Is anyone out there buying with cash and then reselling right away??

22 Replies

Was curious if anyone was buying cash and closing and then reselling to another cash buyer who wants to rehab and flip or hold for a rental etc.

My commercial real estate business keeps me very busy with clients but I do see deals that I can take down with cash and probably resale and make a quick 10k to 15k. The end purchaser I would only sell to  a cash buyer with proof of funds in their bank account. No hard money, no conditions, they buy as-is, no double close, simultaneous etc.

Keep it clean and simple and do velocity. Not interested in turn key and offering property management and all of that. Just  a pure buy and resell.

Just looking for something with little pops in between my commercial closings. Looked at buying a Steak N Shake, other businesses etc. but it's just too time consuming etc. 

Let me add I do not want to hold residential houses for rentals or rehab and sell to end buyers. I have zero interest in that.

I do very well with my brokerage.

@Joel Owens  how is this different from wholesaling ;) or assinging a contract/ double closing?

@Joel Owens I have done two of those in the last 6 months. Found off market deals, bought them for cash, and immediately listed them with my agent. I held out for top dollar on them as apposed to leaving meat on the bone the way the wholesalers try to do. I sold the first one, as is to a hard money flipper for a $35k profit.  There was a little drama with the hard money situation and it took almost 2 months to find a buyer. I ended up holding the property for about 3 months. (I bought a three month insurance policy and was glad it worked out).

The second one was in a class D neighborhood and had some light fire damage. Between the neighborhood and the fire damage it was tricky finding a buyer. In the end I sold it to a cash buyer for a $14k profit and ended up holding it for 2 months total. (I didn't negotiate as well on this one on the buy side and if I'm in the same situation again I think I could pull in an extra $5k to $10k).

We have a lot of competition on the buy side for listed fixers in my area. I have gotten sick of missing out on properties to people who miss calculate the ARV and overpay for everything. It makes it super difficult to get flips off of the MLS. I decided to use this to my advantage and let these people bid up my fixers too. For example, the first one I sold needed a lot of work and I figured I could have sold it for about 35,000 to 40,000 dollars more if I had gone to all the trouble to fix it and market to an owner occupant. After expenses, I wouldn't have made much more money, with a lot more trouble. The flipper I sold it to listed it for $100k more, after rehab, than what I sold it to him for. It's been on the market for months and will NEVER appraise even if they find a willing buyer.

Mark I was just thinking with it being year end some sellers will dump properties really cheap for cash offers to clear their books.

I do not want to mess with finance, loans, any of that stuff.

I am closing commercial deals for my clients so my time is allocated there doing those kinds of things.

I am thinking of it simply because I run across a lot of value add type stuff. Not interested in brokering that stuff ( example repping a buyer on a 1 million property that hardly qualifies etc.) as it's heavy lifting and a small fee for time in. Now if I can just resale for a quick fee that is different with no strings attached.   

I do a lot of that, however it's a very slippery slope on how much drama you are willing to deal with for a little extra margin.

Buy it for 95k cash, relist for 119k and get a 125k conventional offer and a 115k cash offer. What do you do assuming the cash won't come up?

Same situation....cash is at 108k and you have an FHA buyer asking for new carpet at 122k.

Joel, I think you have a good idea. When you find value and have cash, I say grab it. It sounds like you want to unload it quickly which can work well. I just make sure I do these quick flips are in areas with tons of buyers. If I buy a fixer in a small town, I can sell it fine if I get it ready for an owner occupant and a loan. (I understand that your not interested in rehabbing and selling to non-cash buyers). It could be difficult to find a cash buyer for a fixer in some areas though.

My second deal above was in an area I never would have felt comfortable doing a rehab in, but I found value in an off market deal, and I couldn't let it get away.

If I had a cash buyer no contingencies and the non-refundable earnest money was strong then I would try to get the cash buyer up.

Time is money and velocity is key for me.

I do not have to wring every last cent out of a property for a loan buyer to purchase. I have other areas of revenue with my commercial business.

Whatever I do can't take away too much time from my commercial RE business. I just see people buy something quick and resale for 10k to 15k profit and not rehab etc.  

I'd look to partner in the area if your time is that valuable Joel..  I'm sure some flipper would love someone who has cash and access to properties to flip.

I see where you are coming from Joel. If I remember right from a previous thread, your goal for next year is $200 million in gross sales and $5 million in gross commissions?! You don't have time to play around with rehabs, home inspectors, countless FHA re-inspections, failed appraisals and the like. You are just tired of seeing $10k to $15k or more of equity go past you without grabbing it because you are concentrating on something much bigger. I say grab it and market to cash buyers only. You are making huge money per hour and can't afford to get more than a few hours into one of these deals, but it would be nice to make a little money on the side in between some of the drawn out commercial deals. Nice play.

