Wholesaling in Orange County CA, is it realistic?

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Wholesaling in Orange County CA, is it realistic?

Rusty Eddy
Real Estate Investor · Huntington Beach, CA · Member since 2009 · 16 posts · 7 votes

Hi All,

I'm a newbie to this site (just found it last night) as well as a
newbie/wannabe RE Investor. What a great site! Thanks to all you experienced investors willing to take the time and share your hard earned knowledge!

My partner and I are newbie/wannabe RE investors. I am in the process of hammering out our business plan and looking to this site for feedback and advice on investing in Orange County, CA. (We have a 'significant' amount of cash to be invested), now we need to find a smart way to invest our time and money.

So our focus for the time being is on flipping: wholesale then move to rehab/retail. Is there anybody successfully doing this in North OC (Garden Grove, Westiminster, Santa Ana, etc?). A couple questions:

How realistic is it expect to be able to find wholesale deals in this area: (65-70% ARV less repair costs), and still collect a wholesale fee ($5-10k)?

I know finding the deals is the hardest thing to do. I am prepared for the hardwork/thinking outside the box. My main concern: are there deals to be found if one puts in the requisit effort/smarts. Or is it akin to winning the lottery trying to find deals? (The prices in my immediate area can be discouraging)..

I need to decide if we continue down the flipping/wholesale path
locally or consider a different avenue, perhaps out-of-area investing. I'll be out of town all next week, but look forward to reading all responses that you all are kind enough to give!

Any input from investors active in OC will be greatly appreciated!!! And even get yourself a free lunch if you are so inclined :)

George (Rusty) Eddy

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Will BarnardPro Member
Moderator
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
16y

Rusty,

Congrats on your recent success. I am happy to hear that the education you received from Nationwide provided you the necessary stepping stones to success. :lol:

Brian, your deal of $265 + $20k rehab is 81% of ARV - not a good spread by any means for that outlay of cash. The other is better at 75%, but still very, very tight at that price. Please use caution on these, I would hate to see you get hurt on these deals.

Andrew - Rusty is well aware of short sale flips, however his focus is on REO's and distressed homeowners right now. One of the biggest mistakes newbies make is spreading themselves too thin trying to do everything and then getting nothing accomplished. Remaining focused on one or two strategies is key. - Just my opinion. :D

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  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    17y

    Rusty,
    Give us an update on your progress.
    Looking forward to seeing your first deal.

    Podcast Guest on Show #130
    0Reply
  • Rusty Eddy
    OP
    Real Estate Investor · Huntington Beach, CA · Member since 2009 · 16 posts · 7 votes
    17y

    Still looking.. I've called most every REO broker or listing agents I can find. I did have a couple close calls, but no cigar. I have two offers out now. I am now starting to look into the LB/LA area seems to be a lot more going on out there.

    At the risk of lacking focus I figure I need to expand my odds a bit, also it is interesting talking to people and hearing what they have to say..

    In addition to contacting the brokers, I going to start contact sellers. I have a feeling something will happen soon. I'll update when it does happen..

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    17y

    Let me know if you need anything or get stumped on something. Don't give up on the contacts. I just made two new ones and I have been at this game for much longer. The market really dried up but appears to be improving to higher inventory release levels.

    Podcast Guest on Show #130
    0Reply
  • Chris G.
    Real Estate Investor · NowWhere, WI · Member since 2009 · 135 posts · 25 votes
    17y

    I personally have no wholesale assignments deals under my belt as of yet, but I am enrolled in come online courses right now as well as receiving coaching. I just started a couple weeks ago.

    But to answer your question, from what I have been told you can find wholesale deals anywhere, even in the OC. There are motivated sellers everywhere. You'll come across people that have free and clear properties, people that need to sell quickly b/c of a move or job relocation, individuals that have inherited property, plus many other types.

    Start advertising to find your sellers. Bandit signs, vehicles magnets and wraps, window decals, business cards, online advertising, penny savers ads, + many more areas.

    Brokers are only one area to focus on when it comes to locating sellers.

