All Forum Posts by: Dave Schmidt

@John Kilhafner first of all congrats on getting another deal done (hopefully it is making you a nice profit!). 

We always list our properties on the MLS, this is something I would highly recommend. If you don't want to pay a listing agent (I list mine myself, I totally get not wanting to pay a listing agent), then find a service that will let you list it for a flat fee of around $500. So many websites are consistently pulling data from the MLS and distributing it to Buyers and their agents that it is must to have your house on the MLS. With the MLS exposure you will have Buyers and their agents that may have never even saw it on Zillow or FB marketplace.

Like @Michael Plante mentioned above we typically wait a couple days. My preference is to list the property during the week and wait until the weekend is over until we even call for highest and best offer. Then we request everyone's highest and best offer by say Tuesday at 5 pm.

Let me ask you this - is there any downside to waiting 3 more days to accept that clients offer? Was there such a surplus of other recently renovated houses in the area that they would just go buy something else? I am not suggesting that you string out Buyers but it is your property, you are not required to accept an offer right away.

@Tyler Haanen Looking at deals over and over will get you to the point where you can confidently throw together a rehab budget on a napkin. Now don't get me wrong it may not be 100% spot on, but it should be big enough to cover for contingencies and unknowns. 

Once you see the cost of something on paper you can do some round math. One thing I will be say to be careful of in the beginning is what the labor costs. We sub most of our work out ourselves and we understand the labor costs because we use the same subs over and over again. But in the beginning you may not understand what labor costs, this is where consulting with another investor or contractor will really help.

@Lauren Cutchen one of my favorite tips to anybody looking to get into flipping houses is to visit the property after or during a rain! There is so much you can pick up on! Anything from leaky roofs/windows, flooded basements/crawls, and failing drain fields/septic's. I personally can tell you that I get excited to visit properties when it rains because it shows SO much.

@Niklas Hilmoe To me it all depends on the deal. If it is a homerun deal and the numbers check out and you can adjust for the busy street conservatively in your ARV, then why not? Of course the market plays a huge factor in this, but if you can flip the property and make it an attractive buy for your buyer pool then why not do the deal? I agree with everyone above referencing the buyer pool and what the buyer wants, well in some price ranges in the markets that surround me, a buyer may have to settle for a busier road or they may not get the opportunity to purchase their first/second house. If you market the property and make the price attractive enough it will sell.

@Daniel Overby My suggestion is to never buy a house without someone from your team taking a look at it (unless of course it is a ridiculously low price, but then again why would a wholesaler be giving up such a great deal? Get good at figuring out rehab pricing on the fly, get access to your local MLS so that you can learn how to most accurately comp the properties and also figure out which local wholesalers understand what a good deal looks like.

Unfortunately in my opinion there is a lot of noise in the wholesaling game, people are always bringing "deals" to investors but they are not always necessarily a "good/great deal" and most of the time I see properties in my area from wholesalers their numbers are completely off.

@Nick Gee Remember people buy houses everyday. I have sold single wide trailers on lots, it all comes down to the deal itself. 

You need to spend some time doing due diligence on the following: what will the repairs be (allowing for a 10-20% buffer in the case of unforeseen circumstances)?, What is the conservative ARV (I would confirm this with an experienced realtor familiar with the neighborhood)?, and How will you fund the deal and what will your holding costs be total (interest on money, total time for project completion, insurance, utilities, taxes, etc.)?

Once you are sure of the details in a deal then you won't worry about whether it will sell.

@Robin Morales the issue I see here is that there is already a first mortgage on the property. Whoever the lender would be for the second unit would be in a very risky position. Regardless of whose name is on the loan it is still secured by the same piece of collateral (the plot of land and improvements that you own). The other financing option I could think of is to get some type of private financing or use a line of credit to build the ADU and then do a total refinance of the property. You may run into issues with title seasoning on the refinance though based on how long you have owned the property and who the refi lender is.

I am curious to see what the other folks responses will be to this, because as a lender it just seems like a risky proposition.

@Joey Chrisman Congrats on getting your first deal under contract!

I agree with everything mentioned above, but would just like to emphasize getting a second opinion on value (from someone who will estimate the ARV accurately) and just to make sure that the repairs are within your budget. I have looked at a project and then had my contractor look and they will certainly catch something that you may miss - so a second set of eyes can be extremely valuable.

Also, I am not an attorney but if something like a tornado or fire occurred you may be able to back out of the deal (also known as "Force Majuere" or "an act of god"), we have this built into all of our contracts that way if something drastic were to happen while we have it under contract we may be able to move on to another deal. I would look into having an attorney help you put together your own contract that states what you are looking to do, with the sellers and deals we work with our state standard realtor contract just isn't a right fit.

@Nathan Walden I have done deals out of state and it really comes down to finding someone that you can really trust. For me it was an old family friend in the market that was familiar with construction and happened to be a real estate agent. Find a local agent that TRULY understands investing (not just one that puts investor in their bio, but one who can give you real life examples or references of other investors he/she has worked with). Compensate them with the listing, try to help their business in any way possible (assist in marketing, or other places where they may not be the best) and if need be pay them extra to manage the job. Giving someone a $1000 or even $5000 when you are making $50k net profit on a deal isn't such a bad idea. I currently have a local project manager and I give them 5% of my net profits after the job is completed and it is the BEST money I have ever spent.

@Doug Hogan Work can certainly slow down in the winter time but it should not come to a complete halt. There are outside tasks that can be completed during the winter months, the contractor just has to play the weather. There may be a day here or there where they are able to do a roofing, siding or window job.

In terms of the inside, just make sure that the pipes don't freeze and that you have a continuous heat source if you are doing things like painting and flooring. Typically I will replace or repair the HVAC before we start ANY job in the winter, that way we have confidence that the property's heat will be reliable and we won't have to worry about pipes freezing. Another thing we do is have materials delivered early (something like flooring or trim) and have them sit in the house to get to the same temperature as the inside. This helps the installers work with the material a little bit easier and it also helps make sure the material is installed at the same temperature of the house, creating less of an issue with expansion/contraction later on.