Aurora, OR · Member since 2018 · 39 posts · 8 votes
So I'm new to REI. I have a relative who I overheard talking about a prior employees mother whose house was filled to the rafters with junk and the didn't live there anymore. I drove by the house and there is trash on the front porch and when I looked in the back yard trash and junk in the back yard as well. However.... house is probably got about $200,000 to $250,000 equity in it if it is in good condition so I could possibly get a great deal. I utilized list source, zillow, trulia, amortization-calc. and other methods to determine this. Its right next to a few schools, a park, and crime is low in the area. I asked if he had her phone number and he does and I'm trying to make sure my ducks are in a row before calling.
Benefits I planned to market(Let me know if there is more or if these are wrong):
Close on whatever date is best for her
I can worry about the repairs and hauling the trash
No Agent commission on closing
Here is what I don't know:
How to propose an offer
If she bites on the offer what to do next
Well pretty much everything else as far as actually acquiring the property.
I'm sure there a lot more things as well I don't know but this is what is my current road block to calling this owner.
@John Woodrich - I have no experience in estimating rehab costs. All I've done is read almost every one of the BiggerPockets published books. So whatever is contained in there I have read. I have yet to put any of it into practice.
As far as funding. No I am not able to cover the whole thing... It would have to be a hell of a good deal if I was to. I figured I would line that up if I could get a commitment. Worst case I wholesale the thing. But I doubt it would come to that. I really need to see the inside though to get an idea. outside doesn't look half bad. Good neighborhood. Schools close by. Parks close by. Low crime. Rent for comps in the surrounding looked good.
I'm not going to learn a ton more by reading I either need to throw myself to the wolves or get taken under someones wing and the I'm not one to burden someone by my inability. I'll figure it out. Also the way I look at it is if she wants to deal I will probably pop on here asking for a capital partner and hope I can find either one local who has a little experience estimating rehab costs as well. I figure that if the deal is sweet enough though... (big if) then there might be padding for my inexperience.
To respond directly to your comments - I don't think you will get a commitment until you have things in order and I don't think you will be able to sell anyone else on the deal (to get your offer in order) unless they see the property know you have your ducks in a row. You have to get a seller "commitment" however you have to present an offer which is likely to get a seller to commit. Walking in there without any information or any ability to make a decision is not going to persuade a seller to give you any commitment, especially if you can't come up with a price that works.
In my experience the easiest way to close these deals is to be willing and able to make a quick offer and quick close. The person looking to buy is usually offering less than the person selling thinks it is worth however the sales pitch is 1) you won't have to deal with this problem, 2) I have the ability to purchase it from you, 3) I have it all figured out already and can close quickly.
You have to look at it from the other side of the table.
Example 1:
Someone calls you saying they want to purchase you property and wants to see it. They show up, look around, are interested but they aren't sure what it will cost to repair and they aren't sure how they can buy it. Don't really know what they can offer but they want me to commit to selling it to them. They say they will get back to me. At that point if I were the seller I would think you didn't know what you were doing and that you likely had no ability to purchase the property. Probably wouldn't answer your next call because we would have to start again from the beginning.
Example 2:
You talk to a bank and have a pre-approval letter or a partner lined up. You show up with a contractor or someone who can estimate repairs who can give you an idea on the spot. You have all other relevant information needed to make a decision when you show up at the door. You walk through it, talk it over with your contractor, present your offer and show proof of funds. I believe you will have a lot better chance at closing this deal.
I personally have showed up to meet someone at a house I hadn't seen, liked it, presented an offer and pulled up my bank account on my phone to show I had the cash to close. I flipped that $30k house last year and made $90k.
I am just recommending you get your ducks in a row before jumping in, you don't want to lose a deal by walking in at the wrong time. I personally have 4 properties right now that I want and have plans to make a deal on but the timing isn't good. My workers are busy on a different project and I don't want to stretch too thin from a cash standpoint. I don't want to put a but in the seller's head that there is interest so I am going to wait.
I believe your best bet is to try to partner up with someone in the area, you can try to make some money and learn at the same time.
Aurora, OR · Member since 2018 · 39 posts · 8 votes
8y
@John Woodrich - Yeah I can see your point and agree that having your ducks in a row would be the better option. I just feel like in all my "Newbieness" that this is a what came first the chicken or the egg situation.
