Real Estate Investor · Raleigh, NC · Member since 2008 · 35 posts · 1 vote
:shock:
I got NO sleep last night because my wheels just kept turning at how much I LOVE real estate and how excited I am to get started in wholesaling. So, today I bought a digital camera and called some realtors. I found a potential deal. Please help with ANY and ALL input.
Single family home
4 bedroom 1 bath
Bank REO
Asking price- 19,900
AS-IS appraisal- 44,000
According to the comps, it could have an ARV of 61,000.
Is this a deal? My fee will be $5500
So far, the realtors have been cool and have not asked any hard questions. Do I tell them that I am a wholesaler? What will the bank think of the assignment?
I will post pictures of the property a little later. I am going to open my new camera and get going. :D
If the comps are accurate and from the last 4 months it sounds like it could be a deal. Did you get them from a realtor? My question is how much work does this thing need? If ARV is $61,000 and they are asking $19,900, to me that screams that is needs a TON of work. Have you seen the inside?
I have yet to see the inside in its entirety. I did see the inside porch and what looked like the living room though. There is carpet and it needs cleaning if it's going to be kept. The walls were also dirty and needed painting. I am looking for a little more feedback and will probably make an offer on it tomorrow or Thursday. How will this work since this is a foreclosure. Will the bank allow this?
Sounds like your going to try a short sale? I haven't dealt with that, distressed homeowners or preforeclosures so I hope somebody else can answer this question for you...
1) you could throw in an offer of 10-15k and just add a contingency that it's subject to a hard money lender's approval. That will ensure that you have an out. Second, it will also test the seller to see how motivated the bank is. They will liklely coutner, rather than outright ignoring you. At that point, you can take a contractor over to the home, get a more firm estimate and either reject the counter if the rehab numbers are higher than you thought or get the deal.
2) to get around the potential assignment issues with a bank, what you can do is offer to buy it with an LLC, specifically formed for this property (i.e. property is 123 Main Street, so buyer will be "123 Mainstreet LLC, a to be formed LLC"). Check with a lawyer on this for your state. You set up the LLC after ratifciation of the contract and assign the LLC to the end buyer, rather than the contract. You can always sell your stake in an LLC to someone else.
The home actually sold 2 days after I saw it! I should have put it under contract right away! In the interim, I have been building my buyers list and have gotten a good response. Mostly every investor I initially approached wanted to know what company I worked for, so I started my own...Higher Heights Real Estate Services LLC. That is what I have been busy doing. I have to now publish the company and I am now ordering my bandit signs!
1. Never, ever, ever... ever be afraid to submit an offer. Give yourself an inspection period and clarify that you can cancel for any reason.
2. If you look an a property always submit an offer within 24 hours. Doesnt matter if the property is worth less than you thought or if it needs more work than you hoped. Doesnt matter what the realtor says about the offer. If I spend more than 10 minutes on a property they are getting an offer for me it's standard operating procedure. I've done quite a few residential wholesale deal (Closed 56 in 18 months) I submitted over 700 offers to close those deals
3. Bank REO's can be tricky the LLC comment I saw above works I generally stay away from Bank owned properties. They rarely accept contracts other than their own.
4. There is nothing good that can come out of you disclosing your intentions with the property to an owner or a realtor. One of two thing will happen either they are ok with it because they are extremely desperate or you will scare them off because they do not understand or they think its illegal or whatever reason they come up with. I disclose it only if I absolutely have to.
"I am a real estate investor and am interested in your property/listing. I would like to do a brief walkthrough and submitt an offer within 24 hours. The only contingencies my contract will have is a short inpection period and of course clear title" Get's em everytime they ask very few questions and treat you as a very serious buyer.
If you want to get into it full time I would suggest you submit a minimum of 3-5 offers per day.
Feel free to contact me if you have any questions.
Great Q/A I got alot from all of you as I am newat wholesale.
Especially the last post from CitySideInc. I have been fumbling around with what to put in letters to owners to get them intersted, and the don't await to make an offer!!!!
Also remember that with most REO's they will not allow you to assign in most instances (more often than not) and short sales are worse for this same problem. You can do a double closing but be careful and make sure that your title company will cooperate in the deal.
Also for arguments sake if you had put a contract on this property and you did not get a buyer, what would have been your out? Do you/did you have a financing route to close out the property with? Or is your intention to tie it up and see what you can do?
If the latter is the case be very careful with realtors, because you will get a bad name where the realtors are concerned. They are always cool until they realize the money they thought they were getting in not going to show up.
If I were you always make an offer in an LLC or S-Corp depending on your deal. if you are wholesaling, offerin an s-corp. LLC's are usually used for buy and holds or fix and flips.
S-corps are generally for lump sums of cash short term such as wholesale and short sales. Next time you think you find a good deal, just put an offer on it with specific contingencies that will allow you to have a 30 day out. You dont need a lot of contingencies, only a few. Dont be scared to put offers on properties, just make sure you have your buyers lined up way before you go to closing. If I were you I would have buyers before I put contracts on props. Find out what your buyers want and find those specific props. and not go crazy finding props. then finding buyers...
Let me ask you a questions, do you have a cash flow at all if you end up having to pay for any minor costs? What if you find a good deal that you can even do a lease option with and put a renter in there and have certain cost you have to make? Just a thought
Yvonne,
Saw that you're NY - curious, was this the buffalo area? Sounds like buffalo numbers. Don't get too worked up. I found things like this in another area. More will come. Before you get worked up on comps and values - determine what this will cash flow. Based on the numbers you posted - this appears to be a high rental area. Areas like this tend not to flip quickly. Be prepared to hold onto a property for some time. Part of that preparation is knowing that it will cash flow while you wait to flip it so you are not killed on holding costs.
And btw - realtors in areas like this know what they are doing when they show you high comps. You're not the first investor they've sold to. Never forget that their purpose in life is one thing - to get you to buy the property.
And btw - realtors in areas like this know what they are doing when they show you high comps. You're not the first investor they've sold to. Never forget that their purpose in life is one thing - to get you to buy the property.
Tim
BINGO! (yes, i said bingo, i know)...
Research on your own FIRST. I have seen way too many investors fall into this only to lose their shirts.
Every REO listing that I have seen and bought requires 1K down and proof of funds. Proof can be a letter of approval from a bank or hard money leaner or a bank statement showing that you have the funds to make the purchase. How are you going to make a serious offer without having the funds or the documentation to back it up?
Yvonne,
Saw that you're NY - curious, was this the buffalo area? Sounds like buffalo numbers. Don't get too worked up. I found things like this in another area. More will come. Before you get worked up on comps and values - determine what this will cash flow. Based on the numbers you posted - this appears to be a high rental area. Areas like this tend not to flip quickly. Be prepared to hold onto a property for some time. Part of that preparation is knowing that it will cash flow while you wait to flip it so you are not killed on holding costs.
And btw - realtors in areas like this know what they are doing when they show you high comps. You're not the first investor they've sold to. Never forget that their purpose in life is one thing - to get you to buy the property.
Tim
Tim, this is further upstate that Buffalo. Potsdam to be exact.