BiggerPockets

I'm having essentially zero luck the past few months finding decent rehab deals at numbers that make sense. Probably averaging twenty cash offers per week and batting a cool 0.00% so far. 250 offers without a single deal seems pretty unlikely so either the market is that tight or i'm simply being too cheap?

I know this topic comes up regularly but figured i'd start the new year version. What's working for you? MLS, direct mail, networking, probate, etc?

I recently met with a local here in Atlanta, originally from China, who has been buying houses cash with a bankroll of $1.5MM cash from friends and family back in China.

Because he has the money, and/or because he doesn't know any better, he's been buying houses off the MLS whenever his realtor calls him. He feels he's getting a good deal. Minimum 10% ROI. He buys and holds for rentals. Mostly section 8 he said. All professionally managed. He's pretty hands-off, but I'm sure he's making some good money on his money. It's just an investment to him of course.

Point being, he's going to the MLS, but I don't think he's getting true wholesale deals, as Jerry has mentioned.

What's worked for me, on short sales, write the offer at asking price, then add, you will pay $1000 over the highest offer. I let the listing agent represent me. After you tie up the deal get a professional home inspection and with the results negotiate the price

We've been focusing on short sales, through direct mail and off the MLS.

My deals are still coming from my direct marketing. The main issue in my markets is equity. My markets have so many properties with no equity. Unless I create equity (short sales, sub-2 holds, etc) the pool of sellers is too small.

You're probably being too cheap, but only compared to what others will pay. It may not make sense for you to change your buying criteria if the margins get too thin and risky. The main rehabbers in my farms are working volume and on incredibly thin margins by my standards. A house I need to buy for $85K, they are paying $110K for at trustee's sale. They are doing 5-10 houses a month. The smaller players aim for $15K-20K, even on the $200K+ houses. Just one major repair issue and additional hold time and the deal is toast. I don't get it.

Last year an agent brought me an investor buyer on an almost finished rehab. He paid $95K and gave the agent $1500 for finding the deal. He had the flooring done, for probably $2500 plus some landscaping. He listed it with the agent for $5% at $134K. They got lots of offers in the $125K range, but in the end they couldn't get the appraisal higher than $117K and finally sold at that price, after six months. That's not a deal I'd want. But the investor was using his IRA funds and even a few K is more than he had the month before. Those guys are everywhere right now. Someone with cash, building their retirement fund, not needing to make a killing (or a living), is the the real competition. Add to that the new buy-and-hold investors who think cash flow is rent - PITI. Their purchase prices really skew things too.

I'm at a crossroad about changing my buying criteria. My husband always accuses me of being too cautious and needing overly wide margins. My thinking is that I don't get burned by deals I don't do. But I don't make any money on the deal I don't do either. His point is someone with skills, experience and capital (me) should be able to adjust to the current market. Still chewing on that.

My preference is to work with decision makers directly, face-face over the kitchen table.

Therefore, I'm limited to direct mail, referrals, searching neighborhoods for vacant houses and other likely prospects, and talking to neighbors.

As for your numbers, if I get 100 calls from a direct mailing (and hopefully a 5% response rate), after I prequalify on the phone, I would be happy to have 15 qualified prospects I am willing to spend the time and travel their home to discuss business.

Then, I'll make 10 - 15 offers (when I make that effort to visit personally, I always make an offer, subject too newly unrevealed problems that kills the deal, which happens) and be happy to close one or two transactions.

Please note, My goal is to put one or two houses a year, I keep almost all my transactions so I'm am very picky.

Keep at it, they'll come and good luck!
-Kent

My deals are still coming from my direct marketing. The main issue in my markets is equity. My markets have so many properties with no equity. Unless I create equity (short sales, sub-2 holds, etc) the pool of sellers is too small.

While such a deal may not work for flipping, don't pass up on leads like this as there exists other ways to make money off of low equity deals.

Originally posted by Will Barnard:

My deals are still coming from my direct marketing. The main issue in my markets is equity. My markets have so many properties with no equity. Unless I create equity (short sales, sub-2 holds, etc) the pool of sellers is too small.

While such a deal may not work for flipping, don't pass up on leads like this as there exists other ways to make money off of low equity deals.

Will: Thanks for your reply. Since this thread is about how to get deals in 2013, I'd like to hear your ideas for other ways to make money off of low equity leads. I just completed a sub2 that took me six months to negotiate a pay off from $275K to $85K. So I created equity in a no equity situation, without a short sale. But frankly I'm not sure how I would create another deal like that.

Regular short sale leads seem like such a numbers game and a lot of marketing dollars, and the agents are going after those as well.

I'm considering a sub2-and-hold deal as the seller is really eager to be done. Good property with a low fixed rate, with tenant paying market rents, currently loan is right about value. I can get in for nothing, and rents cover PITI and then some. But it's an appreciation play and after 75+ deals I've never bet on appreciation. According to Bruce Norris this would be a good year for that. :)

Any other thoughts about low equity leads?

Steve I think certain markets that were exploding in the boom have recovered faster then others. the key here is demographics. Orlando continued to grow even after the bubble burst as did a few other cities. When the bubble burst in 07 the over build inventory was sucked up faster then other cities. As a result your now seeing a few cities that baby boomers are still moving to bringing steady amounts of cash to the market. The city of Orlando just like Miami and Tampa are the fastest growing markets 2000 thru 2012 in your state. Orlando is 19th fastest growing city in the nation.
80 million baby boomers moving south to either Arizona or Florida.
If I lived in Orlando I would buy and hold big time. il probably be there either way within 12 months too bad I didnt get there like 3 years ago.
As an investor some times things get tough. During our last boom i quit buying after 2006 because I couldnt find anything. I just gave up the bums on the street were getting better loan offers then I could get as a investor with cash down pmts a net worth and 15 years management and rehab experience back then.
I sold off half my portfolio most of my small stuff houses and duplexes and moved south started with cash and sat and waited for 2+ years from 2007 to late 2009 before I dove back into the market down here in the Ohio river valley. I got lucky selling my last home up north 4 weeks before the sub prime melt down. About 6 months later it struck me that I had gotten very lucky. I went from rehabbing back to landlording since I still had apts I just retrenched and stopped buying. My rehabbing was over and I began to focus back on the apts I still had after I sold off the houses. Now i am creeping back into the rehabs but Im doing deals with cash no debt.
I think Orlando will continue to grow for another 4 to 6 years then boomers will probably drop off as customers and growth with slow.

Are others adjusting their margins in order to stay in the game? I read somewhere on BP that the ideal adjustment would be to stick to your buying criteria, keep looking for the 1 or 2 real deals, and to keep cash at bay until others start to fall off...

Obviously this all depends on your goals, but there have to be some investors who are choosing to stay out of the market due to the increased competition.