All Forum Posts by: Alisa O.

@Jonathan C.,
Thank you for sharing your numbers. It is a brave move on your behalf so I applaud to you! When I was reading your post these are some of the first thoughts I had:
+ You are saying that your buyer list is not as good as your partner's. Have you contemplated on spending small portion of your marketing dollars onto forming a better quality buyer's list? Better not dollars, but your time, like calling and asking what your local investors are looking for. I don't mean your competition like We buy houses guys, or realtors or other wholesalers. I mean the guys who are doing rehabs and landlords. These are the guys who can "afford" to pay slightly more than your competing wholesaler. Also, I would track who your partner is marketing your contracts to. If let's say s/he is marketing to rehabbers, I would find nearly every full time rehabber in the area, get their info and market to them before I would contact my partner. You can find them through the permits they are pulling, hard money lenders and the noise in the neighborhood. If you see that a particular company is pulling permits on consistent basis, you really do want to find a way to get in contact with the acquisition person. Also, if you happen to drive to and from your appointment and hear construction noise, do not pass by but get out of the car and get their info. You might come across a rehabber or the landlord. Also, contact hard money lenders in your area and ask them who they are lending to for rehabbing.
+ Since you already got negotiation with the sellers under your belt, have you tried wholetailing? You will keep most of the spread in your pocket. @Michael Quarles and @Aaron Mazzrillo talked about it during their podcasts and on the forums. Some other people might as well, but these two pros stand out in my mind. Maybe someone else can chime in and point to wholetailing pros?
+Even though you seem to be comfortable talking to the sellers, how about trying new negotiating techniques to get better prices. I understand that it's challenging, but one can always strive to improve and make a better spread!
+ You are talking about marketing to high equity and absentee landlords. I wonder if you include high equity absentee landlords who also have a violation or who also inherited the property how would it change for you. Instead of one base and one sub-group, you'll have one base and two sub-groups. It will be a better quality list since the landlords would be motivated on two levels instead of one? Again, pros like @Michael Quarles @Aaron Mazzrillo and @Jerry Puckett talked about it.
+ Finally, you are stating that your partner has a better buyer list. Could it be that her/his attitude on approach is more confident? I don't know you personally, so I can not tell, but if you are offering your contract to your buyers and let's say getting $100K and your partner is offering the same house to their buyers and getting $115K, I would wonder what is it that I'm saying, how I'm saying and when I'm saying affects the bottom line.

Again, thank you for sharing your numbers!

So, if the furnace was on, I wonder why did the pipe burst? Now I'm curios from learning standpoint. I know that cpvc pipes can be used in cold climate if they are insulated, but you are saying the furnace was on. Let me know if you learn the answer. I will ask my guy as well. 

Nalo, here is another version of a personal loan I want to share. It might be lengthy, but you will understand why I'm including all the details. 

Once, when I was in a tight squeeze, or actually standing in the basement up to my knees in water in the middle of New England winter and my usual money guy was on vacation out of reach and I did not have immediate funds, I decided to stay as calm and persuasive as possible and find a contractor who could help me fix flooded basement and who was well off in his business that he was not desperate for the money to feed his kids. He was one of the recommendations I got from an architect I used before and a water and sewer guy at the city department. I persuaded this contractor to become partners with me and loan me the cost of his repair at 8% and $300 fee until the property sold, maximum 5 months. I pleaded that he will have an opportunity to make money on this fix and that if I don't pay, he can put a mechanical lien on the property and if everything works out, every project in his territory is his. Guess what, he went along. Maybe because the water was too cold and I "froze off" my sense of fear or maybe because I didn't give my self another option or maybe because he wanted to take a chance with a "crazy" determined woman, but he fixed the problem and then a few more. I know that anything related to his line of business is his project, but most importantly, he does know that. Later I learned that he did not rip me off, but actually gave me a good price. I paid him before I paid my self when I sold the house. I try to pay all of my guys on the same day they present their bill to me unless I asked for some time before hand. Every one of them knows that I will come through no matter what. I will lose money before I default with them. They know that and they come through for me. Bribing them with coffee, donuts and food doesn't hurt either! :)

The point of this story, sorry it might be too long, is try to establish connections with people and they will come through for you. People do business with people, if you find the right ones, you and them can grow together and draw success off of each other. If you establish with them that you are determined to stay and grow your business and help theirs, they will become partners with you and help you along the way. My only advice is try to stay away from self entitled male chauvinists, they are hard to negotiate with and may waste a lot of your time. Nevertheless, there are a lot of really good people out there who want to grow and look for good healthy business partnerships. We do business with other people, who knows, maybe someone is looking for a business partner like you! The only thing you need to do is go out and make it happen! 

Keep up posted.

Nalo, @Jon Holdman, has some good suggestions. Although I don't believe that getting a second job will be punctually helpful or selling something would be enough money or not perceived as a self imposed "punishment", unless you need to sell stuff to clear up your life. I do believe that a family loan and credit/store cards might be an option. Pawning something of value is another way. My friend reluctantly pawned his watches for a few months to finish his project. As soon as he sold the house and the check cleared, he got his watches back from the store. I believe he did it a couple of times more and then actually became friends with the store owner and now this guy is his private lender on some of the projects. 

