Need Some Advice in DFW
My husband and I are newbies, but have been looking for our first flip property. Having done a lot of reading (including J Scott's book) the 70% rule has been drummed into us. And, since we will be starting out with hard money, I know the deal has to fit into that 70% rule criteria. I have been scouring the usual places (wholesalers, foreclosures, Craigslist, etc...) and working on SEO for lead generation. When I do the math (70%) on possible properties, the purchase price comes out way low, to the point that I can't see anyone accepting it as an offer. The other issue I am having is the ARV. I go to Zillow to at least get a ballpark and then get comps from my realtor. Can anyone share how you go about finding a property and then deciding to make an offer? I should also mention we live in the DFW area and our market is very strong. We are raring to go, but feel a little discouraged at this point. I have a feeling I may not be correctly approaching my search.
The 70% rule doesn't always apply for more expensive properties where 30% equity mean more cash for the buyer on a 500k property vs a 200k property.
Sometimes the rehab buyer just prefers to have a certain dollar amount for profit. For example: some investors criteria on a fix and flip may be minimum $20,000 profit on a flip rather than the 70% rule. I hope this helps?
Thank you Ben, this does help. A different way of having the numbers make sense.
The 70% rule is a "rule of thumb". I use it as a guideline to kind of help me do a quick and dirty "is there any chance this deal will work" analysis. In the end, I make my final determination based upon ROI. The real cash buyers I've talked to have a target ROI and a minimum profit they are looking to achieve. After visiting with some of these folks, I've set 20% ROI as my goal for evaluating a deal.
As for finding deals that work, regardless of what your criteria is, the DFW market is such as strong seller's market right now that it's unlikely you're going to find anything, unless it's off market or an REO/HUD property, particularly if you're talking about areas people actually want to live in. There's so little inventory regular retail buyers are buying houses that need work, because it's all they can find. Marketing is the key, and based upon everything I've heard and everyone I've talked to, you really need to focus on an area and "farm" that area.
Thank you Hattie! Since you are local to me, do you know of any local REI meetings in our area?
Hi @Pat Healey you should go to NTAREI meetings. Check their website. Not pitchy at all and I've made some great connections there.
Email or give me a shout if you like.
Thanks Joe! This looks like exactly what I need!
Also, here is a rundown of some of the meetups in DFW, but I'm pretty sure there are others.
Originally posted by @Pat Healey:
Thank you Hattie! Since you are local to me, do you know of any local REI meetings in our area?
DFWREIA is a good option, particularly since you're in Burleson. They meet at the Woodhaven Country Club, just off of 820 & I-30. They are very active and have a meeting every Saturday morning. I've made some good contacts there, as there are some very active investors (wholesalers, cash buyers, flippers, buy & hold, etc.) who attend. Plus, Robin Carriger, who is one of the leaders, has a program that interfaces with the Tarrant County Appraisal District to generate leads for direct mail. I do the same thing, but in Dallas County.
They do get a little "pitch heavy" on some of the paid trainings, but that part is pretty short and the networking alone is worth filtering it out. Also, they offer a deal review where you can present a current deal and get opinions from the other investors in the room.
Most of the deals I see coming from wholesalers in DFW right now are going for 78-80% of ARV (these are generally houses with ARV from $150-$250k). You can do better than that, but it will take more work. As Hattie mentioned above, the DFW retail market is hot, so the more you can do to market directly to the seller, the better your chance of finding a good deal. I've had decent results with direct mail so far (started in January this year).
Yea! Thank you so much Hattie! I have already signed up and plan on going to the meeting on Saturday morning. Can't wait to meet other local investors!
Thanks Andrew, that's what I was beginning to think. Who do you direct mail to?