    Start building your buyers list also. Check out this thread I found yesterday, plenty of useful information here.

    http://www.biggerpockets.com/forums/93/topics/31418-wholesaling-1-1-housing-panic-strategies

    0Reply
  • Greg Morrison
    Real Estate Investor · Laguna Niguel, CA · Member since 2009 · 6 posts · 2 votes
    16y

    I'm gonna be honest in Orange County we have put our resources and time with just trying to wholesale to other counties. The Inland Empire and LA county have a higher potential. I'm just referring to wholesaling this does not apply to rehabbing, buying & selling real estate ect... just hard to get the margin that you need with wholesaling. Short Sales and Loan Modifications are working. If somebody is getting wholesaling done here I would like to hear more.

    0Reply
  • Rusty Eddy
    OP
    Real Estate Investor · Huntington Beach, CA · Member since 2009 · 16 posts · 7 votes
    16y

    As I have been finding out, it is really hard to do in OC, in the current market. not impossible though.

    LA is and the inland empire are easier. Comparatively speaking OC is pretty small and has a lot of people with a lot of money. LA and IE are much larger with a bigger spread in inventory. We are in a "manufactured market", at the moment.

    I'd venture to guess that nailing short sales or doing some door knocking may be the way to go for now..

    0Reply
  • Greg Morrison
    Real Estate Investor · Laguna Niguel, CA · Member since 2009 · 6 posts · 2 votes
    16y

    You know what works with my team right now is direct mailing and placing door hangers. You can pay some kid $10 for every 100 door hangers he puts out (which takes approx. 1 hour per 100) give him about 400 a day. You usually get 5 to 8 percent return on calls. Set up a system for doing the same neighborhood for 8 weeks in a row but every week giving them different literature and sometimes it may take 3 or 4 flyers before they call. If your doing short sale flyers find the neighborhood that has a high turn over in short sales. Hope this helps.

    0Reply
  • Rusty Eddy
    OP
    Real Estate Investor · Huntington Beach, CA · Member since 2009 · 16 posts · 7 votes
    16y

    I figured I need to start doing direct mail and contacting sellers directly.

    I just started working on getting building some lists with listsource.com and grabbed with a list of NOD's, etc.

    However, the door hanger strategy sounds like something I will try.. Now putting together some mailers and I'll do the door hangers also.

    Thanks for the feedback!

    0Reply
  • Jake Blood
    Member since 2010 · 5 posts · 0 votes
    16y

    how about an update on how you are doing?

    0Reply
  • Rusty Eddy
    OP
    Real Estate Investor · Huntington Beach, CA · Member since 2009 · 16 posts · 7 votes
    16y

    It is about time for an update, thanks for asking Jake. All thanks for the very helpful and encouraging words! It is amazing how helpful people are willing to be. When I first wrote this post, I wasn't involved in any local REI clubs, I've since started to become plugged in and have made some great connections. Including great mentors in Will and Mike at Nationwide (big props!)

    I have been hanging around long enough to find people are able to wholesale properties in OC, bargains can be found but it is hard and as stated margins are really tight, particularly trying to squeeze in a wholesale fee. Generally OC has high prices with tight margins making the ROI lower than other places, with a higher capital outlay.

    As of today, we are about to close on our first escrow, and will likely close on a second escrow by friday. Both of these properties will be light rehabs in LA. LA is much, much larger providing more possibilities, though the competition is heating up there as well. So the journey begins!!!

    Having said that, opportunities seem to be popping up here in OC on occasion, maybe slow changes in the market, but probably in direct relation to starting to build a network. Without a doubt, the relationships you build are your most important asset!

    For the near term, I'm focused on the two properties at hand. Will continue contacting REO brokers. My next step will be finishing up a whole marketing campaign to contact sellers directly, I'm actually looking to looking for Free&Clear/High Equity seller financing deals, with the intent of hanging on to a couple here and there..

    I'd actually like to do a couple other things as well, but as you all know, I need to take one step at a time :)

    Thanks for asking!