Jon is right about the personal loan, as well. Before you start signing up with them, ask their normal turn around time. I would do that before you "bought" the property so you know your time frames and options. 

Fred T brings up very good points, although I doubt the seller will pay for the January 2015 Manometer Survey and the distressed analysis. He is already bleeding money on this "Pandora box". Most likely he will just tell you to accept the existing report done by the structural engineer and the independent contractor or to continue to march. There are no current active red flags related to this foundation and with all the other stuff going on he might buckle. I would tread waters lightly here, although I would put a contingency in the offer regarding the structural integrity of the property. This being said if you are still interested in this property. 

If the seller is getting electrical fixed, is it up to code and what kind of quality job is it? The seller is probably in "fight or flight" mode now, being freaked out by the burst pipe and by the refusal of the insurance company to cover the claim and all the costs pouring on him at the time when he least expected it. I would be seriously wondering what kind of job are they doing and how many corners are they cutting. It is not necessarily the case that they are, but one can wonder. 

Fred's point #3 is excellent. If you are still going to proceed with this property, go through that house with a fine tooth comb. In addition to everything mentioned above I would get a professional thermo-graphic assessment. You will know where the pipes might be in danger and where the property is loosing heat. Whether it is you or the tenant paying for heat, it just makes sense. Small cost to pay as a preventative measure.

As a last point, I would include in Fred's calculations above the cost of acquisition. I don't know how high/low your acquisition costs run in Ohio, in NY they cost a pretty penny. And why shouldn't you include them? They are part of a deal! 

Keep us posted! 

 I hope you are NOT going to accept it!!! $49K was with a pipe intact, not its not! You should lower your offer at least by a few thousand to fix the pipe. I would say to the seller that if one pipe burst, the next one might be coming soon and you want some funds to cover it. Plus your situation changed and now you can do this deal at $45K? Even if they are not motivated enough, at least they will listen. Who knows what will come out of it. The least you can do is ask. If you don't ask, you don't get!

Let us know how it turned out and how awesome you did! Good luck!!!

I agree with Nathan. Both, the down payment and the offer are way too high. With the numbers you are giving your CoC and CF are pathetic. Even if you self-manage today, something may happen tomorrow and you will need a management company, so you must account for that. Also, even if you self manage, will you be unclogging toilets for free? I'm not picking at you, just giving you perspective.

I believe you can get a better deal and utilize your skills and time more profitably.

Nalo, if you don't ask, you don't get! It never hurts to ask. You already know that you can get bank financing so you can go back to the seller and offer them excellent opportunity. I would offer 5% down because the loan will be secured by the property they already know very well and I would start with 4% interest. You can justify it by the facts that if they have any money in their regular bank account, they are probably getting 1% or so and if you were to go to a regular bank you could finance it at 3 something % FHA guidelines as a primary residence. Granted, this would be with points, but they don't need to know any of that. So, compared to their regular bank account they will be making 400% difference. Also, if you negotiate interest with them, go up by 1/8. Its a small saving, but saving nevertheless.

Jim, what doesn't kill us, makes us stronger! I know it is painful, but you will loose out only a few thousands in potential profit and the expenses that you’ve already incurred. If it is written somewhere for you to loose a deal, it is better to loose this one than a $30K or $50K or whatever large deal.
It seems that this deal is going south quick so I would definitely watch for the foreclosure sale if you want to even deal with this property. Sometimes it's better to walk away and concentrate on deals that have bigger potential of making a nice chunk of change.
I would not deal with this attorney in the future. If he's been an attorney for more than 1 day, he would know that whenever there is a slim chance of money on the table, all kinds of companies show up with their hands out. There is a high probability with the decedent having liabilities, but when you have 2 or more people, you have a higher risk. Maybe I don't see the whole picture, but it seems to me he was lazy and wanted to do a quicky, so he ruined your deal. I would pay him his fee and continue to march and find my self another attorney.
In the future I would consider running a title search as soon as you got a contract signed with the seller. If you go with the same company, they will roll in the cost of the search into the total cost of the insurance and settlement. I understand that title companies make mistakes, but at least you can save your face with your buyer if something comes up because you actually did your homework and have a statement from the Title Company confirming that the title is clear and marketable. The title search will run you a few hundred bucks, but at least, if such a situation would happen again (I know it would not! :) ), you would know what you are dealing with (existing mortgage) and would not probably get involved with such a PITA (Pain In T.. ...) deal.
Perseverance prevails!

I'm not sure how far you are in the closing process, but is there a chance to ask your sellers to finance your purchase for several months while you are doing renovations? Unless they are desperate for money, they will make more with your interest payments, than in a bank at 1% or so. If you structure it as a land contract, they have even less risk because if you don't pay they get the property with all the improvements you've already done to it. You just need to make sure that your payments are on time.

You will be paying a mortgage to the seller while renovating at a better rate and then you can finance with the bank at a higher LTV. Because you technically don't get the title to the property while in Land contract, some banks might accept it as a new purchase.