BiggerPockets

Me: Bring wholesale properties @ or below 65% ARV to the table.

You: Bring 100% cash to the closing

Time: 1 - 6 months return per deal; would like to roll the principal capital into rolling deals with the proceeds from each closing to be paid out.

ROI: You get 50% of the net return.

Security: Your interest is secured by title.

Details: I believe there is a great opportunity to maxmize profit potential through short sales and flipping them into the retail channel. Hard Money is expensive and requires 11% - 13% rates + points and fees. Moreover, most require 10 - 20% down. These carrying costs are making me pass up many deals that are simply to close to make them worthwhile. Not to mention, I can only do one deal at a time becasue my capital is tied up in the down payment and repair costs.

Private capital would allow me to do more deals simultaneously instead of one at a time. Also, we can leverage ourselves through a JV with other investors taking a piece of their pie.

The Need:
In my market, Arizona, there are still a lot of retail real estate buyers looking for the great prices of pre-foreclosure (short sales) BUT cannot wait for the 3 months it takes to close. Nor do many wish to repair or renovate the foreclosure properties.

As for investors, there are very few that want to be hands on. They would rather invest in a turn-key solution where their investment property is secured, repaired, filled with a tennant and managed. Simply put, they wish to see a monthly check and that is it.

The Solution: Close on properties quickly with private money. This keeps carrying costs low and allows us to be ultra-competitive with pricing. We bring the properties up to market standards and price aggressively for a quick sale. We use flat-rate listing companies to keep the commissions down and offer incentives for buyers reps.

Target Market: Of those retail buyers, 50% of them are FHA or VA. FHA Loan restrictions cause seasoning to be at least 90 days. Therefore, it is critical to have private funding in order to keep down carrying costs.

A secondary market will be turn-key investors. We can market to both investors and retail buyer's simultaneously increasing our chances for a quick close. With regard to investors, we will take a hit on profit margins since we will need to discount the price to make a good cash flow number. The theory here is a quick turn might be an advantage as we can roll the capital into a new deal more quickly.

I propose a joint venture on a per property basis with an option to roll principal into another transaction. Each property will be presented with current market data and pro forma profit analysis. All closing will be conducted through escrow officer and title company. We can structure the legal entity (LLC,Corp,LP) however you wish. We will draw up an operating agreement with predetermined parameters. I will be responsible for generating the leads, negotiate with the lenders, repair estimates, gathering market data and analyzing ROI, marketing the property, closing the deals.

You can be involved in as much as you feel you need, or as little as you feel necessary. If are interested in learning more and showing an actual Short Sale transaction I am working on currently, please PM me or call me using my profile. You can also use the link to my website to contact me.

Thanks for pointing that out, what I meant to say was at least 65%.

I'm also somewhat interested.

Purchase Information
Purchase Price $85,000.00
Down Payment $21,250.00
1st Mortgage $63,750.00
2nd Mortgage $0.00
Closing Costs: Appraisal $400.00
Inspection $300.00
Termite $50.00
Loan Origination $0.00
Loan Fees, Stamps, etc $1,300.00
Prepaid Tax, Insur, Int $1,500.00
Other $0.00
Total Closing Costs $3,550.00
Paid by Seller -$1,500.00
Paid by Buyer $2,050.00
Required Repairs $0.00
Total Initial Investment: $23,300.00

Future Sale
Total Sq Ft 1,420
$/Sq Ft $84.00
Sales Price $119,280.00
5% Commission -$5,964
1% Closing Cost -$1,192.00
Outstanding Loans -$63,750.00
Sale Proceeds =$48,373.20

Bottom Line:
Sale Proceeds $48,373.20
Improvement Costs -$3,000.00
Initial Investment -$23,300.00
Carrying Costs -$2,688.84

Net Gain: $19,384.36
Investor Rate 0.5
Investor Return $9,692.18
Investor Cash on Cash 37.29%

will you be able to justify a $35,000 price increase on a property that only needed $3,000 in repairs when you go to sell it?

Scott, you could also use the strategy that my partner & I just learned from Mark Evans in Atlanta who has bought over 250 properties using this method; find people who are sick of losing money in their IRA's,401's etc, to self direct them, invest with you, for example, take a $50K, you pay 9% simple interest for 30 yrs, with a 5 yr balloon, buy a REO for 15-20K, put 4-5K rehab, get section 8 tenant, rent for 1-1,220 month, you pay the IRA $375/mon, cash flow the rest, plus have the rest of the IRA money to invest. IN 4-5 yrs, sell, and split 50/50 profit with investor. They are loving it, getting great returns on their IRA's, which you of course attach with a promissary note in LLC to the contract, so it is always backed by the real estate! Lots of people want to invest in RE, but do not have the time & money or knowledge, and have IRA's that have lost tons...Brilliant strategy....

Scott,
PM me. We should talk. I am interested and have the cash.