@Jennifer Lee It is different from wholesaling. Why..? You can't wholesale a deal from auction. and wholesaling a deal from the MLS is possible I guess but maybe a waist of time for a pure wholesaler. and... you can buy a house from a wholesaler for cash, close on it and resell it on market.  There are quite a few different ways to make this work and you can make more money by closing cash and reselling instead of trying to double close or assign contracts.  

My wife and I did about 40 of these in 2014.   But here is the catch...  

There was easily another 40 or more that we wanted to do the same thing with and they didn't sell.  So you have to have a back up plan.   For every deal.  

For us the easiest way to make money is this exact model.  But every deal that doesn't sell has to be rehabbed and sold to a home owner or rented out.   Some of them just need a trash haul or painted, etc.  But a good portion need a full rehab.  

Its hard to tell which ones will sell and which ones won't too...  

It also takes quite a bit of a marketing effort. Just throwing it up (or back up) on MLS doesn't quite cut it in most cases.

@Leigh C  might be right...   you might need a partner.  As simple as this business model sounds, to do it right and actually do volume / velocity it does require quite a bit of time and effort.  and the willingness to rehab...  

We buy and sell about two a month on average to other rehabbers, these are mostly mls properties. 

We sell them to cash buyers no contingincies.

We will have a rehabher lined up to buy before we close, we typically close with our buyer within a couple days after we close on the purchase. 

Dell how many hours would you say you have into each deal and what is your gross profit spread per deal??

@Joel Owens   from 30 minutes to 3 hours depending on who Im selling to. Probably another hour or two of staff time handling the paperwork.  Not sure how to figure the time spend on mls searches, and having one of my guys looking at the houses, finding the deals, its something we are doing anways on a daily basis for the rehab business. 

Price spread ... 5k-15k .... its a fast turnaround, by far the most profit per hour of anything I do, for me its easy, we get a buyer for it while we are waiting to close, couple days after we close it transfers to my buyer/rehabber. 

If these deals show up for you in your normal course of business, and you can find a couple rehabbers who dont have time to find deals, could be quite profitable with minimal time requirement. 

@Joel Owens   Hi Joel,

Isn't that what "wholetailing'  is about. I think @Michael Quarles   does this all the time and talk about it in his last podcast.

James

That's pretty much all I do. Double closes and assignments don't make sense for the kind of title and property problems I work with.  I did do an assignment this past August.  First one I've done since 2000.  

Sometimes I can get in for very little and my cash goes toward the legal and lien issues to get it ready for resale.  Sometimes I use all my own funds.  Mostly it's a combo of my funds and hard or private money.

If you're seeing spreads and REALLY know your market, which I assume you do, I have no issue with tying up funds for 30-90 days (or less!) when the numbers make sense. 

Originally posted by @Joel Owens :

If I had a cash buyer no contingencies and the non-refundable earnest money was strong then I would try to get the cash buyer up.

Time is money and velocity is key for me.

I do not have to wring every last cent out of a property for a loan buyer to purchase. I have other areas of revenue with my commercial business.

Whatever I do can't take away too much time from my commercial RE business. I just see people buy something quick and resale for 10k to 15k profit and not rehab etc.  

 Velocity?  Is that an autocorrect of "volume"?  Or is velocity real estate investments a thing?

Originally posted by @Ryan Mullin :

@Jennifer Lee It is different from wholesaling. Why..? You can't wholesale a deal from auction. and wholesaling a deal from the MLS is possible I guess but maybe a waist of time for a pure wholesaler. and... you can buy a house from a wholesaler for cash, close on it and resell it on market.  There are quite a few different ways to make this work and you can make more money by closing cash and reselling instead of trying to double close or assign contracts.  

My wife and I did about 40 of these in 2014.   But here is the catch...  

There was easily another 40 or more that we wanted to do the same thing with and they didn't sell.  So you have to have a back up plan.   For every deal.  

For us the easiest way to make money is this exact model.  But every deal that doesn't sell has to be rehabbed and sold to a home owner or rented out.   Some of them just need a trash haul or painted, etc.  But a good portion need a full rehab.  

Its hard to tell which ones will sell and which ones won't too...  

It also takes quite a bit of a marketing effort. Just throwing it up (or back up) on MLS doesn't quite cut it in most cases.

@Leigh C  might be right...   you might need a partner.  As simple as this business model sounds, to do it right and actually do volume / velocity it does require quite a bit of time and effort.  and the willingness to rehab...  

 Ryan:  Are you saying you bought 80 properties in 2014 with the intent of a quick resale for all of them?  And that only 40 sold as-is?  Then you say "It's hard to tell which ones will sell and which ones won't".  So what did you learn?  How could you turn that 40 resales into 70 or better?  Even though you had a Plan B, selling only 50% as planned freaking me out. What was the original plan for 2014?