If I need to have the financial backing of a lender/partner in order to approach seller, and in order to get that don't I need to be able to show numbers to a potential lender/partner, and I can't make contact with seller until I am ready and my ducks are in a row how can I get a rehab estimate so my numbers are accurate, so I can present those to potential lender/partner to sign on board to get my ducks in a row so I can get into the house to see what the rehab will be.
Do I just wing it and go with a generalized assumption like a best case/probable/worst case scenario and get my lender/partner to say if rehab costs are estimated to be in the best case/probable scenario then were clear to go other wise the MAO would need to be lowered to reflect the increase in rehab?
Aurora, OR · Member since 2018 · 39 posts · 8 votes
8y
@John Woodrich - Also I'm not one to waste other peoples time... I guess in my own perspective that most of the people who would be experienced in RE and estimating rehabs are probably busy and if they are on here every other person and their best friend are probably asking them already if the want to partner up and unless you have real skin in the game or a track record of success its probably next to impossible to get someone to take you seriously.... then if I do and lets say I finally reach this potential seller and she's like "Actually no we're not interested in selling we are moving back in (or whatever situation) " then I say to my 1 out of a hundred lender/partner "Oh, never mind.... fell through." Will I be able to get them to give me the time of day on the second go around? You see what I mean...
There was a point in my life when I was a machinist. We told all FNG's (F*ing New Guys) "You have two bags... A bag of luck, and a bag of skill. Make sure you fill your bag of skill before your bag of luck runs out." In this case I have a bag of experience and a bag of goodwill.... I want to try and fill my bag of experience before my bag of goodwill runs out. You're only a newbie for so long before your just hopeless. Lol.
Maybe .... Probably just being naive but that is why I started this thread... :D
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
@John Woodrich have to keep in mind this is semi Rural Oregon.. and Oregionians if this seller is one.. move at a completely different pace than most of us movers and shakers in the industry.. I learned this coming to this state.. have to slow down ..
now if your in the metro area that is highly charged and competitive.. so at the end of the day i call it Oregon Porch time.. for whatever reason most of these folks move slow will sell to those they like before the one with the highest dollar.. not always but many times.. I know counter intuitive..
Flipper/Rehabber · Minneapolis, MN · Member since 2016 · 1k+ posts · 1k+ votes
8y
@Jay Krietzman I understand where you are coming from, I am just trying to give you tips to better your chances of closing the deal. We all started at the point you are at, I would just try to know as much as you can on the front end and to check off some of your uncertainty it would at least help to try and pay a contractor to give an estimate and walk through with you.
Just call her. See if she has any desire to sell. If so, go take a look.
You're a newbie. You have no experience, and you admit that unless this is a great deal you don't have the financial wherewithal to close quickly ... in fact, you might wholesale it. Truth is, you almost certainly won't close this deal. Not as a buyer, and not as a wholesaler. You're probably not quite ready. No crime with that, cause everyone starts there.
What you can do is start filling that Experience bag. You've read and listened to enough. It's now time to do something. Call her, talk to her, ask what price she has in mind, and if she'll allow you, visit the house. Take pictures, many pictures. Once you're back home, estimate the repairs as best you can, then show them to someone who knows what they're doing and ask them for an estimate. That way, you can see how far off your estimate was.
All this will help you get experience/practice. Experience will help you understand the business. Understanding the business will help you get your first deal. You can't do that on the sidelines.
Aurora, OR · Member since 2018 · 39 posts · 8 votes
8y
Currently getting a HELOC set up so I can utilize hard money for acquisition.
Also I've ran some info gathering on the owner and property to give myself a better picture of the negotiations if I happen to get that far. Trying to get a current phone # and mailing address to reach out as the relative mentioned earlier couldn't find or didn't feel like sharing.
So basically the ball hasn't moved very far yet. But I'd hate to rush this when it's not a rush situation only have a simple item cause a loss of momentum or confidence turning the potential deal sour. Stay tuned... I'll update either way I ends up... Dud or not.
Honolulu, HI · Member since 2015 · 214 posts · 49 votes
8y
Hi jay
Thanks for the update. I’m in a similar situation. Im trying to work with an elderly man, original owner of a house in the shambles but in a very hot market. My problem is he’s likely to have mental health issues so I need to cover all the legal bases before putting any time or money into it. I certainly don’t want his long lost distant relatives coming out of the shadows or any claim of elder abuse. And of course I don’t want to take advantage of him either.
But if no one helps him he’ll lose everything and end up being evicted by the sheriffs and become a ward of the state.
