All Forum Posts by: Javier Osuna

Great suggestion Aaron.

Although I'd probalby still have to use the ol' numbers,l on a napkin method lol! Math in my head was never my forté. That level of skill will likely come with more experience and tepetition. Yes, higher rent yields can make or break the deal. One must be ready to walk away if need be. If it doesn't make sense, don't force the numbers forcthe sake of making it work. It won't and there will always be other deals. Its all about the RTV ratio your market can sustain. Gotta get some rent comps as part of the analysis.

Yes Matt., I agree completely! Its all about knowing your particular market. San Diego is really a high-priced market and so, the rule will have to be tweaked considerably. Rents are expensive by comparison as opposed to other areas of the county and even then, RTV here still hovers around the .5% give or take two decimal points, depending on the area of town. I will be checking out your link in more detail.

Thanks so much for contributing. :)

Hello Jessica,

I could really use an experienced, investor-friendly escrow company in SD, would you mind sharing who your point of contact is? Thx. :)

Thank you everyone!

I do agree that its really up to whe wholesaler to decide what earnest deposit to ask for. Somewhere in the middle would be reasonable in my opinion. I might probably do something like $3,000 or 1% of the purchase price, whichever is greater. 

As far as earnest money from the seller, most gurus tell you to put $10 down, but I honestly feel some buyers might not take me seriously if I were to pull out a $10 bill at the end of negotiating a contract, so I was thinking of going with $100. Im the end, I'd be getting a $5,000 assignment fee if the deal closes and $2,900 if the deal falls through. The reasons as to why a buyer would back out of the deal could be anyone's guess; my goal merely to insure I'm profitable whichever way the deal goes. Its only a matter of instructing the title company to release the earnest funds in escrow to the assignor in case of buyer default. Then simply turn around and line up a back up buyer before the contract expires.

Thank you all for weighing in. :)

Thank you Shawn!

I figured my heart was in the right place, but as a more novice investor, you always want validation from a more experienced player in the game.

Hey fellow investors!

When negotiating a contract assignment with your end-buyer, what is the criteria used for determining how much of an earnest deposit to ask for, in order to insure the end-buyer has some skin in the game and is not so prone ti back out of the transaction during escrow? Is there a percentage amount based on the purchase price of the property that would be considered 'the norm'?

Thank you in advance...

Thank you Darren.

Yes, defimitely inderstand that the rule is not by any means the only determinimg factor in whether a deal will make sense from am end-buyer's standpoint. I appreciate the input.

Hello BP gang!

I've heard quite a few investors talk about using the 2% rule as a general rule of thumb when evaluating for buy and hold deals for cashflow. However from analizing the rent to value ratio of residential properties in my particular market (San Diego), I am finding that the 2% rule would place the asking rent way above what comparable properties are rendlting for in my area. If someone were to apply this rule here in this market, the home would stay vacant for months on end and the holding costs would kill the investment. In doing the numbers on a few San Diego properties, I find that the ratio falls more in the neighborhood of 0.5% RTV. So as a wholesaler marketing properties to buy and hold investors, would such a yield be considered the norm when analizing a deal? Could an experienced buyer please comment? Thx.

Based on prior experience, how would anyone rate the response rate using Yellowletters.com when marketing to probate leads? Can anyone comment?  I'm currently evaluating alternatives for a direct mailing service. Thanks. :)

Hey Will,

I would do my calculation based on a 65% ARV minus repair costs, taxes and liens in order to account for your assignment fee. As far as the ARV, I would look at the nearest three most recent CLOSING transaction prices (NOT listing prices) of like properties within a half mile radius and work your way out from there. That way you can serve it up to your seller in a more attractive way by telling the seller that your end-buyer will pay all closing costs as, well as your fee. That should also help you be more competitive when marketing your property to your cash buyers. They will likely prefer a property that they can acquire for .70 cents on the dollar, since they will still need to have sufficient margin (aka: meat on the bone) to still allow for a profit after title insurance, financing fees, property insurance, fix up costs and holding costs have been factored in. Most end-buyers won't bother with a property that does not yield at least a 15% return on investment; (most shoot for 20% or better). Also, I would make sure I over-estimate any repair costs by at least 10 to 15%. Leave some wiggle room for yourself. If after going thru the numbers with your seller, they still feel your initial offer is too lowball, I would look their motivation, perhaps come up with a counter offer that's a couple of grand higher and take a lower fee for the sake of closing the deal. If that still doesn't work, it might be a good time to offer terms or walk away if all else fails. You wanna a be able to offer a solution, but any sensible person in an urge to sell will understand that you need to make a living as well. Be empathetic but be ready to walk away from a deal that doesn't make enough sense. There always will be others... Best of lucks!