All Forum Posts by: Sharon Vornholt

Patrick -

As I see it, there are a couple of issues here.

I would never give them $30K. I NEVER give the seller any money. In most cases, you will never see it again regardless of what happens with the house. Until the estate in settled, they can't have possession of that money anyway; it has to stay with the estate.

If they insist on some type of a small deposit, mine is always $100 or less, and I make that check payable to the closing attorney; never to them. Protect your cash.

And secondly, I think that is too much money for the house. Even if the 10K repair estimate is correct (which seems low for a big house that has been a rental and is having some renovations done), that means you are at about 85% of the ARV if that ARV is correct. My next question is about the ARV. This should be a middle of the road number, not a best case scenario.

What is going to happen if you get the actually get the property and are forced to sell it quickly? I don't know a single investor that would buy that house with those numbers. From where I sit, you are going to be looking for a retail buyer most likely. In my area, that house would be too costly to be a rental. It would never cash flow here.

Anything can happen in probate. I have never done anything but an outright purchase on probates, and that has to be with the executor or PR who is the only person that can act for the estate. The heirs have one goal; to get the cash that is sitting in the house. They are interested in anything creative. They just want the cash. They are often the ones that hold out for more money.

You need to consult a real estate attorney to see if a LO is even legal in these circumstances.

Sharon

Nichole -

I was in the home inspection business for 17 years, so I had a general idea of what things cost. But when I started investing in real estate, I had to do just what the others said. You have to hang out in home improvement stores or at their sites online and get actual prices on things.

I also got estimates for work. After a while I learned a standard sized window installed would cost $xxx. On my inspection sheet I use when I walk through the house one of the things on there is "how many windows". I always count the windows then I can estimate that cost for replacement windows.

I do the same thing for all the other items. After having a couple of furnaces installed, I had an idea of what one would cost. But even better, by going to my local REIA meetings every month, I met several HVAC people. Then I could check my estimates by saying, "Hey Terry. I am going to need a furnace and AC for a 1500 sf ranch style house with a basement. Can you give me a ball-park estimate". He would say sure. It's important to know details like "basement" as opposed to "crawl space" as it has an effect on the costs.

Go to local seminars, your REIA meetings etc and meet these types of people like electricians, plumbers etc. They will be happy to help you.

Once you learn how much it costs per sq foot to paint the interior of a house or install carpet, you just use that figure and multiply. Same thing with vanities, tubs etc. Pick standard things and use those figures. You will learn that you can put in bathrooms and kitchens for approximately $xxx, then you can plug in these figures. Learn what an appliance package costs; not the one you want, but the one that will be acceptable in your flip. Rental's will be different.

Once I am done with my "estimate", I usually add about 10% to that number for "unknowns".

It is a learning process, and it doesn't have to be perfect. I might figure keeping the furnace and replacing the windows on my wholesale deal. But the rehabber that buys the deal will say, "I'm keeping the windows, but I always replace the furnace." That's OK; it just works out in the end if you don't forget something big like a panel box that is too small for the house. It doesn't have to be perfect; just good enough.

I would say listsource is the one. As far as your second question, I really have no idea about that one Kyle.

I think so. There are definitely a lot of cash buyers out there that haven't been in the game very long that are looking to sell.

Who are you getting your lists from Kyle?

Hi Kyle -

I use a little different criteria. I live in KY and you can get to anywhere in the state from where I am in about 3 hours. I found that mailing to folks in KY was a complete waste of money. Louisville just wasn't far enough away from them for it to be problematic to own property here. If you live in a big state like Texas or CA, then that situation can be different. I only mail to out of STATE people for that reason. You have to figure out what that distance is for it to be too much of a pain in the a##. Another thing I found is that by leaving those folks in, my list was just way to big to manage.

I also don't put any "last sale date in". I personally have found that this doesn't mean much in my area, and it takes out properties that I might be able to buy. Other investors from states where property values are much higher often buy property here and they are cash buyers. It's not unusual that folks (including many investors) will pay cash for property and regret the decision relatively quickly for one reason or another possibly due to a lack of experience. By the same token, there are a lot of folks that have refinanced their original 30 year mortgage multiple times and now owe more than they originally borrowed, so that timeline won't work for them either.This is where equity comes in; I think you need the equity piece. Why mail to someone that owes too much?

A few years into a California investor's business of trying to be a landlord in KY, may be all it takes for this cash buyer to throw in the towel. I bought 4 properties from a single investor in CA in just this exact situation. I might add that he paid too much for his "cheap properties" and ended up owing a huge amount of money at the end of these closings. Just because you think a property is cheap, that doesn't mean it's always a good deal.

I would also exclude trusts and corporations as everyone said.

One last thing; I would separate SFH from mulit-families as far as the lists go. You may want to put them onto different mailing schedules for several reasons. Good luck.

Sharon

I believe that the quality of your property determines the quality of your tenant. Crappy property = crappy tenent regardless of screening.

Sharon

Kelly -

I have to wonder if this is really a good deal if it has been sitting there for 200 days. You might want to spring for an appraisal and a home inspection on this one.

Sharon

Hey Brandon-

I have been investing since 1998, and a full time wholesaler since 2008. I don't even remember how many I have wholesaled; but it's a bunch. The number of deals you do is always important; there's no doubt about that. But one other figure I worked on the past two years, was getting my wholesale fee up. I think that number is just as important. You can make more doing fewer deals, and it helps keep you from jumping on marginal deals.

I have had a few come my way that I would have normally passed on, but I had a low end buyer looking for those types of houses. So I would put the house under contract and pass it on to him a few days later for $3K-4K.

I have also made $20 on a few, but that is not the norm here where the average price of a SFH is about 140K or so. I looked back at my average wholesale fee a several years ago, and I saw that with the high and the low I was making consistently about $7500 on average, and I decided I wanted to get that up. I made it my goal to try to make 10K on each house. Do I always do that? No. But most of the time I manage to do that.

Having a money goal in mind rather than a "number of houses" goal, made me more focused on the types of properties I should be buying. I also made it a point to really nail down what my buyers wanted me to bring them.

That brings me to one final point; many of my buyers have changed their buying criteria the past few years. We need to be really listening to what they have to say, and be ready to adapt. As the market changes we all have to be ready to change.

Sharon

Alison Miller. No way. Isn't there a mom that would like a part-time job that she could work around her schedule?

I always do a double closing for that reason. My seller has no knowledge of who my buyer is or how much they paid. In that case you just have two contracts; one when you buy and one when you sell.

Is that what you are asking Thelma?