Hey BP community!
I run a wholesale team that sources and assigns 4-5 deals a month here in Virginia Beach. I just locked up a 3/1.5 1350 sqft townhome yesterday that is in GREAT condition. No work necessary. No updates necessary, it's market ready. Trying to figure out the best way to go about it
$81,000 Purchase Price, closing end of April (Got at a GREAT price)
Rehab: <$1,000 (i would pressure wash and do some paint touch ups, but that's IT)
Closing costs ~$2,000
Wholesale: I could easily wholesale this to an investor who will either rent it out or just buy and re-list on the market. Would assign at $100k. I would make $19,000
Wholetail: This is very similar to wholesale, I would actually use private or hard money and actually close on the property, then list on the market the next day after staging and getting professional pics. I am confident it will get $150,000. I'm looking at about $2000 closing costs on the front end, if I pay 6% for the loan over 90 days (it won't take longer than that to close and resell) that is $5000, and closing costs of 10% ($15,000) I am looking at ~22,000 in expenses from start to finish. $150,000 - 22,000 - 81,000 = $47,000 profit
Hold as rental: $81,000 purchase price, I get a loan on it for 70% LTV = $105,000. I cash out $24,000 (tax free, right?) and have about 45k in equity in the property. Because my credit history will not allow me to get a conventional mortgage (not bad credit, just no length of history, I'm 19 years old), companies like limaonecapital would charge about 6-7% for a 30 year mortgage, which would cashflow after all said and done about $200-250 a month. So I make $24,000 and add 45k to my net worth.
So before you ask the legendary questions "well what are your goals?" I am in a race to increase my network to $1MM (Currently at $50,000) so I can join the GoBundance mastermind (look them up! @Brandon Turner is in there). I am also moving out to LA in the next 2 months to go build an artificial intelligence company, so need cash for living expenses. Again, I have crazy dealflow because I built my business around that and will have 2-3 similar to this coming later this month and the next.
I currently own 1 rental property that I acquired as a sub2 (tenant moving out at the end of this month) Have a contract out on another sub2 and then negotiating final contract diction (not terms) with an owner of a vacant 4-plex.
I think just writing this out helped me decide which direction I would like to go, but I would love to hear some feedback to shed some light on possible blindspots! Have wholesaled 30 houses in the last 8 months but its good to feel like a newbie when it comes to buying to own!!! :D
47,000 ALL THE WAY TO THE BANK.... whatever that word is you just made up.
@Lisa Misuraca thank you for the feedback, so I can learn from your perspective, can you tell me why you would choose that option?
If you plan would be to wholetail it to a retail buyer, consider that you may have some issues with the buyer's appraisal. If you're purchasing for $81K and quickly reselling for $150,000 with minimal updates, an appraiser is unlikely to find the $150,000 value realistic. I've seen a lot of flippers get burned with this particular strategy (wholetailing to retail buyers).
Personally, I'd probably wholesale it...
I would wholesale. It will go fast and this seems like the least amount of risk for you. I agree with J Scott about the appraisal. Sometimes the best deal is the least risk and the most cash in your pocket. If you are moving and starting another venture....I think wholesale does it all for you. The wholetail alternative has several possibilities that could bottleneck your earnings. In the time it took to list, inspect..close... you might have found another deal with less risk.
I like the rental idea, and Think that if you can hold it for a year, then sell, that might mitigate the appraisal risk mentioned above.
If your goal is networth, do what adds the most: Keep as a rental! If you need the equity as cash you could get a HELOC down the road at 75% LTV.
Nice work nailing this one down! I’d either wholesale or keep as a rental. Wholesale for quick cash in hand that you can use for your new venture.
Or keep as a buy and hold, for some equity and cashflow. If you can cashout refi quickly, then you’ll get cash out as well. Short of that, you can get a heloc with somewhere like penfed that will give you up to 80% ltv
@J Scott Thanks for the feedback. Do you think an appraiser for me to get a private money loan before I close would take any issue? I'm talking about getting a loan at70% LTV of $150,000, because it wouldn't have closed at 81 yet?
For 81k I would do the BRRRR strategy on this one. You could possibly get every dollar you spent on this purchase back on the refi and than some if it appraises anywhere close to 150k ARV. As long as it cash flows and you estimate all the right costs it's a no brainer to build long term wealth. If you walk away with extra cash from the refi that's even better to put towards your next deal. I don't like the wholesaling strategy because I feel it's very short sited when you start to factor in the tax deductions / appreciation of a property vs the tax your going to pay on your quick sale cash return. Worst case scenario flip it for top market value. Why take 19k on a wholesale deal when you can probably make at least 50k from what your saying.
@William Brown if your goals are driven by net worth, keep it! There’s definitely a way to end up with it for little to no money out of pocket. However, if you did want a chunk of cash instead, I’d structure it like this:
Bring in an equity partner to come in at a basis of 100k (so you pocket 19k now), and list it on the MLS and split profits. That limits your risk, and if your numbers are accurate it gets your equity partner a really good return.