I have been wanting to start my rei career for some time, but some circumstances stood in the way. Anyways I want to take a chance.
I was doing some research and I found a house that seems like a great deal. So....
Its,in San Diego,CA in a nice central area
3/2 about 1700sf for about $135 sq.ft and the area sells for on average over $240 sq.ft so its seems like a great deal for a flip. Its also through Fannie Mae, so what should I do...I dont have alot of money either, please let me know what I can do, I really want to take some action and risk!
Lexington, KY · Member since 2009 · 2k+ posts · 1k+ votes
14y
I am a little confused by your question...you are asking if you should wholesale this property or rehab it, right? You go on to say that you have very little money...so how is flipping even an option unless you are able to get a loan (in which case you would need money for a down payment), or you partnered with someone (which is unlikely since few people are looking for partners with zero experience). It looks as if your best bet would be to wholesale this property, but you are going to need much more information and some knowledge before you jump into wholesaling, otherwise you will ruin your reputation in a hurry by presenting bad deals to potential buyers (you reputation is all you will have).
My recommendation would be to slow down. I know you are eager to take action and are ready for risk, but in my opinion you have very little to gain. The action you should be taking is to start learning. Start figuring out what properties cost in your area and what causes differences in value. Start looking at renovation costs in your area (get with some experienced investors and start learning from them). Find a local real estate investing association/club and start attending meetings. Ask questions, network, and learn!
I, of course, do not know your entire situation, but I have seen a lot of people dig themselves into a hole by being too eager to act instead of learn. I can’t think of too many jobs where you would go in untrained and perform well…real estate investing is no different.
Good luck!
Chicago, IL · Member since 2011 · 18 posts · 4 votes
14y
If you take action based on what you just said, you can kiss your money goodbye.
If it's a Fannie Mae prop that means it's listed on the MLS, right? Get a broker who will give you sound advice(they work for commissions) or talk to the listing broker and find out what the story is.
There is a reason why this is avail at a 44% discount to area sales. You need to find out why.
Thanks I will talk to the listing agent tomorrow. I don't even have any moeny right now, and wouldn't get myself into it much based on not knowing the details. Couldn't a property that needs a lot of repairs be listed at 44% discount?
Riverside, CA · Member since 2010 · 92 posts · 28 votes
14y
I would not ask the listing agent/broker for value advise, nothing against agents or brokers, but finding out the value and repair expenses of a property is YOUR job as an investor and is what will make you money or make you loose all of your money, all it takes is one bad deal and you are out of the game. If you really want to start your REI career, I would start hanging around other investors in your area, REI clubs, asking lots of questions, etc.
Chicago, IL · Member since 2011 · 18 posts · 4 votes
14y
Originally posted by Mimi A:
Couldn't a property that needs a lot of repairs be listed at 44% discount?
Yes, of course. Sounds like you realize why this is selling for a discount so the next step would be to determine the cost to improve the property so it can be resold for market value.
Lexington, KY · Member since 2009 · 2k+ posts · 1k+ votes
14y
I am a little confused by your question...you are asking if you should wholesale this property or rehab it, right? You go on to say that you have very little money...so how is flipping even an option unless you are able to get a loan (in which case you would need money for a down payment), or you partnered with someone (which is unlikely since few people are looking for partners with zero experience). It looks as if your best bet would be to wholesale this property, but you are going to need much more information and some knowledge before you jump into wholesaling, otherwise you will ruin your reputation in a hurry by presenting bad deals to potential buyers (you reputation is all you will have).
My recommendation would be to slow down. I know you are eager to take action and are ready for risk, but in my opinion you have very little to gain. The action you should be taking is to start learning. Start figuring out what properties cost in your area and what causes differences in value. Start looking at renovation costs in your area (get with some experienced investors and start learning from them). Find a local real estate investing association/club and start attending meetings. Ask questions, network, and learn!
I, of course, do not know your entire situation, but I have seen a lot of people dig themselves into a hole by being too eager to act instead of learn. I can’t think of too many jobs where you would go in untrained and perform well…real estate investing is no different.
Good luck!
Involved In Real Estate · Milwaukee, WI · Member since 2009 · 124 posts · 7 votes
14y
Originally posted by Silvio B.:
If you really want to start your REI career, I would start hanging around other investors in your area, REI clubs, asking lots of questions, etc.
That is a great suggestion... but BE CAREFUL! I have attempted to do this, and have gotten burned SEVERAL times! "Pay it forward" isn't a common theme in my area...
Investor · San Ramon, CA · Member since 2011 · 1k+ posts · 569 votes
14y
Originally posted by Michael Quarles:
IMHO flipping doesn't require repair or money. All you need is to know how. So if it's a great deal then flip it.
With a track record that's probably true, assuming you can find properties with purchase plus rehab is below 65% ARV. But for the first go? I haven't heard of either HML or Commercial lenders going above 65 to 75% of purchase. All require self funded rehabs unless they know you and you're good for your word.
Do you have other sources? I would love to explore buy, rehab, refi and rent as a strategy to expand my holdings.
Rental Property Investor · San Diego, CA · Member since 2011 · 1k+ posts · 1k+ votes
14y
Originally posted by Renae Bliss:
Originally posted by Silvio B.:
If you really want to start your REI career, I would start hanging around other investors in your area, REI clubs, asking lots of questions, etc.
That is a great suggestion... but BE CAREFUL! I have attempted to do this, and have gotten burned SEVERAL times! "Pay it forward" isn't a common theme in my area...
I can vouch for several great clubs in San Diego. Three in particular.
I will say this, if this property is on MLS and it hasn't been snagged quickly. Chances are slim its the deal you believe it to be. Things move fast here.
I will say this, if this property is on MLS and it hasn't been snagged quickly. Chances are slim its the deal you believe it to be. Things move fast here.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
14y
One common mistake (or misconception) is the quoting of discount to value. many fail to include cost of repairs.
For example, which deal is better: Priced at 52% of ARV or priced at 74% of ARV? The answer is - You cant answer the question as the info does not include the repair costs to bring the home to ARV. Thus, investors and those who market property with these discounts to ARV must know to add together both acquisition (ask price) and rehab costs, then divide by the ARV (exit value) to come up with a true discount to ARV.
To answer the OG question, to flip or to wholesale depends on your abilities and as such, can not be answered soley on the info provided thus far. To rehab/flip, you must have a team, have access to the cash and have access to time to complete the project. To wholesale, you can get away with zero money or just an earnest money deposit, then flip the deal (wholesale it) to another investor buyer. To do this, you must first understand what is a great deal, how to find it, how to build your buyers list of wholesale buyers, and how to proerly structure (vest) the contract so that you can wholesale it. As with REO and short sale properties, you can not "assign" the contract so you must know how to get around that clause.
Most would be wholesalers fail because they are told how easy it is, just lock up a contract, flip contract to your new buyer and enjoy your easy paycheck. In the real world, these people can not find good deals because they do not understand what a good deal is or how to properly investigate. To be a wholesaler, you must add or bring value to a transaction. Without that, you will have little success.