All Forum Posts by: Trent Vanderzee

It sounds like you have some decent equity already. (?)  Offer to buy out the partner and then refinance the place to do it and possibly pull cash out for the improvements.

Hi Scott, I'm a GC in Cedar Lake.  I have about 2 months backlogged however if not more (quotes to do) so I probably cannot help in your time frame.  Let me know if you want to wait.

@Arpan Patel The contracting and repair of a property is a cost that has to be part of the calculation before you determine if "the property does well".  It would be absurd for any contractor to come into a deal to manage the repairs and then split the "profits".  The profit gets split after repairs are paid for, including the cost of managing the project.  Unless there is an equity differential and the contractor invests labor instead of cash, but that is a different story.

@Dallas Kidd I too am a contractor and investor, but I would rather work for retail than for budget investors who want to cut corners, skip permits etc.  Maybe that's why some investors don't like working with contractors.  They don't want the costs of compliance or of 25 years repairing homes as they don't realize the value that brings.  Why pay for licensed, insured painters and flooring contractors when $10 or $12 an hour guys can do the "same thing".  As @John Mathewson said, he is worried about the contractor "profiting on construction".  Isn't that what a contractor is in business for?  But trust is the key factor, he said, so I will give him the benefit of the doubt.  I suspect he means profiting beyond a normal margin or taking advantage of the situation.  Communication is the key to it working.  Discuss the contractor's costs and margin up front or have him bid the job so there are no surprises.

@Scott Steffek I am flipping in this market also, so put me on your buyers list, please.

@Mike Ventura The 45,000 is equity in the property which gives the bank security in the loan by holding a mortgage on the property.  You could call it a down payment if you want, but not on a "180,000 mortgage".  You would have a 135,000 loan (note) to repay with rental proceeds or sale proceeds in the future, which is secured by the value in the home, and the mortgage will give the bank the right to take the whole 180,000 home to repay the 135,000 and attorney fees, late fees etc if you default.  If there is anything left it would be yours after the home goes through foreclosure again, the process of which is different for different states. 

Semantics really.

Be prepared for the bank appraiser to be conservative. If ARV truly comes back at 180,000, then at 75% LTV you get to borrow 135,000k total. If you laid out the 25k in rehab costs and the 5k down out of pocket, you will get that back, plus 95k remaining principle, plus 10k profit out, minus holding costs. You would have the added value of 25% or 45k in the property of course also. Nice deal if it works. Don't underestimate rehab costs and overestimate ARV. 55K flip deals aren't that easy to find these days.

Thanks for sharing.  Heard about this at auction today and had to verify.

@Mike H. 

You are right there is less competition.  One reason is just what you stated.  It takes a risk-taker to buy sight unseen.  Another is that cash up front is an entry barrier to a lot of folks.

So the game is about edging out the next guy in information, as I see it.  The more you can determine about the condition of the house, often without getting in it, the better.  One recent house, for example, I knew the builder was primarily a track builder, but the home had a high efficiency furnace as evidenced by the PVC flues through the wall.  Obviously built with upgrades, as a builder around here in the price range at that time was almost always using 80%.  

Then you figure if no one gets inside, all bidders have to anticipate the same amount of risk and no one wants to lose money, so the bid rarely goes higher than what would be a break even deal in a worst case scenario.  The problem lately is the quantity going on the block is decreasing rapidly.  So the deals are drying up and the competition will get hotter.

I'm not keeping these, so LTV doesn't come into play. I flip as fast as I can and move on.

My last purchase was in a desirable neighborhood at 264K and just listed it for 364900 after about $25K in taxes, upgrades, granite etc.  The agent gets a piece as he is part of the team also, but it should be my best one yet.  We enticed the outgoing owner to let us have a look around the night before the auction and even so, the bid was not going much higher.  There were 2 or 3 other bidders that I beat out for it.  

About half of mine I have not gotten inside.  Sometimes the door has been "opened" by someone before me.  I make real sure to announce myself and that no-one is living there before going in though.  Not worth getting killed over it.

I let one go cheap to a competitor last month that will likely turn 100K for him in a couple months.  It was just me and him, toe to toe.  Not sure if he will be so kind in return someday.  But those are the exception not the rule.  And it takes an education and some homework to know the other risks of buying this way.  They can often foreclose a second mortgage and sell at auction subject to a first mortgage or other liens or rights of redemption that survive the sale.  (Different for different states)

Lastly, one of the hardest parts is being the name and the face that has to tell the owners that have been scratching to hang on in many cases that it is time to go.  Just being in that place at that time requires empathy and sometimes tough skin for the threats and curses.

@Rusty Scott 

The Sheriff's office was able to make things look like it canceled and keep it out of court.   I had put them on notice and they held my checks until I and the attorney agreed to it.  Quickest way out and have my capital back for the next one.  I'll always wonder what might have happened.  I just figured no matter if the bank and or the attorney screwed up, if the owner made a payment they would let him keep the house.  And whatever ounce of flesh they might award me from the attorney or bank would not be worth the pound of endeavor.  But,... I'll always wonder.