    2Reply
  • Brian Wall
    Wholesaler · Santa Fe Springs, CA · Member since 2009 · 219 posts · 83 votes
    16y

    Rusty,
    My partner and I have 2 properties in the Santa fe springs/norwalk area (just outside Orange county) where we need a cash partner. We would be willing to split the deal with you, while at the same time showing you exactly what we are doing, and some projects we have just completed.

    Neither of us are experts, but we are learning and are willing to share our experience and the deal.

    We currently have our cash and our private lenders cash tied up in 5 projects, and we may have to pass or wholesale these two deals if we can't locate the cash.

    The numbers on both are about the same. We have a purchase price of $265k, both need about 20k in repairs (using our GC and crew), one resells for $350k, the other $380k.

    So, these are not "juicy" deals, but we can make some good money fairly quickly. This area is a hot buyers market for the time being.

    Thanks,
    Brian

    0Reply
  • Matt Mathews
    Real Estate Consultant · yucaipa, CA · Member since 2008 · 233 posts · 109 votes
    16y

    The Inland Empire-SanBernardino-Riverside Countys. have the most potential right now. Although it should be noted that the middle priced market is where all the inventory is available $250K and up. Most of the Sub-prime has either been sold off or is in Foreclosure Limbo due to Loan Mods. The middle market (Alt-A paper) mortgages, will soon be flooding the market. If your in a good cash position, 30-40% discounts under market value shouldn't be a problem.

    0Reply
  • R Jenkins joshua
    Real Estate Investor · oak creek, WI · Member since 2009 · 187 posts · 8 votes
    16y

    Mr Matthews what does
    'middle market (Alt-A paper) mortgages '
    mean

    I am thinking about virtual wholesaling in CA : Is their any laws in California against Wholesaling

    Is their any good counties to wholesale in CA

    I reside in Wisconsin [fyi]

    0Reply
  • Brian Wall
    Wholesaler · Santa Fe Springs, CA · Member since 2009 · 219 posts · 83 votes
    16y

    Jenkins,
    "virtual wholesaling" could work in California. The wholesaling margins are kind of thin, as others have mentioned, but if you are not actually going out to see the house, you are probably not spending that much time on each potential deal.

    I just have not had the time to setup a website, do you have one already?

    I know myself, If I were given a property that was "pre-qualified" as a motivated seller, with some information, I would pay $2500 to the person that referred me, if I were to purchase it, at the time I close escrow on it (you would get paid right from escrow).

    Brian

    0Reply
  • Andrew R
    Real Estate Investor · CA · Member since 2009 · 138 posts · 19 votes
    16y

    Hey Rusty I wanted to ask if you have thought of doing a shortsale flip ?
    You could get a list of 60 day lates or even freshly recorded NOD's and then market to those clients & work from there ?

    Just a suggestion :)

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y

    Rusty,

    Congrats on your recent success. I am happy to hear that the education you received from Nationwide provided you the necessary stepping stones to success. :lol:

    Brian, your deal of $265 + $20k rehab is 81% of ARV - not a good spread by any means for that outlay of cash. The other is better at 75%, but still very, very tight at that price. Please use caution on these, I would hate to see you get hurt on these deals.

    Andrew - Rusty is well aware of short sale flips, however his focus is on REO's and distressed homeowners right now. One of the biggest mistakes newbies make is spreading themselves too thin trying to do everything and then getting nothing accomplished. Remaining focused on one or two strategies is key. - Just my opinion. :D

    Podcast Guest on Show #130
    1Reply
  • R Jenkins joshua
    Real Estate Investor · oak creek, WI · Member since 2009 · 187 posts · 8 votes
    16y

    Brian W : Yes I do have a website

    Send me some of your parameters :
    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
    what county , zip codes , properties style ( Multi-family or SFH or Duplex or Commerical )

    To be honest with you :
    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
    I would take $1650 for bird dogging my first 5 deals with you

    Reason : I rather you keep the difference for mentoring / guidance
    into the CA market [ virtual wholesaler ]

    Send me some parameters via email
    , if interested

    0Reply
  • Brian Wall
    Wholesaler · Santa Fe Springs, CA · Member since 2009 · 219 posts · 83 votes
    16y

    Thanks for the warning Will. I do realize that the margins are very close.

