All Forum Posts by: Andy Sabisch

Have a question and looking for options. Seems like deals are either feast or famine at times as many of you can attest to . . . we found a great SFR that was priced well below market value due to a secondary structure that is past saving and as such, a lender would not loan on the property. The seller dropped the price significantly and we were able to lock in a contract with a cash to close offer. We are able to have the issue corrected easily after closing and plan on doing a cash out refinance to get our cash back out. So far so good.

Fast forward two weeks and a great deal on a duplex came up today that has a 19% CoC ROI and a 23% 5-year annualized return with good positive cash flow from day #1. As you know, good deals go fast and this one will fall in that category. We are looking at an above asking price offer (with our offer resulting in the returns above) with a 30 day to close (NOTE: This is an estate property).

We do have an option for a loan from a local bank but they require 30 days to close barring any hiccups. We want this to be a buy and hold property so a 20 – 30 year term is where we are focusing unless a bridge is better to ensure we meet the 30 day to close and then convert to a fixed term loan.

Be interested in thoughts of BP members as to how you see the best option to structure the duplex deal . . . . HML for the entire purchase price (up to the LTV limits), HML for the purchase that we can convert to a conventional loan with the local bank who already has some of our other rentals, go with the conventional bank and hope we make the 30 days or any other options we might not be seeing.

Thanks in advance for your assistance

Wanted to ask how you made / are making out on the property?  Did you list it at the price you wanted to?  Was there interest and did you get it under contract?  We all are curious if the market is changing there and if so, how quickly . . .

Quote from @Drew Sygit:

@Andy Sabisch We actually have too many deals and need more funds.

Of course, we may different opinions on what a "deal" is:)

You might want to follow the "Deep Dive" series we're doing on our BiggerPockets blog about Metro Detroit cities, City of Detroit Neighborhoods and comparing Metro Detroit to other hotspots investors usually consider:

https://www.biggerpockets.com/...

Familiar with that market as that is where we moved form and flips were all over.  Same with buy and holds.  The areas we are in now have two extremes in property - low prices and little appreciation or high prices with a large negative cash flow at this time. I guess there are those that want to deal with D properties / tenants but that is not the sandbox we want to play in and holding a property to hope for appreciation is not either.  We have found flips that produce $30 to $50K but they take some digging and being creative in the purchase and what you do to it.  Interest rate hikes are shrinking the pool of buyers in that market however.

My question was in the markets we are very familiar with, why would people be clamoring to buy a property that is in the B or C area (working class), has little room to drive rents up (plenty of other options) and is negative from day #1 if the sole purpose of the property is rental (multi family).


Will listen to your podcast but this was more of a curiosity question as we have our criteria that we stick to and the model seems to have worked.

OK, quick question.  We have found that the calculators on BP are pretty much spot on as long as you put in good data and have used them on several property purchases.

So the question is, if you run the numbers and the analysis shows a negative cash flow, what is the basis for buying that property?  We have looked at properties where the numbers did not show a positive cash flow and there really was not much you could do to raise rents enough to change that result (or lower the purchase price).  However, we have seen the properties sell for asking price (or more) and question why would someone buy a rental that is not flowing positive?

Thanks in advance . . . hope the question makes sense . . . we have shot for positive at Day #1 or seen what it would take to make the numbers positive . . .but when the area or property can't get through the $0/month barrier, not sure why they still sell.

We have all been where you are - over analyzing deals to the point they are lost.  I assume you will be looking at flipping in your local area (hopefully to start).  You know your area better than we do miles away.  To start with, how much capital do you have available and will you be looking at HMLs or PMLs for funding.  Getting that for your first deal may be a challenge but presentation is everything.

You mentioned getting your real estate license to get the deals before others do but that will rarely happen.  Other agents are looking for the same deals and they have clients that are ready to close quickly.  We just picked up a property (close in two weeks) where we were not the highest offer but were ready to close and had the proof of funds to seal the deal.  If you have not lined up financing in advance, you will lose a good deal that comes along.  Get the funds lined up so when you find that diamond in the rough you can pull the trigger and get ahead of the competition.

You should look for FSBO properties, auctions and even drive for dollars . . . those are the deals where you can buy them for enough below market that you can make money.  Listed deals often require creative vision to see what others have missed . . . . not ideal for your first flip.

What price range are you looking at for your first flip?  How much are you looking at doing yourself?  DO you want a cosmetic rehab or a full gut?  If so, do you have the contractors lined up or available to do the work?  The good ones are often booked months out and if you are paying HML interest, it adds up quickly.  Make sure your rehab estimate is accurate - do not use online guides or programs that give you rehab estimates that are 2+ years out of date - go to Lowes or Home Depot and see what the current price is . . . better sit down when you see what pricing has done.

