All Forum Posts by: Mitch Messer

Hey @Austin Faux! Looks like a good deal, but note two things:

• Assuming you plan to credit the full option payment toward the purchase, you're double-counting the $10K in your profit. After 36 months, once tenant/buyer (T/B) is ready to close, their purchase price will be $82,995, not $92,995. In fact, if you spend the $10K long before closing, you'll actually have to come out of pocket $5K to close, so be careful.
• If you do get two T/Bs in succession, you should plan for at least a light rehab (paint, carpet) between them. After three years, the home will likely need it.

I agree with you, though: As an out-of-state operator, I would definitely wholesale this to a local investor. Your ability to create owner financing generates massive value out of thin air. Everyone can't do that, so investors will pay those wholesalers who can! Good luck!

Hi @Drew T.! Your expenses seem mostly reasonable, but I would suggest that vacancy is more a function of the landlord than the location. Just because an experienced landlord is seeing 5% doesn't mean every landlord can expect the same. I'd recommend you assume 10% vacancy.

Also, you seem to be missing management expense. Someone will have to deal with the tenant and their issues, either you or a property manager. Here in Atlanta management fees run 8% - 10% of the rent.

Hi @Douglas Booth! We've had success for many years using Rentals.com to market our homes. Our most recent listing was for a 3/2 lease-option for $995/mo and $3K non-refundable option consideration. Ad ran for 30-odd days (Aug 8 - Sep 7) and generated 104 leads (55 email; 49 phone) with 10K search impressions and 516 unique visits. Best of all, the qualified tenant/buyer we found came through Rentals.com.

For the record, this was using their "Standard" ad, which at $60/mo is the cheapest option available. Standard gets you 10 photos in the ad, plus placement on their Rentals.com, Rent.com, and RentalHouses.com sites.

And, no, Rentals.com isn't paying me to say this (although, perhaps they should...)!

Hi @Laurie Johnson! We do work with bird dogs. Usually they find us and BP has been a great place for many to do so.

Look for small- to medium-sized operators (Google "we buy houses <your-local-area>"), call them up, and see if they are open to receiving leads and then paying if they buy the properties.

The biggest challenge of being a bird dog is quickly learning how to recognize a bona fide deal and not waste your time (or the operator's) with non-deals. You've often got to kiss a whole bunch of frogs before finding a prince. It's your job to find the deals that we can't find on our own.

While it is hard work, it's probably the best practical training in deal recognition and acquisition, which I consider to be the #1 and #2 skills of a successful real estate operator.

Hi @Account Closed! Just so we're on the same page: If ARV is really $230K and the cost to repair is truly $40K, then the absolute most anyone should pay in cash for this home is $190K, right? So their $210K asking price is probably not what they are (or should be) really expecting. As the expert, it probably falls to you to break the news to them.

If what they really need is an income stream, you should definitely make them an offer involving seller financing. For example, you might offer $200K as follows: $25K down and $1500/mo until the balance ($175K) is paid in full (in just under 10 years).

Do I need to say this constitutes zero interest financing?

You could then either do this deal yourself, if you have the down payment and repair money, or wholesale this sweet deal to another investor who does. If you were to sell it for the same monthly terms but asking $35K down, you could walk from closing with $10K in your pocket with zero repairs and zero hold time!

Hi @Michael Conway! If your neighborhood is one in which folks want to eventually own, you might test whether offering your home as a lease-option is viable.

Here's how it might work:

• Find a family that wants to own but is unable to do so right now. You want folks with solid household income, but with credit defects that can be addressed within three years (BK, short-sale, deed-in lieu, etc.).
• Give them a lease, ideally at a higher than market rate (maybe $2400, $2500, or even $2600), for one year.
• Decide on a purchase price.
• Sell them an option, which gives them the right, but not the obligation, to purchase the house at the purchase price anytime during the year.
• Make the cost of the option (the non-refundable option consideration or NROC) about 1.5% - 2% of purchase price. The NROC gets applied as earnest money once they are ready for a mortgage.

If, after the first year, they are making steady progress toward qualifying for a mortgage, you can do another lease and another option for year 2. First, though, you'd adjust/raise the rent and adjust/increase the purchase price.

Our experience is that families who are serious about owning can get there act together and purchase within 3 years. If so, you reap the windfall.

If you don't see any progress being made toward a mortgage, just don't renew their lease or option. Let them move on, leaving behind the NROC of course. Then find yourself another, hopefully more serious, family.

RECENT RETAIL SALES:

• $84,500 - Sold 8/2015 - 5444 Farmview Close, 3/2.5, Built 1987, 1465sf
• $120,000 - Sold 8/2015 - 1003 Sly Fox CT, 4/2.5, Built 1990, 1999sf
• $107,500 - Sold 3/2015 - 830 Fox Valley DR, 4/2.5, Built 1986, 1674sf

Two-story 3/2.5. Ceramic tile in Kitchen, Bathrooms. New-ish roof and HVAC. Needs paint, carpet, siding repair, exterior trim paint and Kitchen update. ARV is $90+K. Fix-and-flip or hold for long-term cashflow!

• Location: Stone Mountain, GA 30088
• Description: 3 Bed, 2.5 Bath Single-Family Home; 1767sf
• Year Built: 1984
• Repairs: Interior Paint and Carpet; Kitchen update; Minor exterior siding repair and touch-up exterior trim paint
• Price: $52700

Interested? Call or email me for the address, photos, and full property details.

NOTICE OF PRICE DROP:

As of September 2, 2015, the price for this property has been reduced from $51.5K down to $48.7K.

Interested? Call or email me for the address, photos, and full property details.

@Chukwudi Motanya No seller financing is available at this time.