Starting out and have a few questions!

12 Replies

Hello!

Just starting out in SE Louisiana. I have several questions- maybe these are obvious, but I'm just asking as I have questions. 


1. Is having a tax lien on a property more motivation to sell for the owner? I read where it can get tricky depending on how much is owed on the house. I haven't seen much about people using this as a strategy to get leads. Can y'all explain more on it?


2. For wholesaling in Louisiana- it seems it may be better to use transactional funding instead of just assigning. True? Also- do I need an LLC to use this funding?


3. I am trying to figure out the best method/strategy for my family to get started. We are currently renting. I want to put us in a home as well as start investing. Originally, I was thinking just using FHA to buy our home and start by trying to wholesale properties to earn the extra income. I guess my question is what advice would yall have for getting started if you also were looking to buy a place for your primary residence as well?

Let me address #2: 

2. For wholesaling in Louisiana- it seems it may be better to use transactional funding instead of just assigning. True? Also- do I need an LLC to use this funding?

Although I am not an attorney nor a licensed real estate broker in the state of Louisiana, my understanding is that you need an LLC. The Transactional Funder will not lend to you in your personal name. You can confirm this with other members of your local REIA Real Estate Investment Association.

States and counties are beginning to enact laws making it difficult to Assign a contract. This is one of the reasons people choose to double close using Transactional Funding. If you are essentially "forced" to double close, you need to keep in mind the costs of funding plus closing costs when setting your selling price. I'd recommend that it be 10% or more above the amount you are paying for the property. That ensures that you have enough profit to cover costs and still walk away with a good amount of money in your pocket.

Ultimately, the numbers have to make sense for the person buying it from you. If it is to a rehabber, calculate it as: your purchase price + profit you desire = his purchase price. Then, + rehab + 20-30% profit = the price he sells it to the ultimate owner occupant buyer. As an example:

$100,000 = your purchase price +

$15,000  = your desired profit

$115,000 = his purchase price +

$30,000 = rehab estimate

$145,000 = subtotal +

$43,500 = 30% profit for him

$188,500 = Price he sells it for to owner-occupants

At the end of the day, you have to feel that this house will go for $188,500 in the current market.

@Rebecca Hays Hi Rebecca, I started wholesaling in Baton Rouge when I started out so hopefully my insight is relevant to you.

First off, I haven't specialized in tax liens so although there definitely could be motivation for those homeowners, I've found it fairly difficult to isolate tax liens for homeowners vs tax liens for renters. Also the amount of the lien would change the motivation. From what I've heard from other people in other states, they filter it based on amount and basically go in saying they will wipe out the lien when they purchase the property, then go to the state and physically drop off a check. There are certainly people on here more familiar with the process than me.

Second, you can assign contracts in Louisiana without any issues. In many cases transactional funding will chew up a good chunk of your profit, since it usually would have to come from hard money lenders. There are some title companies that can do double closes. I use Title2Land in Baton Rouge, they can do subject to, double closes, and assignments.

Third, if you have a w2 job, keep it and wholesale on the side. It generally takes a while to get your first deal, and you will have trouble qualifying for a loan with your wholesale income. I found that driving for dollars then doing a direct mail campaign had my best ROI for marketing. I tried a cold caller, google ads, and direct mail. That may also help you find an off market house for yourself too!

Best of luck!

@Travis Steinemann

THANK YOU! I really appreciate your insight. I'm on the Northshore so not too far from you! 


That is all good to know- thank you! I have been driving for dollars and will continue doing that for now. I'm also working on rehab costs. I was in residential remodeling for several years so I have a pretty good idea of estimating costs. However, I was also able to have subs out to a property if I needed additional insight. Do you have any advice on estimating rehab costs? I assume you put in a certain amount contingency fee?

@Rebecca Hays Welcome to the wonderful world for opportunities.

Generally, when the profit is over the $7,500 range OR over 8% of property purchase; then double closing would be recommended.  This way both the seller and your end buyer would not see your profit margin; in this deal.

When the profits are under the above range; then straight assignments are fine.  Hopefully, the seller and end buyer understand that you fairly compensated for your efforts.

Occasionally the seller OR title companies do not allow assignments; this may be due to the seller being bank or short-sale or probate sale or property was on MLS; then you have to do double closings only.

Usually for double closings; try to get full costs from lenders; including wire fees; docs fee; transaction fees; so you can see what works best for your situations.

@Rebecca Hays

1) yes

2) you dont *need* an LLC. it offers extra protection, but it shouldnt stop u from investing. if u really care to know more, talk to an attorney.

3) I recommend house hacking.

hope this helps. and not to put you down, just know wholesaling can be tough - as long as u are effective and take meaningful action consistently you'll succeed. i wish you the best of luck and good choice making!

@Rebecca Hays I do a detailed rehab estimate based on J Scott's Book on estimating rehab costs. My materials numbers are pretty spot on but labor can swing wildly depending on the contractors. Keep in mind that it is just an estimate and everyone's estimates will be different, just do the best you can and ask for feedback from your buyers.

@Travis Steinemann

Thanks! That's good info. Now that I'm looking into it- I'm thinking maybe the house is in too much disrepair. Is there kind of a baseline for what buyers will be willing to do? It needs more than cosmetic updates.

In that case, would I just look at the lot? But if no one wanted to mess with the house, they would have to pay to demo as well I guess.

@Rebecca Hays you can talk to a title company and they can give you one in some cases. Or you can probably use the one from the LREC (Louisiana Real Estate Commission) website. It is quite long though (but thorough). I use a two pager from my title company though.

@Rebecca Hays and buyers will do whatever needs to be done if the numbers make sense. The pool of potential buyers decreases the more work that needs to be done. And for the numbers to make sense it should be 70% of ARV (after repair value) minus repair costs minus your wholesale fee. Most newbie wholesalers underestimate rehab costs to try to make a deal where there isn't one.

Some investors like burnt houses that have fire damage, some like teardowns. I don't have those buyers so I don't target those houses. My bread and butter is 3 bed 1.5 bath to 4 bed 3 bath around $150k-200k ARV, because those are the ones that work as flips or rentals in my market (bigger pool of buyers).