Yeah velocity is a thing, in any professional services gig as well as in investing.  Number of engagements/deals per month/year.  It is a form of volume, but better in the sense that you can sequentially deploy the same resources.  Consulting case teams, in my world.  Cash, in what Joel is talking about.

Originally posted by @Richard C. :

Yeah velocity is a thing, in any professional services gig as well as in investing.  Number of engagements/deals per month/year.  It is a form of volume, but better in the sense that you can sequentially deploy the same resources.  Consulting case teams, in my world.  Cash, in what Joel is talking about.

 I looked up the definition of velocity right after I posted that question.  I still didn't see how it applied to RE. 

"Sequentially deploy the same resources......cash" made it clear.  Thanks!

Kristine Marie Poe 

My situation was some-what unique.  In 2012 and 13 I was part owner of a big turnkey organization and was bought out in early 2014.  

Essentially, I was left with a lot of pre-rehab inventory after the buyout and I was still acquiring more  (I never slow down!).  So the natural thing to do was unload properties wholesale or "pre-rehab" is what I call it since we aren't wholesalers.  We used our deals to build our local buyers list, and buy us some time to get our construction up and running again.  Not to mention property management.  

Because my wife came on board with me full time (she ran construction and property management for the TK operation that I was part owner of) I knew that we had a "plan B". 

If you aren't willing to rehab properties you can very easily get stuck.  When properties sit like this they very quickly start to acquire BOH issues, weed liens, vandalism, squatters, you name it...   

To answer your question I don't believe that you can turn the 40 into 70...  unless you rehab.   I fancy myself to be a pretty decent acquisitions guy in my local market and I don't think I could have bought any better.  Some of my absolute favorite deals didn't sell pre rehab...    With that being said, if your goal is to do 5 or 10 in a year I think that you could easily make it work for all of them.  Doing volume (or velocity..  ;)  makes things a lot harder.  For example mowing lawns...   mowing 80 properties cost money, takes time etc.  these types of holding costs add up fast...   stack the odds against you the more props you have...   

  

Originally posted by @Dell Schlabach:

@Joel Owens   from 30 minutes to 3 hours depending on who Im selling to. Probably another hour or two of staff time handling the paperwork.  Not sure how to figure the time spend on mls searches, and having one of my guys looking at the houses, finding the deals, its something we are doing anways on a daily basis for the rehab business. 

Price spread ... 5k-15k .... its a fast turnaround, by far the most profit per hour of anything I do, for me its easy, we get a buyer for it while we are waiting to close, couple days after we close it transfers to my buyer/rehabber. 

If these deals show up for you in your normal course of business, and you can find a couple rehabbers who dont have time to find deals, could be quite profitable with minimal time requirement. 

And then Dell you have the one I'm trying to sell you that dragged on for what seems like FOREVER.      I hope you make more than the 15k though and at least I think i fixed the deed issues today.     Expect to be able to close on it by the end of the week or first part of next.  Assuming you still want it of course...

LOL this is officially my new favorite thread. Big money ****. (well for me anyway) You guys remind me of me in World of Warcraft.

#----------insert fantasy World of Warcraft business here---------------#

I have a super efficient auction house operation that I sometimes only spend 2 hours per month on (but I might go 8 hours a week if I find it particularly amusing). The mechanics and particulars are different but the principle is the same. I see something with a profit spread potential I just snatch it up immediately and resell it. The only difference is in WoW the numbers are different, as well as profit %, so I don't have to worry about holding costs (auction posting fees). If I did, I'd just alter my number parameters (buy/sell points, # of redundant inventory) and still have a good business model.

Essentially what happens is:

1) Large enough experience in enough markets

2) Large enough buildup of gold (that's what us basement dwellers call money in WoW!)

3) Great enough efficiency through tools/systems (best believe I've done a lot of tweaking, not botting or cheating though, what kind of auctioneer did you take me for?)

4) Only focus on things that yield maximum profit to time/effort ratio, let everyone else dominate the other business models (yall can have em!!!)

5) Don't have to think about it or spend a bunch of time on it (I have yet to meet anyone who not only can boast the same time/gold ratio as me but be able to apply such tactics to nearly any conceivable market in WoW like I do, and I've read a lot of gold blogs)

This is only possible in a high yield/consistent way with enough mass buildup of wealth and building a thick matrix in my head of the market (it happens automatically without conscious thought these days since I've been doing this for years).

#----------/end fantasy World of Warcraft blurb here---------------#

Can't wait to build up a few hundred K and start playing around a bit. Until then I'm going to be micromanaging my beginner operations just like when I first started WoW. Broke as **** and learning the ropes.

I wanna see more time/profit ratios!!!

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