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Business model to flip to investors or home buyers??

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Joel Owens Verified Moderator

Commercial Real Estate Broker from Canton, Georgia

Mar 01 '12, 05:59 PM


In addition to working with clients I was looking at buying with cash a few properties a month to resale to investors.

My thought with investors is they can pay all cash versus the red tape from home buyers.No underwriting or appraisal and waiting games.Decision to purchase from me is numbers based and not emotional.

With my multiple niches I would like to add another income stream but not have that one stream take up all my time.

Example if you can resale for cash 4 properties a month at a 10k profit that is 40k versus a flip in 90 days at maybe 25k in profit.

Ryan Pyles post in another topic intrigued me and I have been thinking on this type of transaction awhile.

"Got a call earlier this year from a guy who lived out of state. His dad died 2 years ago and left him a house here in Toledo. His dad had rehabbed the house to about 90% before he passed away. The house had been sitting vacant for 2 years and now he just wanted to be rid of it. I didn't really want it because it was a 2 bedroom which are hard for me to flip. So I made him a super lowball offer and he took it! On 1/24/12 we closed on the purchase for $14,000. I put $1,500 into cleaning it up and finishing the rehab, which amounted to installing the bathroom (all the materials were sitting in the house...just needed installed), and some other minor repairs. While my guys were rehabbing I called every Realtor I know asking if they had a landlord that was looking for an easy rental. As luck would have it, someone had a buyer for me. We closed 2/16/12 for $25,000. The Realtor only wanted $1,000 commission (even after I offered her $2,500). So, not a huge payday, but definitely an easy one!"

I really have no interest carrying paper and being the bank like some turn key places.

When I bought really low I would do some carpet and paint and get rent ready for an investor to buy from me.The only unknown would be the property management as I usually focus on sales.

Thoughts???



Medium_allworldrealtyJoel Owens, All World Realty
E-Mail: [email protected]
Telephone: 678-779-2798
Website: http://www.AWcommercial.com
www.AWcommercial.com 678-779-2798 [email protected]


J Scott Verified Moderator Donor

Real Estate Investor from Ellicott City, Maryland

Mar 01 '12, 06:18 PM


This is basically wholesaling, but buying the property outright first instead of double closing...

I do this a couple times per year when I have a property I'm not interested in rehabbing for some reason.



Medium_lishproplogoJ Scott, Lish Properties, LLC
E-Mail: [email protected]
Website: http://www.123flip.com
CHECK OUT MY BIGGERPOCKETS BOOKS: http://www.biggerpockets.com/flippingbook


Joel Owens Verified Moderator

Commercial Real Estate Broker from Canton, Georgia

Mar 01 '12, 07:58 PM


Thanks J.

The wholesaling thing to me basically gets into these people trying to make a fee with having little to no money of their own.Then you have to get into all these exotic type closings where things can go wrong.

I figured if there was no other assigning,simultaneous,double close and all that and I just bought and resold it would be much cleaner.

My closing attorney gives me a deal on things so I don't incur much costs.



Medium_allworldrealtyJoel Owens, All World Realty
E-Mail: [email protected]
Telephone: 678-779-2798
Website: http://www.AWcommercial.com
www.AWcommercial.com 678-779-2798 [email protected]


Eric Michaels

Real Estate Lender from Chicago, Illinois

Mar 02 '12, 09:02 AM


I have thought a lot about this since I too buy with cash and I get annoyed with the hassles of rehabbing. So somehow I think, why can't I buy with cash and sell it wholesale? In those one off cases when cash can really get you a big discount it can work. But the beauty of traditional wholesaling (I have never done it) seems to be not the lack of cash needed but the lack of transaction costs of assigning a contract. That allows for very thin margins.

But the purchase and sell to an investor idea adds transaction costs (on 2 transactions) that are not insignificant and often prohibitive to wholesaling. In my area, great deals often come with back taxes owed and we have transfer taxes and title insurance and lots of other fees. IMO opinion, on most properties it is better to rehab and sell retail.

Also, your idea that you can flip 4 a month at 10K with little work is IMO wildly optimistic. I think that could be your best month with alot of work. That is a trap many people fall into...thinking about what they "could" do one month and then extrapolating that to thinking you can do that "every" month.

I think you may be overestimating how easy deals are to find. If you are flipping a 100K properrty to rehab investors and trying to net 10k for yourself, you are looking at trying to get properties for roughly 50% of true value. Those type of deals are not just lying around for anyone to pick up. You have to scour for them. I have done probably 50 houses and have never bought one as low as 50% of the true value. 50% of some old value, yes...50% of some appraised value, yes...50% of ARV, yes....but never of the true FMV.
If you are trying to flip 50K properties it is even harder to squeeze 10K out and if you are fliiping 250K properties, you can squeeze 10K out easily but have a much harder time finding your easy cash buyers.

