All Forum Posts by: Henry M.

So I've been responding to many wholesale threads regarding underestimating rehab costs. I have also read many threads regarding most who can assess what a property may cost to rehab within minutes of viewing it. I thought it would be interesting to see what wholesalers/rehabbers (new & experienced) would estimate this cost to rehab if you only had these photos to assess.

Whether you are from Texas or out of state, it would be nice to get an idea of what anyone believes it could cost just by reviewing these photos. It would be a good exercise and possibly helpful to those who are new.

This house is located in Texas and is a 3/2 @ approximately 1,100 sqft. It was built in the early 1960's with an ARV of roughly $130K. We could get into what the maximum offer would be but I am more interested in what the cost of rehab could range for this home.

Let's keep this professional and hopefully you could point out what you notice in the pics or what you definitely feel you should replace or renew.

Let's have fun with this. And yes maybe this has been done before but again, this is an example we could use to tackle the issues with under estimating repairs. The rehab costs should reflect a typical cost. Not a DYI or your crew that has done over 100 rehabs for you. This is meant as an exercise to see what it may cost in your opinion if you were new to the area or business.

This will hopefully come from two view points, a wholesaler's and a investor/rehabber view point. 

Thanks in advance for your participation.

Your BP Family Member,
Big Henry


SEE PHOTOS BELOW (ZOOM IN):

Jerry,

If we are going to quote a post, I think it is best we use it in the context it came from... So for those of you who are interested in reading more on wholesaling - click link below:

 http://www.biggerpockets.com/forums/93/topics/7165...

Bryce Y.,

I just saw your answer. No problem, better late than never.

It happens to the best of us.

I was just trying to elaborate on the thought of what Joe Butcher asked. I was running through a process out loud (in writing) as to get other newbie investor/wholesaler/whatever everybody else wants to define it as. 

Either way, I think we've exhausted the point.

Remember all we are are is a juggernaut thread.

Lol ;)

Big Henry

As well as Texas is a non-disclosed state. So prices are gathered through other means (outside of the MLS)... Which is why Zillow may be off. However, I do like Zillow. They do offer quite a bit of information but I never depend on them exclusively. You have to gather info through multiple sites (at least a dozen) to arrive @ a median price per property when trying to do CMA's (if you don't have access to MLS).

Even with your info Bryce (which we thank you for) we still see a slight discrepancy at what is listed @ $295K vs. what the wholesaler is offering @ $285K... And if he is offering it @ $285K, then he must have definitely negotiated lower than $280K to make it worth his while.  

We still need plenty more info but it's a good exercise for those coming up and trying to learn what we have outlined for them. This is just the tip of the iceberg in this example.

Just my two pesos.

Big Henry

Hey Bryce,

Nice to meet you here on BP.

In regards to the subject matter... I believe the "under contract" should not be an assumption unless due diligence is being made through a process of elimination.

If the property is under Active Option, then it will reflect just that on MLS. Hopefully, Joe Butcher, will provide a link or more info for us to review to better answer his question.

I come across these types of deals frequently. There are notorious companies/individuals who advertise wholesale properties who usually do not have those properties under contract. The only way I see a legitimate deal being valid is if it truly is under contract less ($) than the active listing amount on MLS, by way of Shortsale.

Otherwise, it would have to be an expired listing or off market property (in regards to MLS). Now whether a wholesaler can wholesale a shortsale, is possible but not probable unless they either disclose to buyer or by using another source to take down property such as transactional funding, a HML or even a private lender. In other words, it would be very difficult (not impossible) to do a double/simultaneous closing.

So let's make some possible assumptions for the sake of argument:

1) Wholesaler has knowledge about property but doesn't have it under contract.
2) Wholesaler has property under contract.
3) Wholesaler is ghost-marketing.
4) The property is in fact listed and active.
5) The property was listed but expired or off market.
6) The property was never listed.
7) The property has been advertised on Zillow by a third party (owner/seller, Realtor, or other).
8) The property or deal doesn't exist.

All these assumptions mean nothing if the property does not meet an initial criteria for a good wholesale deal with the listing price of $309K.

Considering this is a wholesale thread, then $24K may still not be enough for a good deal @ $285K.

Now if there is a retail buyer in the wings, sure this could be attractive for a quick payday, however this is reaching.

If I was truly interested in this property then my due diligence would slowly narrow down through process of elimination to the truth. Again some of these assumptions may interact or interfere with one another. This would be revealed through the due diligence stage.

This is food for thought for Joe Butcher and others wanting to answer his question, new or experienced.

If I missed any assumptions, please feel free to add but overall this is it in a nutshell. Without tackling it any further, our information is limited and it is difficult to give an accurate answer to the question(s).

Just my two pesos.

Big Henry

 I believe I understand what you mean or are trying to say but to others it may be confusing since most wholesalers don't know what they're doing... Then we relay to those seeking education to conduct thorough due diligence yet you state don't worry about what other sites provide trusting the deal listed at a lower price could be a good deal from an unknown wholesaler.

And how would a $309K list price be a much better deal at $285K, for a wholesale deal?

Retail, I accept but wholesale, it would have to have an ARV much higher to even be considered a good deal.

Not busting your chops Joe Gore, just wanting clarification on your comment.

Big Henry

@Joe Butcher

@Joe Butcher

When you say listed on Zillow, what do you mean? As in the Zestimate? Or is it advertised by a Realtor? 

Maybe include a link to what you are sharing with us and maybe we can answer that question more precisely. 

Just curious to help.

Big Henry

Yup Sharad, I agree. Come to think of it, I think  @Will Barnard's: "The Truth About Wholesaling!" about covers the topic.

Big Henry

Alexis,

I may not be the best one to answer this but considering you have posted more than once, I would hate for you to think no one is interested in answering your questions. 

Before I attempt to give you my mediocre advice... Let me ask a few questions. 

Are you working full time elsewhere? If so, for how long?

This is important as any bank will only count so much of the rental income affecting your debt to income ratio.

Also, are all these tenants in long term leases (i.e. year)? This is also important. 

Do you have any other assets to offset the debt in general? 

Are you truly only wanting to refinance due to the furnace on your credit cards or are you trying refinance the terms on your note or are you trying to pull additional cash out?

If it's just the furnace, how much is the amount? Why is it so important to pay that off immediately? Is it because the 0% interest is on a limited time frame with an expiration date slowly arriving? There are also other credit cards which will allow you to transfer amounts at a 0% interest to earn your business. As with most credit cards, they're banking on you be late on one payment before increasing to some outrageous interest rate.

The interstate rate is only relevant if you pay the minimum monthly amount due... Otherwise, you can double, triple, etc. until it is paid in full.

As fir your property, usually, you can refinance after a year or two seasoning. It depends on each lender's criteria. If you do have an excellent history with your bank, I definitely would try there first. But keep in mind, regardless when you refinance, you will lose money in the process which most will be tacked onto the loan. So it has to make sense and be for the right reasons (i.e. lower interest rate, avoid balloon payment, etc).

A letter of explanation may suffice regarding your loss but again it depends on who the lender is and the underwriter working your loan.

Bottom line like any lender, they want to make sure you are good for the loan and in the event you default (which we know is a liability they do not want to incur as it's all about performing notes), the collateral is worth backing the loan. 

Not sure how this will kill your credit score unless you have placed yourself in a pinch and forsee missing future payments. 

If that's not the issue, then you should be good. Just like anything else do your due diligence on multiple lenders and retrieve what they have to offer before running your credit.

I'm not sure if I even scratched the surface but I hope this helps a little.

Just my two pesos. 

Big Henry