I would be happy to talk to you about your options and bounce ideas off . . . feel free to message me . . . . good luck

So you bought a property a year ago for $225K and are looking to sell it for $400K . . . . and it sounds like you did limited upgrades in that time.  Did you find a property that was extremely undervalued at the time you bought it?  The market has been hot but in many areas, as the interest rates go up a 0.5 point, the pool of buyers is reduced.  Has your agent run a comparable analysis for your property?  Have you looked at Redfin to get an estimate (not ZIllow as they are typically off in one direction or another)?  These will tell you what the market is looking like at the present time.  You are expecting the property to get into a bidding war and drive the price up $25K.  Not sure about your neighborhood but I have friends that invest in the Charlotte area and they have seen a down turn in the frenzy that was 2021 and early 2022.  Be aware that your definition of GREAT CONDITION may not match what people that are looking in that price range would consider GREAT CONDITION.

Redfin will give you a value . . . see how it compares to your agents estimate (https://www.redfin.com/)

Take a look at the comp report from your agent, see how long properties in the immediate area are staying on the market and at what price.  Just because you feel you should be able to get $400K today does not mean it will fetch that on the market.  You do not want to be the most expensive property on the market nor priced above what the properties in your immediate area are selling for . . . it will not generate activity and when you start dropping price, buyers wonder why.  A few of recent buys have been properties that we saw have been on the market for 75+ days and had a few price reductions.  We were able to come in even lower and get a great deal number wise because the seller had tainted the well water so to speak with the initial pricing.

Just to close the loop with this post . . . the agent said that was her office's policy.  We talked and she understood that it was something she should have said before and she suggested we go through the listing agent which we did.  Did the walk through and submitted the offer as a dual agent . . . offer accepted - done deal.

Going forward we understand that for sub-$100K properties that using the one agent will require that cost to be factored in.  Knowing that going in is one thing but finding out at the end was the issue.  We are good with her for future properties.

Quote from @Steve K.:

@Dwayne Poster the listing agent usually has additional expenses: they often pay for photography, staging, cleaning, marketing the property, etc. which is why in many areas the listing agent gets a higher commission (3.2% listing agent, 2.8% buy side is typical in my market). For sub $100k properties, listing agents might have a minimum fee they negotiate into the listing, or pass those extra expenses on to the seller. I don’t know exactly, I haven’t worked in a market with properties in that price range. I’m sure agents in these markets arrange some way to avoid losing money on each transaction though, like this $800 fee. Nobody wants to take on the stressful work of being an agent just to lose money.

I agree wholeheartedly that the listing agent earns her commission in dealing with teh sellers, preparing the property for sale, arranging for photos, etc. and have no problem with that 3%.  For the general home buyer that needs to be taken to a dozen houses sometimes more than once to make a decision, the buyer's agent can spend even more time and earns their 3%.  However, when an investor finds the property, runs the numbers and the only factor is seeing inside, the buyer's agent has very little invested past the 30 minute walk through and the time to draft an offer in Docusign.  Once the contract is accepted and the package goes to the title company who does all the rest of the work to get it to closing (at least in the areas we invest).  So with that, the minimum of $3,000 for opening the door and drafting an offer seems a bit high.  For the agents that find a deal and bring it to us, we woudl gladly pay them the 3% rather than it coming out of the sellers side but in this case she was getting 3% + the difference to reach $3,000.  

Quote from @Wayne Brooks:

@Andy Sabisch This is common on low priced properties, at least for experienced agents. The agent will make less than $1000 at 3% on that sale.

A suggestion then is on properties under $100K, have the fact that the buyer will need to pay the difference between the commission and $3,000 or at least mention that when you start working with a client.  I understand that in many parts the country that $100K won't cover the down payment on a property but for others (like us), there is a large number of properties that do not fit that mold.

Quote from @Garland Best:

@Andy Sabisch It is very common to have a minimum commission that an agent will provide services for. It is a fallacy that agents get paid for not doing anything. Currently, the seller generally pays the commission in which the listing broker shares with the selling broker. This general practice has recently come under some scrutiny because the seller is wondering why he/she should pay somebody who is working for the buyer. In the future, the buyer may be responsible for paying the entire buyer agent's commission. Remember, she is working for you.

I agree that expecting someone to work for nothing is unrealistic.  In this case, we found the property and the agent's sole role was to obtain access to it.  As far as handling the rest of the transaction, the title company we use takes care of everything once the contract is signed until we sit at the closing table.  In this case, the effort on the part of the agent was minimal past putting the offer in Docusign and routing it for signatures.  The agents we have in adjoining counties (separate MLS's) that look for and bring us leads are working continually to find deals so there is no question they need to be paid at some point for their efforts.

I understand that the commission structure and which side pays what amount is under review but as times have changed with listings being readily available to anyone with a computer, in many cases buyer's agents (at least for investors) have had their role change to simply opening doors and if that is the case, the 3% is probably not going to stand the test of time . . . but that is another discussion for another thread.