30 homes, 150 letters, 5 months, 1 offer...what now?

30 homes, 150 letters, 5 months, 1 offer...what now?

New to Real Estate · Nampa, ID · Member since 2015 · 66 posts · 49 votes
Back in May I did driving for dollars, I found 30 homes I liked so I went home and hand wrote letters to the owners addresses I found on the county tax website. I sent out 5 rounds to all 30 houses on a weekly frequency. First call yelled at me and said "stop sending me F()$& letters" -- I sent him one more letter this was the offer for his property. The second call wanted to sell and wanted me to come over and give them an offer. I did this and they wanted way more than the home was worth. Third call was an investor who gave me props on being brave enough to send consistently "hand written" letters. But he wasn't interested in selling. Fourth call wanted me to rehab his property as his contractor. Fifth call just wanted someone to talk to and I made a good friend. He wanted to sell but had no where to go and was really sick. Then no calls or responses for several months. Everyone left on the list got an offer with or without a response. A few days ago I got a phone call in regards to house I put an offer on. They asked if my offer was still good. I told them I'd call back after I look at my notes. Come to find out the guy who was sick died and his brother wanted to sell the house. I checked my numbers and I think they look good for a wholesale. C class neighborhood 1,040 sqft 2 bed 1 bath Offer: 15,500 Comps: 70,000-127,000 Renovations: 21,000 Rents: 550-675 I would keep this as a rental since this town is extremely good for rents because of the great schools but I'd like to turn some profit for another house in a little better neighborhood. What would be a fair wholesale price? Any thoughts? Comments?
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Real Estate Investor · Raleigh, NC · Member since 2012 · 427 posts · 297 votes
9y

Did the seller say they wanted $15,500? I am confused where that number came from. What did the seller say they wanted to get for the house? 

That comp range is ridiculous. You have to be more accurate than that. Your higher comp is over 50% of your lower one. Renting at a max of $650 a month, if you can wholesale it for a 15k profit I'd wholesale it and move on. It takes a lot of time at $200 a month to get that. I get the impression you are a newer investor (I may be wrong). That 15k can go a long way to your marketing and getting established. Right now you are hand writing 30 letters a pop, using that 15k you can start sending out 1,000.  

Finally, I want to commend you on taking action. Driving around looking for ugly houses and handwriting letters is not fun, but you did the work and hopefully are going to reap the rewards. 5 calls off of only 30 houses mailed 5 times is pretty darn good by the way. 

PS If the second, fourth, and fifth call have not sold follow up with them now. Call them today. And I would call the third one to see if he is interested in being a buyer.

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  • Lender · Vancouver, WA · Member since 2015 · 482 posts · 316 votes
    9y

    See https://www.biggerpockets.com/real-estate-investment-calculator

  • Real Estate Broker · Daytona Beach · Member since 2016 · 29 posts · 12 votes
    9y
    Lets say the ARV is 85,000 Multiply that by .70, which is 59,500 Then subtract the repairs 21,000 = 38,500 Then subtract your fee -10,000 =28,500 28,500 should be your max offer and being that they want to sell for 15,500 you could probably add another 10,000 as a fee. Then you want to find a buyer at 38,500 so the seller would get 28,500 and you would get 10,000. Hope this helps
  • Real Estate Investor · Raleigh, NC · Member since 2012 · 427 posts · 297 votes
    9y

    Did the seller say they wanted $15,500? I am confused where that number came from. What did the seller say they wanted to get for the house? 

    That comp range is ridiculous. You have to be more accurate than that. Your higher comp is over 50% of your lower one. Renting at a max of $650 a month, if you can wholesale it for a 15k profit I'd wholesale it and move on. It takes a lot of time at $200 a month to get that. I get the impression you are a newer investor (I may be wrong). That 15k can go a long way to your marketing and getting established. Right now you are hand writing 30 letters a pop, using that 15k you can start sending out 1,000.  

    Finally, I want to commend you on taking action. Driving around looking for ugly houses and handwriting letters is not fun, but you did the work and hopefully are going to reap the rewards. 5 calls off of only 30 houses mailed 5 times is pretty darn good by the way. 

    PS If the second, fourth, and fifth call have not sold follow up with them now. Call them today. And I would call the third one to see if he is interested in being a buyer.