    The thing is I already have buyers for those properties, so my hold time will be minimal.

    The market in Norwalk/Santa Fe Springs is very hot, for now.

    jenkins,
    I have emailed you.

    Brian

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y
    That being the case Brian, your deals are good as your hold time is cut in half and you are in and out much faster making for an annualized return as good or better than if you had a 30% spread!

    We do the same on our turn-key trustee sale purchases where we have a buyer lined up for the property and thus, we are in and out in 45-60 days.

    I wish you well with them. If I didn't have about 10 deals going right now, I could be interested in that.

    Podcast Guest on Show #130
    0Reply
  • Brian Wall
    Wholesaler · Santa Fe Springs, CA · Member since 2009 · 219 posts · 83 votes
    16y

    Thanks Will.

    I am trying not to "count my chickens" so to speak, but it does look good.

    We are targeting a 60 day turnaround.

    We have our own rehab crew, so we can gut and rehab a house (assuming no major structural work) in about 3 weeks.

    Brian

    0Reply
  • Andrew R
    Real Estate Investor · CA · Member since 2009 · 138 posts · 19 votes
    16y
    Originally posted by nationwidepi:


    Andrew - Rusty is well aware of short sale flips, however his focus is on REO's and distressed homeowners right now. One of the biggest mistakes newbies make is spreading themselves too thin trying to do everything and then getting nothing accomplished. Remaining focused on one or two strategies is key. - Just my opinion. :D


    I do agree with you Will, that focusing on one or two strategies is alot better then doing a whole alot of nothing.
    0Reply
  • Doug Haisten
    Mobile, AL · Member since 2010 · 238 posts · 44 votes
    16y

    Rusty (and anyone else wholesaling REOs),
    Did you use a buyers agent or did you use the listing agent?

    Doug

    0Reply
  • Rusty Eddy
    OP
    Real Estate Investor · Huntington Beach, CA · Member since 2009 · 16 posts · 7 votes
    16y

    We are rehabbing the properties, Ironically I got the properties through a wholesaler, actually somebody that we are involved in a current deal with.

    Generally, for REOs dealing with the listing agent is the way to go, or more specifically before it is actually listed :) The REOs have gotten thin so finding them is tough right now, but I do have a couple agents forwarding pre-listed deals.

    If you were in a buyers market, you could work through a buyers agent, they would have to be really aggressive and willing to continually submit offers on first day listings, and expired listings,etc. It could be effective but would take a lot of work and require an unusual amount of persistence.

    1Reply
  • Scott P.
    Real Estate Investor · San Clemente, CA · Member since 2010 · 10 posts · 1 vote
    16y
    Originally posted by Brian Wall:
    Jenkins,
    "virtual wholesaling" could work in California. The wholesaling margins are kind of thin, as others have mentioned, but if you are not actually going out to see the house, you are probably not spending that much time on each potential deal.

    I just have not had the time to setup a website, do you have one already?

    I know myself, If I were given a property that was "pre-qualified" as a motivated seller, with some information, I would pay $2500 to the person that referred me, if I were to purchase it, at the time I close escrow on it (you would get paid right from escrow).

    Brian


    Brian,

    I am in So Cal and would like to look for some qualified leads for you. What are the pre-qualifications and questions you would need for a good lead?

    Thanks,

    Scott

    0Reply
  • Brian Wall
    Wholesaler · Santa Fe Springs, CA · Member since 2009 · 219 posts · 83 votes
    16y

    Hi Scott,
    Here are my basic requirements:

    SFR only (no condos, Multi Family)
    At least 1000 sq ft, living space

    After repair value $500k or less
    At least $100k spread between after repair value and purchase price.

    Must be located within 30 min of zip code 90670 (my home base).

    I have my own rehab crew, so I don't really have a "repair cost", I more look at material cost, and time.

    Brian

    0Reply
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