All Forum Posts by: Will Barnard

I disagree that BP "supports this behavior". Many of us experienced investors, moderators for the forums, and the staff at BP go to great lengths to educate others in the correct and legal way to do things. I am not sure which members on BP have been invited onto the podcast to talk about wholesaling so I can't comment on that, but I would certainly hope that none of those invited gave bad, illegal, or immoral advice. If so, shame on them and the staff for not calling that out. I certainly would if I heard it.

Gotcha, back of the napkin is ok to start but you will still need to lock in a more accurate number obviously. WHen you combine a remodel with an addition, you will get some economies of scale to help lower the price pSF on the deal in total. If you factor in $300pSF-$350pSF for a small addition as you mentioned and then add in the rest of your rehab, you should be pretty close. Again, your purchasing power, your subs (or GC) will also determine fluctuation in these costs as well as quality of the finishes, design, etc.

Here again I question the validity of this. How could any property at a value of $180k or so cash flow $800 monthly when you are using financing (especially when you finance the majority of it? It is likely you are not accounting for all the expenses associated with holding a property which is a common mistake by new investors. Cash flow does not equal gross income less PITI (principle & interest payments, taxes and insurance. You also have legal, accounting, repairs, capital expenses, vacancy, loss to rent, property management costs (if you self manage, your time is money so you still need to account for that), utilities (when the unit goes vacant or if landlord pays some or all utilities), etc. While you may not have some expenses each month, over time, you will have them so you must allow for them.

One person coming to the thread to say this does not mean much. I'm not saying you didn't make $100k, but if that is true, there is more behind the curtain than just that. You are either very lucky or you have built marketing systems which cost money, you have been doing this for much longer than 2 months, etc. You are just one, I can post thousands who have done none. Just to say you made $100k and that makes it real is not really an answer to the original posters question. A bit more in depth explanation would likely go a lot further for the OG poster and all who are reading this.

Jerryll provided good advice here in his own direct way but he is right. Come to me with that script of yours in your first post and you wont get very far. Come to me with proof of your desire and purchasing power and you have both ears.

Also, as others stated, many agents suck or are just too new so you need to find the very best ones.Best meaning they have been in the biz for a good decade or more and also work with investor clients. If they do not understand the investor mindset or their needs, they will fail you.

It all depends on many factors. Price point, area/location, individual investors abilities or finances, individual investor's risk tolerance or business plan, level of rehab, etc.

As an example, the 70% rule (more appropriately should be named "70% guideline), is a simple back of the napkin analysis and is NOT ever to be used to make your final purchase decision. It is just a quick check to see if you are in the ballpark or not and then you do an itemized calculation of all expenses, rehab budget and ARV to see if your ROI, cash on cash, IRR, etc meets your desires/goals.

Typically, when you are dealing with properties under $200k and especially under $150k, you definitely need a 65%/70% or better deal to make that profitable as you have less economies of scale, lower profit margins for the oops and what ifs, etc. Same when you are dealing in luxury market price points where you also need 70% deals as your rehabs are typically very large, time consuming, hold times are longer, risks are higher, etc.

In summary, you need to use these % guidelines only for quick analysis and not for purchasing decisions. I have done deals at 65% or better, 70%, 75%, and even 80% and made money. I have also done deals above 80% and lost money, but the initial analysis did not have them at above 80% of course, things went wrong and as such, the % of the ARV was hurt in those cases.

I don't think your question here was ever really answered so here it is: They either lie to the seller, take advantage of their ignorance to RE sales by locking up contracts for tiny amounts of earnest money deposits (EMD) in hopes to find their buyer and make their profit. Many sellers will not know to ask for a POF or how much the EMD should be. Others may have buyers in hand and use their POF to get the deal. They target motivated sellers who may have had a death in the family, a job out of state where they need to move quickly, health issues, or any other mitigating circumstances where they are highly motivated to sell. Not ALL wholesalers will work in this manner of course, but it is very common to see this kind of stuff, in fact, people all over BP brag about their deals where they locked up a property for $100 and made $10K or $50K.

All the advice above is good and accurate. MLS is not the best place to find deals, although I have purchased form the MLS and done well but my situation and location (and abilities) are not matched throughout the country. On deals where I purchased from the MLS, I either bought after another buyer did not perform and got a better price or I tore the house down and built a new larger one in a high end area where the cost at purchase was basically my land cost plus cost to demo and where I could build for under $200 pSF and resale for over $750pSF. Those cases made sense, but such a strategy is not for everyone and certainly not for beginners.

Ever heard the term, your network is your networth? It is not just a saying, it rings true in our business and the more you network, the more contacts you have, the more deal flow you will get.

Ben, financing is the least of your problems here. Take your $140k purchase, add in $25k in renovations and you get $165k. Divide 165k by your $180k ARV and you get .916666 which means your deal is 91.6% of ARV. You need to cover holding costs (taxes, insurance, utilities, etc.) as well as resale costs (RE commissions, title and escrow costs, recording fees, etc.) and debt service costs (interest payments and loan fees. All of these costs will add up to well over your 8.4% spread you have in this deal which makes this NOT a deal at all. Even at 85%, you will likely lose money and when you finance 100% of a deal in a property value under $200k, you really need to be lower than 75% minimum to have a profit spread at the end.

To answer your question, financing is key if you are not sitting on cash and as such, it is imperative you line this up before you start making offers on properties. You have many options in financing - hard money lenders, private money lenders (be careful as many people interchange these terms and many hard money lenders call themselves private money lenders - its not true), seller carried financing, subject to deals (leaving sellers mortgage in place which is a form of seller financing using banks money), credit cards, lines of credit (secured and unsecured), or a combination of any of these named. Study, study and study all of this so you are clear on what they all are, what rates you should be paying for each, how you can acquire each, etc.

As J Scott stated, the "lender" typically is not on title, the other entity with brains/brawn would hold title, you would hold the deed of trust and promissory note (plus personal guarantee rider from both individuals) against the property.

Another structure option would be for you to also join in on title as a partner for an equity share in the deal and that can be structured in any format you all deem a win/win/win.