All Forum Posts by: Paul Z.

@Ryan Boyce Glad to see you join in the convo and for reading so far! I'm definitely new to this as well so I believe I can relate to you when you explain the importance of seeing "real" examples and "quality" snapshots of deals.

When you're new, I've felt that one of the greatest assets I can have is by demonstrating competence in what I know so far, but also to be humble in admitting I don't know everything, I'm getting stronger because of my mistakes, and I'm open to any and all insight to help make the most effective and efficient decisions possible. We're all in this for different reasons, but I do believe we can say that finding happiness is a common denominator! :)

Paul

@Gerald Harris I greatly appreciate your positive insight!

@Mike B. Perfect! I may have to see if I can work some type of rule into my pre-analysis with the data I currently have. $30/$40/$60 may be a good start.

@J Scott everything you just said is exactly what I'm going to keep reminding myself. In fact I might start losing sleep over it hearing it from you now considering how much I respect your business philosophies!

We've done a fairly thorough pre-inspection and have taken some detailed notes (btw this house had a new roof and siding installed in 2011). We want to always play it "conservative" whenever we can and work towards numbers more like $30k rehab and about $215K sale price on a project like this.

Even if this house doesn't work out, I plan on using it in a "Sample Project Prospectus" to present to interested Funding Investors. This way we can show them what kind of deals we're looking for and how they would be completed. Security, Competency, and Credibility is the name of the game!

Paul

@Sean Price thanks for the comments!

Regarding your concern with the age of the house we're going to make every effort possible on this and every project to eliminate "most" of the major concerns. As I mentioned above we have two very important tools that help us to limit the roadblocks: A Project Manager that specializes in property restorations caused by catastrophe/insurance claim allowing him to have great insight on how to get into the "innards" of the property. And two being a fairly extensive "pre-purchase" home inspection that we've tried to mirror very close to what an official inspector would use.

If the home needs to be rented after rehab for whatever reason (good or bad) we would either look into refinancing to pull most of the money out and pay back the funding investor or I would go back to the investor and see if they'd be interested in some type of mortgage agreement. Cashflow for everyone is my motto! :)

I'd also like to mention that it's my responsibility within the organization to decide whether it's a "flip" or a "rent" market. So the extent of rehab is always a factor in protecting us (and investors) from not being able to refinance or cashflow the property.

@Mike B. that's what I thought your response might be. Experience is a great tool for gathering quality data that can be analyzed and averaged. I'm getting close to that but not there yet! Thanks again for your insight its appreciated.

EDIT: Do you use your $30, $40, $60 rule for only inner city Chicago? or are you using it as a blanket rule for a wider area?

@Mike B. I'm interested in hearing about your "in-the blind" methodology and how you came to $30/sq ft and $32,760. I have some thoughts on what you used to do come to those numbers but I'd love to hear what your system is. Thanks!

Thanks for the comments @Kenneth Hynes and @Mike B.

This auction is actually web based and allows access to the property at any time through contact of the REO agent.

We are also allowed to perform any type of inspection we'd like (at my cost should I choose) during that time (with the exception of turning on the plumbing utility). I'm very lucky in who we have on our team being that we have a project manager who specializes in property restorations caused by catastrophe/insurance claim. He's very good at pre-inspections and defining pre-purchase rehab budget estimates. We also have an extensive "pre-purchase" home inspection checklist/system that we go through on any property we're analyzing. In some cases we still order an official inspector to give their opinion as well.

Paul

This is an auction and its subject to the reserve price. I'll contact you direct over FB regarding address etc. :)

@David Thomas I have a comp analysis methodology that I like to use based on J Scott's concept. I also try to stay as close to the comp analysis criteria(s) as possible. I then adjust the comp properties to what they would have sold like had they been in exact comparison with the subject property which then returns a range. Sometimes the range is a bit wider than I'd like and sometimes the range is nice and tight. I then assess on either the average or the lowest price based on that range. In this case it was a bit wider than I'd like (due to the fact of my available comps meeting the minimum criteria) so the average was used. After analysis by our RE agent his ARV (Sales Price) was right in line with ours.

If you'd like me to send you the complete worksheet with instructions that we use for comp analysis please let me know. We're always open to hearing insight and ways we can become better.

Paul

****NEED FUNDING****

Market: Cook County, IL- Northwest Suburbs

Spec: 4/2 Split Level w/ finished basement, attached garage, 1092 sq ft., 51 yrs. old.

Sale Type: Bank owned web auction. Opening bid $60K; reserve unknown

Level of Renovation: Complete interior cosmetic + Cabinets/Vanities, Countertops, Doors, Appliances, Washer/Dryer, and Water Heater.

Demographic Analysis:
50% of listed non-distressed homes within subdivision have sold within 6 months.
4.25 months of total inventory
10.2% unemployment as of July 2013
"Major" corporations and employers within 5 mile radius
$59,623 median income

Disposition:
Property is situated in a well developed urban community with great schools and almost zero crime. Homes surrounding the property are all very well kept with mostly updated exteriors, clean lots, clear roads, and well developed landscaping. There's definitely pride of ownership amongst all the neighbors. Plenty of major retail shops, restaurants, and entertainment all within close distance.

Comp Analysis:
Personal Valuation w/ detailed systematic approach (Please inquire for methodology)- $176K-$232K w/ avg. being $201K

Agent Valuation- $200K-215K "conservatively." High-end $225K

Exit Strategies:
Flip
Refinance into rental. Rental rate conservatively for area is $1500-1700/mo.
Refinance and offer a lease/option to buyer with negotiated terms.

Financial Analysis:
*I prefer J Scott 's flipping formula:

Worst Case-
Sales Price (ARV): $200K
Fixed Costs: $28,425 (Purchase, Holding, Selling, Private Investor Interest Payments)
Rehab: $40K (high-end)
Profit: $25K

$200K-$28,425-$40,000-$25000= $106,575 MPP
Price Ratio- 53%
70% Rule?-Actual 73%

Best Case-
Sales Price (ARV): $200K
Fixed Costs: $27925 (Purchase, Holding, Selling, Private Investor Interest Payments)
Rehab: $30K (low-end)
Profit: $30K

$200K-$27,925-$30,000-$30,000= $112,075 MPP
Price Ratio- 56%
70% Rule?- Actual 71%

Timeframe for Rehab: 3 weeks (On market by 4th week)

Investment Proposal:
50/50 split or simple rate of return for investment of Purchase/Rehab cost and completely negotiable. This is an auction so the "safety-net" is the reserve price. If the reserve doesn't meet our MPP we don't buy, and then it's on to the next one. Simple.

Bidding starts in 1 day and ends on 1/25.

For a COMPLETE prospectus, sample sales package on this property, and long-term business plan/vision please contact me. Our team has already visited the property to inspect and estimate appropriate rehab costs. We have a system, process, contract, and team member in place for everything. Security and competence is our priority for anyone who partners with us, and we will prove it to you!

MISSION: Overcome Realty Group is a compassion driven real estate procurement company that bases its success solely on the amount of service, support, and benefit that we can provide for others. Through real estate investment strategies focused on the private homeowner or renter, we intend to be a provider of real solutions, creators of value, contributor to positive causes, and suppliers of revenue to not only ourselves as a company, but also most importantly the communities, home sellers, home buyers, industry professionals, and investors we work with every day.

If you're HUNGRY like we are to continually make goals and dreams a reality by acting upon them, contact me! [email protected] or 847-912-9733.