dylan Silver (08:28)
granular question here in the Joliet market. If someone is looking at acquiring a heavily distressed single family asset to flip themselves and they want to do a roof to studs flip in the Joliet market, roughly what can they expect for an acquisitions price for a heavily distressed home in that market?

Eddie Ruettiger (08:50)
You’re probably around $200,000. So you’re probably around a $200,000, you know, depends. You could get stuff under $150,000, but you’re probably around $200,000.

We’ve got some areas that sell for four. We’re a very diverse area when it comes to market pricing and strategy. I’ve got houses that I’m showing that are priced at $200,000 and I got houses that I’m showing that are priced at a million dollars. mean, so we have a very diverse market. but normally you’re probably around 100 to 200,000, probably $100,000 in repairs. And then your profit margin is probably 50.

thousand to a hundred thousand depending on where you’re at and what you’re doing.

Dylan Silver (10:12)
Now, one of the trickier things that I’ve seen in the Sun Belt and I’m in Texas, and I imagine it’s entirely different up there, is we’ve seen sometimes hold times for these flipped properties become longer and longer as people are competing with new construction. But I know the dynamic is entirely different out there. How long are these properties days on market for before they’re selling? Is it only a handful of days before there’s a handful of offers in?

Eddie Ruettiger (10:41)
Yeah, it is. So I have clients that were looking to buy and my clients are in multiple offers right now. We are still in a multiple offer situation in the suburbs of Chicago. And I service a large area throughout Chicago. I was out in the Western suburbs. One of my buyers was involved with an offer that was one of 15 offers.

I’ve had you get a little bit southwest, you’re in the Joliet Plainfield Market, there’s a chance you’re three to seven offers. You start getting a little farther south where you’re getting more into farm area, more rural, you still have a chance it’s going to be, you may be the only offer, but there might be two or three offers in. and that is the appeal of working this market.

Yes, I know you could go out and make a profit margin of 200,000 in some other markets, but your carrying time is a lot, lot harder and a lot longer. Where here we’re looking at market time anywhere from, you know, two weeks to maybe a month in market time on average. And I think it was realtor.com that had the numbers out. The South and the West,

your guys’s inventory is at 2019 levels or a little bit above 2019 level. All right, now I didn’t see your demand numbers, but for our market, we are at 50 % below and in some cases, 75 % below those inventory numbers in the Chicago market. Depends on which municipality you’re in, where you’re at, stuff like that. But overall, we’re 50 % below those 2019 numbers.

But our demand is equal to, or in some cases, higher than the 2019 demand. And everybody goes, why 2019? It was the last normal market we had before COVID. And since COVID, we haven’t had gotten really back to a normalized market. that is the aspect that we’re looking at and what we’re dealing with basically throughout a lot of the Midwest, but right here in Joliet and Plainfield, south of Chicago.

Dylan Silver (12:45)
Yeah.

Now, working with investors is a pivot that I’ve seen some agents make and sometimes it’s intentional. Sometimes they stumble upon it then it becomes a big portion of their business. How did you start working with investors?

Eddie Ruettiger (13:05)
So I’ve always worked with investors and it’s just been something I’ve done. But a couple years ago, I had a client look to sell one of the units that she was holding onto. It was a vacant property. She…

got it by her spouse passing away. They did nothing for it. It sat vacant for five years. And she was like, well, I hope I get like 50 grand. And I looked at the numbers, ran the numbers, did everything I normally did. And we ran that backwards. And not only did we get above list price, and this is where the pricing comes in key.

If you’re priced right, you’re gonna start, they’re gonna compete and…

push that margin down, well, I’m willing to make this and this and this and you’ll get the best offer for your client. But we ended up having 18 offers on that one. She has other properties I know she’s going to want to get rid of soon. So that’s when I started this list and saving individuals in my phone and saving that. And it has come in for other things. Cause I got another estate sale that we had and

a very popular neighborhood that is more rolled down in Morris area, the Morris area. And that one, we ended up with 22 offers on it. Again, price correctly, but now I started having, and I’ve been building up this database, know, cause I get most real estate agents will get the phone call. Hey, blah, blah, blah, blah. I’m just wondering, do you have any properties that are gonna come to market or, know, that are, you know,

a rough that need help, need work. We would look at them before market, blah, blah, blah. And I started taking and saving their information. said, at the time I don’t, but I’ll tell you what, is this the best number to reach you at? Yes, I’m going to save you on my number. And then the next question I always ask, okay, my question is, is, so you’re an investor, do you have your real estate license? And.

They’re like, well, yeah, but I don’t use it. I just want to know if you’re licensed or not. So I know the relationship that I have and what I’m working with. So they’ll get saved in my phone, you know, real estate agent investor or just investor. So I know who’s in my phone. And it that’s how it came about is it really came about having that listing three years ago and really now pivoting and now building this database up for.

my clients when they go to sell and it’s really helped them a lot.

Dylan Silver (16:17)
It’s a great pivot to make. I think especially for folks who may not be in Chicago and they may feel like they’re if they’re in the sunbelt and they’re trying to figure out, how do I maybe add something to my business? Or, you know, they’re looking at options, right? Working with investors is a great opportunity because typically it’s either going to be a buyer’s market or a seller’s market. And right now where I’m at, it’s a

heavy buyers markets, who are gonna be your buyers? They’re gonna be investors who are now looking to get back into the market when interest rates are coming down and also when where I’m at, there’s so much new construction happening as well. We are coming up on time here, Eddie, any new projects that you’re working on and then also anything you’d like to say directly to our audience.

Eddie Ruettiger (17:03)
Yeah, so I came out of the investor aspect. I got a listing. I think if you are the right investor and you are looking to, you know, maybe get out of the development of a single property, I have 10 acres in Braidwood, Illinois that has electric water, gas already ran. There is a pond, there’s 21 lots already plotted out.

And so if you’re looking to take the next step and maybe get into a development situation, this would be a great opportunity. It’s 10 acres. Like I said, gas is to the lot, water, electric, sewers, brand. There’s no roads in put yet, but you can take a look at it online. I’ve got one address.

Hold on one second, I gotta remember the address. I think it’s 759 Kayla in Braidwood that I’m utilizing for that one. Or no, 579. Let me verify that. But that would be an amazing opportunity if you’re really looking to get into a development of your own. And then the other aspect is, if you’re always looking for property to invest in and look, I’d love to have your name and number.

shoot me a text and just say, know, investor or real estate agent and investor, you know, whatever the case may be. And you can text me at 815-823-5478 and I’ll save your phone number down, include your name so I know who it is. But yeah, it was a great opportunity to talk to you and that address is 7-5-7-

for Caleb Rowe we’re using. It’s just there’s 21 addresses and I don’t have them all memorized. And with Google and Google Maps nowadays, it’s better to put an address in on the listing than the old school. I’ve been around for a while where they used to put 0000 and then the city and the town. No, we wanna know where the lot is and this gives you a pinpoint location. So 574 Caleb, I gotta get that memorized is what I need to do.

But yeah, that’s pretty much what I got going on.

Dylan Silver (19:11)
Eddie, thank you so much for joining us today. Thank you for your time.

Eddie Ruettiger (19:14)
No, I appreciate it. Thank you.