  • New to Real Estate · Nampa, ID · Member since 2015 · 66 posts · 49 votes
    9y
    Ronnie Monroe thank you for your input. What is the .70 you multiply first?
  • New to Real Estate · Nampa, ID · Member since 2015 · 66 posts · 49 votes
    9y
    Eric F. Thank you as well I'm so grateful for any input. The 15,500 was the offer I sent in May and they accepted it. Yes I'm green, I have completed 1 wholesale and it was for a family friend. So I see how the deal structure works I just don't want to make a name for myself around here as the guy who doesn't leave meat on the bone. Is a 15k wholesale profit taking to much from the deal for the flipper? Also I just found out today a new elementary school is being built down the street is going to increase value of the property?
  • Investor · Rockford, MI · Member since 2013 · 116 posts · 54 votes
    9y
    If you want rentals as well in the future, why not buy for $15,500 they've agreed on, put the $21k into the rehab (all in for $36,500) and get a refi upon completion? If your ARV is correct, even assuming the lower end of comps you could have a cash flow property for your portfolio and get your initial investment back out to do again as well as some cash for marketing.
  • New to Real Estate · Nampa, ID · Member since 2015 · 66 posts · 49 votes
    9y
    Jason D. Thank you! That's a great idea too! Call it an excuse but I don't have much time for a large remodel at the moment and doing a quick turn around on this would gain some confidence from my not-supportive wife.
  • Investor · Rockford, MI · Member since 2013 · 116 posts · 54 votes
    9y
    Understandable! Some quick money should help with that. Best of luck either way!
  • Real Estate Broker · Daytona Beach · Member since 2016 · 29 posts · 12 votes
    9y

    @Nate Hawkins Its the 70% rule, 70% of the ARV (after repair value) Its not a one size fits all but its a good benchmark when starting out.

  • Houston, TX · Member since 2015 · 15 posts · 3 votes
    9y
    Hell of a job on getting out there and making a deal happen man.
  • Real Estate Investor · Raleigh, NC · Member since 2012 · 427 posts · 297 votes
    9y

    Getting a refi on a $36,500 property is not that easy. I would make sure you figure out how you are going to refi before doing so. 

    @Nate Hawkins 15k profit on a wholesale is not too much. No profit is too much if your seller is happy and your buyer is happy. If the seller is happy with 15.5k for the property, and your buyer is happy at 30k, then you're good to go.

  • Flipper/Rehabber · Tucson, AZ · Member since 2016 · 114 posts · 18 votes
    9y

    @Nate Hawkins, I have just started driving for dollars, and maybe found and sent about a dozen properties so far (once).  I am sending a hand written card.  Do you use cards?  Postcards?  Or just a white piece of paper hand written?  I have a few template messages that I copy, and I modify each one a bit toward their individual property.  How short is your message?  I would be afraid to send a message as much as once per week, but maybe I shouldn't be.  I also like the idea of eventually just floating an offer out there.  Would love to hear a few more details.  Good job!

  • JD MartinBusiness Member
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    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    9y

    I agree with @Eric F. that you need to seriously tighten up your comps before you proceed. If your real comps are ~70ish, my guess is that you're not going to assign that to someone for 30 unless they don't really know much. I wouldn't do that as a flip or B&H for that price, even assuming your rehab costs are right on the money. If your comps really are ~120ish, then you have a lot of room to work here, even if you're off a few grand on your rehab. At the upper end, I don't see a problem with you turning 15k but you're going to have to come way off if your comps are at the bottom - and any investor is going to want to know the true comps (he/she will probably know them anyway, but wants to see if YOU know what they are) before they commit. 

    At the bottom end of this there's no room to work unless you are willing to take 5k or similar - which is honestly not bad for an assignment in a dubious neighborhood with low comps and a (relatively) low time & money expenditure on your part. 

