All Forum Posts by: Steve Wilcox

I have gotten some of my best deals this way- sometimes another investor or homeowner under prices rehab, or runs out of money, and they need to get out.

Call the building department and make sure all the proper permits have been pulled and what stage of inspection they are in. If they have not passed rough building, rough plumbing, and rough electric then those items are NOT done. 

Make sure you inspect the structure and the quality of the work that has been done to date. These can be great deals but sometimes people who have no money cut corners which can lead to big expenses later in the project. 

Honesty, they are managing your asset, liabilities associated with it, and your MONEY.

Knowledgeable especially on local issues, local inspection protocol, and landlord tenant laws and restrictions. 

Good Communication, answers the phone or email promptly and professionally. 

All the proper licensing, insurance, ect required for your state.

 Try asking the same question a the same time over the course of separate conversations and write down the responses. 

Call more banks, I am sure there are 30-40 small banks and credit unions in your area, call every single one of them and ask to speak to a lending officer.

That said- do you have any experience in new construction? How many rehabs have you successfully completed that were major renovations (do you have HUD1's to prove it?)?

If you dont have experience then finding a partner who has done it would go a long way. 

IN our area there are a few local banks that do this and they go from 50% of ARV, to 70% of cost of rehab and construction. These loans are FULL DOC, meaning you need to qualify for it as well.

Also if you have a specific project in mind prepare something including comps, plans or at least a rendering of the finished product, and an LOI or contract on the property and youll have an easier time.

As a first time builder there are TONS of new legal, zoning, and construction issues that you do not deal with on a normal rehab. 

So from what I have heard we have response rate of 1-8% on direct mail. From that 1-8% what percentage of those actually turn into leads worth perusing, then from there into actual deals?

When we talk about that 1-8% response are we talking about per letter or is that combined for 4-5 touches? 

I.E.- If I have a list of 250 houses that meet my criteria of 50-100% equity in a very narrowly defined area on a map, and I send 4 letters to each person, lets assume a 5% response rate. 

Should I prepare for 50 calls or 12? Then of those calls how many will be worth perusing? Of those how many should I expect to be deals?

The real questions center around the ARV.

While 12K seems really cheap to some of us we don't know your local market, @Drew Denham , if there are any realistic good comps for this property you can get a good sense.  of if the deal is worth it. Earlier this year I looked at a historic carriage house that was a MONSTER rehab (+/-500k), where it would have cost more to rehab it then to tear down and build a 4000sq-ft house but it was deemed historic. We had comps to support a valuation of 1.25M so it made sense to take on all the potential problems because there was a huge spread. Ultimately the owner decided he did not want to sell right now and took the property off the market, but ultimately its all about the numbers. 

Often comping these old houses, especially if its a Waldo as @Ben Leybovich discussed in his most recent podcast then the value could be extremely volatile depending on who appraises it. 

These houses can sell for a premium but as a GC I would recommend you watch the movie the money pit before really jumping into one of these projects. They are not for the inexperienced, under-capitalized, and don't work in cheaper markets. 

The MOST that I am seeing is 75% LTV and most banks are not comfortable with big cash outs.

Also I think that @Douglas Dowell  meant specifically reinvest into the subject property, not into another deal

I dont think there are any banks that would give you 100% LTV, think about it from their end- what security do they have that you will preform if you have no equity in the deal, if things get tough why would you take money out of your pocket if you have no equity, why not just default and walk away.

Also if they do have to take back the property they want assurance that they will at least be able to get their money back, which would mean they would need to be under the true value because there will be broker commissions, transfer fees, ect associated with the sale of the property. 

If you really want to save money its fairly simple to set one up yourself directly. Google setting up an llc in your state. 

However keep in mind that sometimes being cheap can end up being expensive. If you have an attorney you have worked with and have a good raport with you can be direct and tell them you need to save the money and ask what would be different if they set it up vs if you did it yourself. 

It needs to be ever updated, if you are giving it to someone for a purpose take a few minutes and update everything in it. I keep a baseline statement, then can add my flips whenever you are actually giving someone the statement.  

Your own home and mortgage (or rent) should be stable, you can check your bank account online, and your rehabs should have equity in them which also goes under assets. If you jsut bought it use the purchase value (unless you have an appraisal done then use the current appraisal), if you have fully rehabed and it has not sold yet you can estimate a conservative value (not asking price but your eventual sales price) and subtract out whenever liens are on the property and use that equity as an asset. 

Your liabilities should also be relatively stable other then the ones related to your flips, total up mortgage (or rent) car payments, credit card or other debt, student loans, ect, then add in your info for whatever deal your doing. 

@Ali Boone can you share the link on the forum I would love to see the article as well