Rental Property Investor · Oceanside, CA · Member since 2018 · 78 posts · 60 votes
Hi everyone, I was able to secure a HELOC for 50k. I have 16k in the bank and I can finally put a cash offer on a currently occupied duplex. I am having trouble getting responses from listing agents - Is this normal? This will be my first property and I plan on getting a second before years end. I have a ton of questions...
- I live in CA and want to invest out of state do I get an LLC for the state I am in or the state I invest in?
- What should I offer on a house? 50% of listing price? 75%?
- What should I look for that has burned you in the past?
- I plan on adding renovation costs into escrow then pulling all money out in a HUD refi (as mentioned on BP Podcast #301)
@Christopher Lane congrats on securing the LOC... first step complete! Have you already identified the property you want? To find the best deals you may want to do a little bit of marketing to try and find off market deals. I have been using mailers through deal machine and it's been working well. You could also start driving for dollars. You could also hire an investment friendly broker to help bring you deals or reach out to some wholesalers.
You could put the property in an LLC. Your LLC is just the holding company so I think it could be a California LLC but check with a real estate attorney.
Offer a price where the numbers make sense for you. There is no 'rule' on how much you should offer.
Just be conservative with your rehab costs. Things add up pretty quick, always factor 10-20% for contingencies. Also check on the ARV. I would be conservative on this as well. You can enlist the help of a broker to assist you with ARV.
I am not sure the logistics on your last comment about the rehab/HUD. I have never done that before. My last BRRRR I closed, rehabbed it then did the cash out and got about 75% of my all in capital back.
@Tom Fidrych Actually the listing's I'm interested in have been on the market for over 3 months and have history of price reductions. Thanks for your super helpful reply.
@Michael Doherty Thanks Mike, when I ran the numbers I could still offer pretty close to asking, these are really good deals, but all the properties need at least some light work. I don't have as much money as some here and I want to be as frugal as possible is all.
Unfortunately I won't be much help with that question. Every market is different and I am not familiar with your market. The rule of thumb I use which could be applied to any market generally speaking is: ARV x .70 - Rehab costs= Max offer price.
So $200,000 ARV x.7= $140,000- $50,000 (estimated rehab costs)= Max offer of $90,000. I think if you use that rule of thumb you should be in good shape with a large enough buffer for any unaccounted factors.
@Paul Welden I recently (today) upgraded to pro here at BP and have already started to utilize the Find deals portal and have already reached out to a few properties that meet my criteria. I am pretty tight on funds since I am just starting out and working a 9-5 but I'll likely do that when I have a bit more wiggle room. Thanks!
@Christopher Lane I agree with @Account Closed. If you want to win the deal, then you'll likely want to make a competitive offer. It all depends on the deal. If the property needs work, you could likely offer less than market value. However, if it's recently renovated, you can still offer less, but it is unlikely for you to win the deal.
@Jeffrey Donis I would not offer something insulting or not competitive. The properties I would offer lower than asking price are properties that have been on the market for over 60 days and have recorded history of significant price drops. Something I also look it is how many times it was listed and then retracted then relisted in order to give the appearance that it is a newer listing than it actually is. The worst they can say is no!