All Forum Posts by: John Stevenson

In this current economy, flipping properties does not always work well. If you believe that the resale value is $171k, how many other properties in the area are listed in and around that price range? How long have they been on the market?

Now look at the sold properties in that price range. What was the difference between the listing price and the sales price? Plus, do not forget to factor in your listing and closing costs which could eat up another 8% of the value.

Since your profit margin is so small, you will really have to weight this deal very carefully.

It is a nice thing to see you involved to help out the family, but how much risk are you willing to take? Besides Option #1, all of the others involve financial risk on your part.

My recommendation is to contact a good certified general real estate appraiser and request a feasibility study. They will weigh all of the options for you combined with what is happening in the market and the effect of the flood plan rating and inform you with their recommendation. They even have cost guidelines which will give you a basic idea of the renovation costs without getting a contractor involved.

The cost would probably be between $500 - $800 which is a small price to pay for choosing a bad option if you decide on your own.

Another option would be to contact builders/renovators and see if they are interested in buying the property and then finishing it themselves. Could end the headache both ways.

Let me know how it turns out.

Yes the agreements are standard "boiler plate" in fact in some states they are made by adjusting a listing agreement. You should not be approached by a Realtor that has written out something on the back of a napkin, so to speak. NAR (National Association of Realtors) has documents for this.

Mike,

The long and short of the matter is that if an agent stops by with a buyer make sure you sign an agreement that he/she can present a offer for this buyer. Generally the fee is 3 - 4%. Do not pay more than that.

Realize that a realtor knocking on your door with a buyer is an exception but it is not impossible, had it happen on one of my FSBO properties. As it turned out the offer fell through. It just goes to show that if you have a good property you could get a good offer.

@Ed Lee makes a good point. The difference between the SFR and the duplex is just too great. Do not forget to take into account vacancy which can eat a profit margin.

But if after sound research you find that it really is going to net you $800/month, then I would recommend adding a few of these properties to your SFR portfolio. The additional cash flow will help you make more SFR investments.

I personally would recommend investing in discounted single family residences. Here is why I think it works in this economy.

1. Distressed properties (Foreclosures, short sales, REO etc) are readily available and are being sold for cheap.

2. Because of the restrictive lending requirements, loans are hard to get forcing many people into renting. If given the choice, people like renting homes more than apartments.

3. As the economy improves and lending requirements relax a little, these renters are going to want to buy.

4. As demand increases and the economy improves, so will real estate prices.

My research indicates that if done properly, the yields will be between 15 - 20%. I estimate the holding period to be no longer than 5 years.

To be a successful investor you need cash flow, but you also have to feel comfortable with your investment strategy. If your investment strategy is working for you and it is going to meet your long-term goals, why change?

Honestly, single family residential homes are dirt cheap. As the market appreciates and you turn around to sell them, it is going to be a lot easier to sell a single family home than an apartment complex. There will be a lot more people looking to buy homes to live in than apartment complexes to manage.

Stick to your guns. It is not always about the cash flow.

One consideration with regard to offers contingent on bank financing is that banks want a fast transaction, a guaranteed fast transaction.

Getting a pre-approval letter from your bank is a great way to fast track a real estate transaction. It tells the seller that you are ready to close on an accepted transaction.

If your stated down payment plus the amount on the approval letter is equal to or greater to the asking price, it should be a clear cut deal. Attaching a copy of the pre-approval letter to your offer tells the bank you are serious. I believe that is their main concern.

Just remember that "it is the squeaky wheel that gets the grease."

The person in the cubical that sets the prices probably never talked to the person in the other cubical in the basement that receives the offers.

If you really want the property, I would call them everyday until you get a response. Then you will know where you stand. And if they do not get back to you before the offer expires, send them a new offer for less. Eventually they have to accept something. If your offers are on the top, it just might be you.

Buyers can find out about auctions through experienced real estate agents, online research or contacting auction houses directly. HUD homes can be found on a special website in each state. Of course, auctions that are going to happen on the courthouse steps can often be found out by looking in the legal newspaper at the foreclosure listings each month.