All Forum Posts by: Andrew Taylor

I keep seeing news stories about the affordable housing crisis, and I'd like your opinions on that issue, specifically as it relates to Houston and the surrounding area. Not necessarily talking about section 8 stuff, but just general housing priced so a larger segment of the population can afford it.

• IS there a lack of affordable housing?
• What constitutes affordable housing? Is it a rent less than X dollars monthly? A mortgage less than X dollars monthly?
• Does it have more to do with availability of financing than with total cost?
• What am I not asking that I should be?

Saw a story yesterday that said there are something like 40,000 people on a waiting list for affordable housing in Houston alone. That seems like an opportunity to me, but it's also a market I'm so unfamiliar with that I'm not even sure what I don't know. Realty pros seemed like a good place to start.

@Erin Liggins check out "Flip" by Rick Villani. You'll need to update his numbers by about 10% to account for inflation but otherwise it's an excellent starting point. 

I may be able to help. What specifically are you looking for?

You're "lowering your fee to $10,000"? Good lord, what did it start at? 

Inflated assignment fee aside, I think you're seriously underestimating the rehab costs. I'm a contractor and there's not much I can do with $10/sf. Assuming it needs flooring and paint, you're not left with much budget for anything else. Cabinets? Countertops? Electric and/or plumbing fixtures? 

Is the city going to require you to bring the plumbing and electric up to code? Are the appliances in working order? What about doors and windows? The roof? Foundation? HVAC?

Conservatively, I'd guess your per-square foot number is too low by half, assuming the place really does need the bare minimum.

@Cody L. if he gets a $180k house under contract for $130k then he's already at 78% BEFORE any rehab, and I won't be giving him anything. 

That's my fundamental concern here. I don't care if the wholesaler makes fifty grand, as long as the deal still makes sense for me. But to tack a $10k fee onto a deal that's already thin (using the 70% guideline) just smacks of greed (or stupidity, or a fundamental misunderstanding of what an investor buyer is looking for).

Pigs get fat; hogs get slaughtered.

I'm by no means an expert, but I'm also searching for deals in Houston and have a few observations. I think there's a sort of feeding-frenzy mentality when it comes to a lot of these wholesale "deals." Every book I've read that talks about wholesaling says a reasonable fee for that service is $2-5k. A $10k assignment fee is cause for a good laugh and an immediate unsubscribe. But they only need one sucker to pull the trigger to both make risk-free money and prove to themselves that that's what the market will bear. 

I think the 70% rule is a good starting point, but I suspect it's not realistic to use it for 100% of your deals and expect to stay busy enough to make a living. That being said, until my partners and I have a few deals under our belts, we are passing on every deal that doesn't meet the 70% rule. It means we pass up a lot of deals, and every day we have to fight the urge to join the feeding frenzy and jump on a deal that's less than stellar just so we can "get in the game."

But it also means we are a little less likely to lose money on a given deal, a little more likely to pocket a little profit. Until we're old pros, I'm comfortable knowing I'm doing every little bit to increase my chances of success on every deal - even if means they're fewer and father between.

As for the non-refundable deposits, that seems to just be the law of the land.  We much prefer deals where that deposit goes to a title company, but barring that, developing a relationship with the wholesaler is crucial. 

 Does it change your calculus if I'm the builder? I can build new construction for a shade over $100 per square foot. Houses are selling out there for close to $200 per square foot. I've had two different realtors advise me to put a spec house on the property to increase my chances for a sale.

When I say rural, don't think deliverance country. Think acreage estates. There are million-dollar homes on my street.

That was actually one of the things we discussed - the nursing home scenario and how to structure it so our equity didn't get eaten up by their medical costs.

Maybe we're better off having me build and more or less lease to them.

A trip to the CPA is on the books for tomorrow, and an appointment with our RE attorney will follow shortly. We thought they might both have their own suggestions.

I own 4.5 acres in a rural community. I paid 125k for the land and have since put about 100k of improvements into it, including a well, electric service, fencing, and a 2200sf barn/workshop with living quarters. Intent was to build a house, but plans changed and we ended up purchasing a home nearby.

We've paid cash for everything, so I have no mortgage except for a 50k home equity loan we took out against the property a year or so ago. Total monthly cost is 250 equity loan, 300 taxes, 50 HOA, 75 insurance, and about 30 electric.

We've been planning to sell it, but I don't see a lot of people spending 225-250k (my target range) for a property in this neighborhood with no house on it. I think I'll be lucky to get my investment back.

My dad lives nearby in a rental, and he mentioned yesterday that they'd be interested in buying the place to build a home on. His proposal was to buy it for the equity loan amount (50k), then build a house. They'd live there until they die, then will the property back to me (instead of splitting inheritance between me and my brother).

I think the property would easily be worth 500k after they build (and I'm being conservative). At 4% appreciation, and assuming it's 20 years before I get it back, it should be worth about $1.1M, with a mortgage balance of about 150k. So I'd net something like 950k.

Is 150k now better than 950k in 20 years? (There's no way that 150k is getting invested, either. I'll have to use 50k to remodel our current house, and the rest will get applied to our current mortgage.) Is there a better way to structure this deal? Anybody have other ideas? My knee-jerk reaction is that it's a win-win for all parties, but I'm open to suggestions.

Thanks in advance for your input.