Hi. I am a newb trying to put together a new deal. I have found a rehab multi that I like and believe has potential. It definitely needs rehab before anyone can move in. Im confused as to what my next steps would be. If it were not needing rehab before someone could move in I would make an offer subject to an inspection and then walk it with contractor/inspector to see where we stood.
However, since this one needs significant repairs before hand, is it unreasonable to contact the selling agent (i don't have a buying agent) to request sometime to walk through it with a couple of guys BEFORE putting an offer on it?
That is my leading option. The next one is contacting a 203k mortgage broker to find out how much I can afford in a mortgage before making an offer on the property. But I can't get fully approved for 203k without getting bids out to contractors.
Even typing this out, I think the way to go is to see if I can look at it before submitting an offer simply to see if it is even worth my time.
Everything is boarded up so I cant see inside, by the way.
Since you are new to this industry, play it safe. I would definitely go take a look at the building first. You'll need the practice in assessing repair dollars anyway. In order to know if it's truly a good deal you'll need to know how much repair work.
Don't let the boards on the building fool you. Call the agent to see the inside, its not unreasonable. Boards can easily be taken off the doors. Do ask about structural damage for safety reasons.
yeah I have to agree, walk the first few until you get really comfortable. Then you can spam offers and walk them during diligence.
I would not even think of making an offer till I saw the inside.
Talk with the seller or sellers agent to get information about the condition of the home(even if you already know) Rather than make an offer discuss with the seller the range you typically buy homes at for cash. It will be a deep deep discount but this will at least prepare them for your low offer you'll be making in the end AFTER you inspect the home.
This is what I do with mobile homes. I get information about the home and explain how much cash we are willing to pay based upon the description of the home and condition. I think discuss with them that we can usually pay higher if we do some sort of seller financing. Specifically, I say something along the lines of "well mr. seller, typically for a 2/1 in your area at the age it is we are paying $xx.xx cash up to $xx.xx cash. I know that may sound low to you but we can often come to a price closer to what you're asking if we can pay you some money today and make monthly payments. Is that something you'd be interested in?" If they say yes, then you may have a potential deal. If they say no, I'm generally not going to consider the deal as likely but I could be wrong.
After you have seen the home you can start to make CONSERVATIVE offers.
Here are a few things
Seller financing with multis with investors that understands seller financing is much easier then single-family houses; no Dodd Frank when investors buying from an investor
If it needs work on a multi, and you know values well and you can price it well, don't forget you can do a joint venture with the seller, by subject to and a note, fix it and resell it, but you need to get private lender funding for the rehab
Regarding single-family homes remember this
We are here to make a profit either on price or terms
if we don't get it at 20% discount or more I think you're being a fool
You make the money when you buy
Think of a car dealer:
what did they say when you try to bring your car to their lot and sell it to them?
The dealers that make the offers are pros at negotiating, and they always have a reluctant buyer attitude
"oh Mr. consumer I'd love to be able to give you all cash for your car quickly and I can usually do it within 24 hours but the number you know is not going to be a great number but will be a number that we think is fair. "
The reason why it might not be a high number is we have to pay a lot of expensed, our overhead, as in the salesperson, insurance, the lease on the building and more, and we have to price it low enough so the car will sell."
"you can probably get a little bit more if you sell it for sale by owner, but you got to deal with a lot of crap to do the paperwork and all that stuff"
See that's how you have to negotiate with the home seller so that you can go to low enough cash price?
Presenting to the sellers
What I usually do is draw three columns on the yellow pad, and I'll put at the top "options to sell your home"
The first, traditionally selling with an agent,
the second column selling to an investor for cash, and
the third column selling on lease to own or selling on taking over payments
First column goes over the costs to sell with an agent, and this includes
commissions, closing costs, sellers concessions, holding costs on a vacant house, etc.
making two house payments for 3 to 6 months isn't fun
Selling to an investor it really depends on how you can buy,
do you have
private lender money, or
can you buy a contract for deed, or subject to, or wraparound mortgage?
If it needs work,
do you have joint venture partner money, or
can you do a joint venture with the seller on a minor rehab?
These are all tools you must have in the REI toolbox to do the real estate investing business,
Dont be a one trick pony,
be a transaction engineer
Since it sounds like you are new to this you might consider getting an agent to represent/help you. Since the property is already listed, the seller is expecting to pay the sales commission (whether there is one or two agents involved) so any advantage on price you might have had from a private sale probably isn't an issue. There are plenty of Indianapolis folks on BP, I'm sure you could get a recommendation for an investor-friendly agent. This is not to say you couldn't do it on your own, but more advice could help you make a more confident decision.
I would definitely try to walk it first. There's just too many questions without having seen it. And I should note many sellers won't take an offer seriously if the buyer hasn't even looked at the property yet, especially regarding multifamly where agents and sellers have to deal with a lot of wannabes.
You can ask the agent to walk it with you, and you can also later on ask the agent to meet you and your contractor at the property so your contractor can give you an estimate of rehab costs. The agent won't mind since you are showing interest.
Always walk the property first!
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