You gave an interesting anecdote of 1 such deal, but it was just that... an anecdote. He did make probably 7-8K with little work, but he told the story because it was unusual and he got lucky. You have taken that 1 unusual and lucky anecdote and somehow decided you can exceed his results 4 times every month.

If anyone out there can seriously find properties at 50% of their true FMV, please contact me if you want a cash partner. Legit numbers only. True FMV IMO is what you can sell the property for in under 60 days with no rehab.


Edited Mar 2 2012, 09:09 by Eric Michaels


Brandon Harris

Virtual Assistant from Fort Lauderdale, Florida

Mar 02 '12, 10:46 AM


Originally posted by Eric Michaels:
I have thought a lot about this since I too buy with cash and I get annoyed with the hassles of rehabbing. So somehow I think, why can't I buy with cash and sell it wholesale? In those one off cases when cash can really get you a big discount it can work. But the beauty of traditional wholesaling (I have never done it) seems to be not the lack of cash needed but the lack of transaction costs of assigning a contract. That allows for very thin margins.

But the purchase and sell to an investor idea adds transaction costs (on 2 transactions) that are not insignificant and often prohibitive to wholesaling. In my area, great deals often come with back taxes owed and we have transfer taxes and title insurance and lots of other fees. IMO opinion, on most properties it is better to rehab and sell retail.

Also, your idea that you can flip 4 a month at 10K with little work is IMO wildly optimistic. I think that could be your best month with alot of work. That is a trap many people fall into...thinking about what they "could" do one month and then extrapolating that to thinking you can do that "every" month.

I think you may be overestimating how easy deals are to find. If you are flipping a 100K properrty to rehab investors and trying to net 10k for yourself, you are looking at trying to get properties for roughly 50% of true value. Those type of deals are not just lying around for anyone to pick up. You have to scour for them. I have done probably 50 houses and have never bought one as low as 50% of the true value. 50% of some old value, yes...50% of some appraised value, yes...50% of ARV, yes....but never of the true FMV.
If you are trying to flip 50K properties it is even harder to squeeze 10K out and if you are fliiping 250K properties, you can squeeze 10K out easily but have a much harder time finding your easy cash buyers.

You gave an interesting anecdote of 1 such deal, but it was just that... an anecdote. He did make probably 7-8K with little work, but he told the story because it was unusual and he got lucky. You have taken that 1 unusual and lucky anecdote and somehow decided you can exceed his results 4 times every month.

If anyone out there can seriously find properties at 50% of their true FMV, please contact me if you want a cash partner. Legit numbers only. True FMV IMO is what you can sell the property for in under 60 days with no rehab.

Hey Eric, I see your in the Chi, not sure what kind of deals you are finding up that way, but here in southern FL due to the amount of foreclosures properties are selling for 40-70% of their FMW daily, I'll PM you my info so we can stay in touch in possibly work together on a deal in the future..



Chris Calabrese

Rehabber from Mt. Pleasant, South Carolina

Mar 02 '12, 10:57 AM


We have recently started going to the courthouse auctions and were thinking about this for auction properties if we could get them really cheap. The thought was to buy and get them gutted or cleaned out and ready for rehab. Then sell to another rehabber for maybe a $10-15k profit, instead of maybe spending $30k and a bunch of time in rehab to make $25-30k. I think it could work well because so many investors are buying rehabs off the MLS that the prices are going up, but very few attend the auctions.

It would only make sense in a few cases, where the "wholesale" profit would be relatively high relative to the full rehab profit. Otherwise, it's probably worth the extra effort.



Eric Michaels

Real Estate Lender from Chicago, Illinois

Mar 04 '12, 09:23 PM


I guess if you have a list of buyers ready. But when you buy at auction, don't forget about the back and current prop taxes you are going to owe as well as other transaction costs.
I would assume your end buyer rehabbers don't have cash or they would buy at auction themsleves. Are they financing with a mortgage? Auctioned properties are often in rough shape and missing appliances or damaged which means mortgages are tough.



Eric Michaels

Real Estate Lender from Chicago, Illinois

Mar 04 '12, 09:29 PM


Originally posted by Brandon Harris:

Hey Eric, I see your in the Chi, not sure what kind of deals you are finding up that way, but here in southern FL due to the amount of foreclosures properties are selling for 40-70% of their FMW daily, I'll PM you my info so we can stay in touch in possibly work together on a deal in the future..

Brandon,
So you are saying you can buy a property, immediately relist it for sale at double the price you paid and get it sold in under 60 days?
I am guessing you have never actually done this...but have read about it or been told?



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