All Forum Posts by: Mitch Coluzzi

Realistically, Curtis with the limited information we cannot give you an accurate idea.  But before you do anything, you need to get someone in there who can give you a boots-on-the ground opinion.  Feel free to toss some pictures, an address, or a quick sketch onto the forum; certain the BP community will help you guessimate within reason off of that.

At the under 10k range, negotiating typically goes upwards (think multiple offers) as land values do hold some weight. The ones that sit on market; you should NOT be buying without a solid rehab background and sufficient knowledge of the area. Gut says if this is on the MLS at 9.7k and has more than 10 days on market; it is MOST LIKELY not a good deal or something you want to attempt as your first investment.

@William Baumann you may want to shop around for a new HVAC contractor if you are paying anywhere near those rates.  My guys in NW Indiana will gladly commute to South Bend for those rates.

@Todd Whiddon great opportunity and offer.

The incubator would be huge...  Would love to help, learn, share however possible.

Let me know if I can help from the Midwest in any way!

Everyone is right.  Primary goal is for YOU to make money as the buyer.  However, I understand what Andrew is saying... Given that he is dealing with a small bank on this note, working the "this is where I am coming from approach" makes sense.  All the right pieces, potentially in the wrong order (forums are so snap-shotty)

The first and most important step with any transaction (be it flip, wholesale, or note purchase) is to find the maximum number that works for you.  Period.  Not a dollar more than X.  The seller has one, so should you.  Before any negotiating starts, you NEED to know what this number is.  The conversation and time investment is done when you realize that your number and their number are so far apart (EI: you want to pay 100k, they owe $1m).  At that point, cut your time invested and look for the next opportunity.

If they are willing to deal, but need some convincing... then you can work on identifying why, what, who, and how.  Knowing the motivation of the seller is important but motivation does you no good if the numbers cannot work in any world.

Basically: figure out YOUR number.  Get to the bank and ask about the note...  do it in person if possible, can get a lot more information out of small banks in person.  Are they even willing to sell the note?  If so... where are they starting?

Last tidbit of advice:  In my experience, small banks love to use the county's assessed value as their price ceiling for a property.  Grain of salt advice. :)

To the county taxes: it is unlikely you will be able to negotiate them.  Taxes take precedent over mortgage.  That said, typically the bank will pay up the taxes so they can further pursue foreclosure (they have a better chance to negotiate a reduction, but even that is unlikely).

Why did the 2014 offer fall through? Did they uncovered something in their due diligence that you should identify?  Did they just realized they were vastly overpaying?  Did it appraise abnormally low?

As to the numbers; just make sure you are factoring accurately.  Is this a conversion 6-plex or a true-build.  Do you have other multifamily units in this area?  If not.. you'll want to find someone who does to compare costs and understand tenant demand / expectations.  If you cannot fill the building with tenants "what-if" cash-flow is unusable.

Keep in mind... the seller could not make his payments for one reason or another.  Is it just gross mismanagement?  This is the easy answer, often people jump to this out of ignorance to the real factors...  Perhaps there something fundamentally wrong with the property?

Not trying to discourage you, just trying to make sure you consider beyond face value.

@Ryan Haase get em while you can! Even hold properties in the midwest are well above the 75% mark through the MLS. I am seeing 6-8% advertised caps on multi-family [before you make the adjustments for actual operating expenses, it is gross how negligent some pro-formas are]... The scarier part is: they are selling. 

My guess is with 18 months they are behind on taxes, and within 24 you start seeing them in foreclosure.  The beauty of overpaying... Most of these are not corporate buyers, typically individuals / "new investors".

Licensed as well. Have only bought 2 off the MLS in the last 18 months; but they fly off the shelf when you list the finished good there!

If you are in flip or hold section, try seeking out wholesalers.  If you are wholesaling... step up your game!  A lot of my purchases are coming from wholesale, personal direct marketing, and sheriff sale.

There are still deals to be had, but what worked 3 years ago is no longer relevant. REOS are hot commodities on the MLS, low-balling is a thing of the past. Evolve or wait patiently for the next downturn [could be awhile]... Cheers!

Ignorance can be a cheaper route in some instances... but you never want to put tenants' health at risk.  There are some out-of-the-box kits you can grab for under $50. If nothing else, it will provide YOU with piece of mind in telling future tenants nothing.

If you have ANY reason to believe there are or could be residual chemicals on the property (in the walls, studs, etc) then you need to have the appropriate tests done and abatement performed.  Professionally.

Just as a heads up, abating a meth manufacturing location can get very, very expensive.

@Dell Schlabach yep.  Broker pays agent a portion.  You can form an agent team, but they are still underneath a broker... or can be broker themselves.  Either way, the principal broker for the firm is the first compensated party.  The problem with flat-fee (for many) is they undercut the buyer's agent.   Per some significant data I have collected buyer's agent compensation does directly influence time on market...  Ethically, it should not... but the data says it does.

Instead of looking to get paid, I would negotiate a much lower listing commission or do a flat fee brokerage internally.  For example: your broker lists at 3.5% total, 2.5% to buyer's office, 1% to listing office.  How to accomplish?  That's where your paid saleperson comes into play... they don't get a split they worked for nada on that property, broker is still compensated 1% for his license / insurance.

Unless you are trying to pull money away from the rehab entity for tax purposes I would stick minimizing the cost rather than getting a return check (which is what we do: we are structured across 3 companies: rental, construction/flip, and brokerage). 

Having a broker license gives you a bit more freedom on how you structure your listings / sales.  That said... you can't just take pass a test and pull a broker's license, most states have a salesperson time-of-service requirement (2+ years).

First and foremost, the classes/training is relatively inexpensive so it is a good idea. The expensive part is generally the MLS access. Regardless with any sort of volume it is very cost effective.

From a compensation standpoint, a big split is not immediately possible.  A new agent (will be a salesperson), has to be under a broker.  The broker is who legally will be compensated for all transactions, and then gives the salesalesperson a split of the commission.  Recall on your hud, commissiocommission is made to the firm, not the agent.

 You could potentially structure a lower listing rate to realize the savings but the broker still has final approval in office rates.

Now... if that person works with you long term and forms a brokerage... golden :)

Personally, I do not.  I keep a breakdown of cap imps. (by type / unit for individualized depreciation purposes),  maintenance, and change-over costs between tenants.