All Forum Posts by: Scott E.

This is a great question. And no disrespect to anybody who replied above, but I disagree with everybody who has responded on this thread.

Sellers very often care about who they are selling their house to, and what the buyer plans to do with it.

I've done at least a half a dozen deals where I've used hand written letters to tell my story, and I've been told that these letters have single handedly tipped the scales in my favor (There are some rules around writing the seller a letter. Consult with your agent on this). A prime and current example of where this worked for me:

I'm flipping a house in Phoenix right now. I got the deal for $1,550,000. This home was formally owned by a couple who lived in the house for 40 years before both passed away. The estate (adult kids) were handling the sale. I learned after negotiations that there were offers on the table for literally $100,000 over my offer (yes, ONE HUNDRED THOUSAND). But those developers would likely be tearing the house down. My plan was to remodel the existing home. This meant a lot to the kids, who had decades of memories in the house. So they sold me the home at a huge discount, knowing I didn't plan to demolish. Of course my offer had other favorable aspects to it (cash, relatively quick close). But my plans with the property played a huge part in their decision.

I have several other similar stories. These letters have worked particularly well for me when buying a primary residence. Some sellers love to hear that the home is going to "a first time buyer" or "a newly married couple" or "a young family"

My only public service announcement: Just be honest. I'm a big believer in karma. Don't write the offer as "John Laney" acting like you're not a flipper when you're really a flipper. That would just be deceptive and not cool.

You wont have a problem getting a loan on a NNN retail condo as long as the tenant, lease terms, and HOA are strong.

The down payment requirement is going to be largely correlated to the income. A $1M deal that generates $70k per year in NOI will require less money down than a $1M deal that generates $40k per year NOI.

Just make sure you're offering whatever the industry standard is in your market. Around here, most brokers still expect 6% commission with 3% going to the seller agent and 3% going to the buyer agent.

If I listed a home with 2.5% going to the buyers agent (co-broke), that would generally be considered a discount.

I don't want to send that message to buyers agents in my market. So I always offer 3%.

There is WAY more inventory in my market... something like 4x the available homes compared to just 1 year ago.

But what I'm seeing is that there is very little quality inventory. A lot of people are throwing their homes up for sale to see if they can get those sky-high 2021 prices. But nobody is paying those prices anymore, because most of these homes are gross and dusty.

If a very nicely finished house flip or spec build hits the market in a prime location, those deals are still selling.

So now more than ever these 2 things are very important for house flippers:

1. Location, location, location

2. Hire a designer

I have worked with several private and hard money lenders who offer loans like this, and the draw process varies quite a bit from one lender to the next.

In general, you'll need to front the first payment to your contractor, then get reimbursed by your lender via a draw request.

But you need to talk with your lender about these details. They are the only ones who can tell you exactly how this loan you were approved for will function.

There are benefits to either option. This is going to come down to personal preference. But here are a few things to consider:

-If you renovate and rent, you can hopefully screen out the 'users' via a background check, credit check, employment check, and just using a good judge of character. Won't guarantee you will have great tenants but you can increase the likelihood you will have great tenants.

-Think about where you see this market headed in the next 5-10 years. Is the population growing or declining? Are there a lot of job opportunities nearby? Is there a lot of residential and commercial development happening? The answers to these questions will help you decide if you want to own this property as a rental in 5-10 years.

-If you really can sell for $250k and you only have $190k into it, you'll walk away with a profit of around $45k after closing costs. How long would it take for this property to make you $45k if you held onto it?

If you plan to hold onto the property forever, consider going for a 30 year fixed loan and then buying down the interest rate with "discount points."

In this market, you might even get the seller to pay for some or all of those discount points.

I don't think your accountant is steering you wrong. And your math is all very well thought out. But I'm just a huge fan of fixed rate loans when you have a choice. I was a mortgage loan officer in 2007 and I was processing modifications, short sales, and foreclosures in 2011. I saw way too many people negatively impacted by adjustable rate loans.

Prices are down from peak 10-25% in my market, depending on the product and sub-market.

And listings are still sitting on the market, not selling.

 I tried my best 😂 

A year ago the home appraised for 192k. Today it appraises for 172k. That's about a 10% drop in value, which is perfectly normal and to be expected. Prices are down at least 10% from a year ago in most markets.

What it means for you as the buyer, is that you should be looking for a 10% discount on your contract price (at least). You say your contract price is 160k. Well try to get the deal for ~145k.

(This all assumes that your underwriting is sound and you're accounting for the right amount of rehab, holding costs, selling costs, etc)