    Skyline Properties
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  • New to Real Estate · Nampa, ID · Member since 2015 · 66 posts · 49 votes
    9y
    Eric F. Thank you, I will keep that in mind.
  • New to Real Estate · Nampa, ID · Member since 2015 · 66 posts · 49 votes
    9y
    Kathryn Bowden Thank you for your response. I was either ignorant or hungry or both. I just wrote the same script for 2 mailings then my other script for 2 and my last one for 1. Here's all my stuff. DMS #1 Dear -----, My name is Nathan I am a local investor in twin falls. I found your property at 123 main st. I am looking for another house in this area. I buy as-is with CASH! Let's make a deal! Call, text, snailmail today! Nathan My address My number DMS #2 Dear -----, Hi My name is Nathan I want to $buy$ Your house at )adress( Please call me at 208-329-**** DMS #3 Hi, I'm Nate Hawkins local investor, I found your property at ___________ This property fits my criteria I'm ready to buy now! If you need money call and tell me your situation. 208-329-**** If you prefer send me a text or a letter! Respectfully Nate Hawkins 208-329-**** I found it took a really long time to write this over and over. So I photocopied a pencil written one from a blank piece of paper with the address and name not there. This way I could write them in a 1/4 of the time. After the response I sent an offer. In the offer I said it was good for 90 days (again might be ignorant) I also sent proof of funds on the ones I could actually afford. I'm thinking about sending another 5 rounds to the rest of the list a few that are left would be some great deals.
  • New to Real Estate · Nampa, ID · Member since 2015 · 66 posts · 49 votes
    9y
    Jd Martin I know the comps I will work on it. Thank you for your insight.
  • Paul AmegatcherPro Member
    Rental Property Investor · Brookville, OH · Member since 2016 · 488 posts · 363 votes
    9y
    Originally posted by @Nate Hawkins:

    Jd Martin
    I know the comps I will work on it.
    Thank you for your insight.

     Nate,

    Usually the 70% rule (70% of ARV - Repair costs = max allow offer) tells you the max you are allow to offer. Using the bottom end of your numbers ($70000*7)-21000=$28000. Since you are wholesaling the property you need to offer less than $28000 but since you already have an accepted contract for $15000 then you could technically wholesale the deal to another investor for $28000 total purchase price which includes the $13000 in wholesale fee. Hope that makes sense.

  • Old Bridge, NJ · Member since 2016 · 27 posts · 12 votes
    9y
    The only thing that would scare me here is if you have no intention of truly purchasing and instead using these deals as a wholesale. Shouldn't these letters be structured differently? It seems that the seller would be mislead in believing you are buying right away since your stating you have cash. Unless you are buying out right and then flipping? I'm new to wholesaling so just trying to figure out on doing it the right way without coming off to the seller as a bad investor.
  • Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    9y

    Wow. It still amazes me when I see the amount of work and follow-up effort that a newbie will put in, and THEN ask: what now? (There, I got that off my chest). I vote: do what you can to keep it!

    And keep SAVING. You'll be amazed: Lenders WANT your business, but want to see consistency along the way. OWNING a rental, AND ongoing savings, will help a LOT. All the best...

  • Murfreesboro, TN · Member since 2016 · 33 posts · 8 votes
    9y

    I  am a newbie but, if you buy a property in run down condition for 70% of $100,000 ARV = $70k your rehab cost could go beyond $30k. Me, I would pass. But Nate deal sounds good.  Just my thought!

  • Murfreesboro, TN · Member since 2016 · 33 posts · 8 votes
    9y

    Sorry, I missed calculated. My error.

  • New to Real Estate · Nampa, ID · Member since 2015 · 66 posts · 49 votes
    9y
    I guess it's fitting to give an update for all those who contributed to this conversation. I ended up listing the property on Zillow and on Craigslist. I re-listed on Craigslist 4 times per day with different wording and different display pictures to catch the most people. It was on Zillow for 3 days and received over 400 views and 5 saves. At the end of the 3rd day a buyer called and got it under contract for $26,500.00 I agreed to split the closing costs After closing costs on both sales: $9,348.60 Thank you all for your input.
  • Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    9y

    @Nate Hawkins, "both sales"? You "agreed to split the closing costs"? Does that mean it was a double-close? I hope you NEVER thought that your end-Buyer should ever pay ANY of the FIRST close! Your "agreed" split was only regarding the SECOND close, right? 

    So, given your frenzied marketing campaign, you never saw keeping it as an option?

    ie. Your end-Buyer stands to make MUCH more out of it than you, for less effort - by keeping it!

    Congrats on your gross profit of $9,348.60. How will you invest THAT money? Cheers...

  • Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    9y
    Originally posted by @Nate Hawkins:

    I buy as-is with CASH! 

     Are you prepared to close and buy as-is all cash? If not, you should not lie.

  • Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes
    9y
    Originally posted by @Nate Hawkins:

    I ended up listing the property on Zillow and on Craigslist. I re-listed on Craigslist 4 times per day with different wording and different display pictures to catch the most people. It was on Zillow for 3 days and received over 400 views and 5 saves. 

     It sounds as if you were acting like a RE broker ... if you did not own it, did not have a listing agreement, and did/do not have a realtor agent or brokers license, then this is illegal and considered fraud. Posting about fraudulent RE transactions on public forum is not a winning strategy. Maybe I'm missing something, though.

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