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Author Topic: Anatomy of a deal  (Read 4776 times)

Offline David Alexander

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Anatomy of a deal
« on: January 04, 2004, 02:44:33 pm »
I have a student that we are working on deal together...

Here some thoughts about the process... and how it's going...

She put out banditsigns (of course right ;) ) about 125 of them so far.... Approx. 20 - 25 each time she put them out... over a span of about 90 days... so, not every week...

From those signs... we went on 10 appointments... ( I don't know how many calls... I suspect about triple) Now most of the appointements... were fruitless... and when you start out they will be.... But, you need to get toe to toe with sellers.... You screen for motivation and if the numbers might work.... In the beginning that's the first two skills your trying to hone.... Talking on the phone... (screening, setting appointments etc.) and talking face to face (screening, working the numbers on the fly, being a dont wanter, closing and putting a deal together)

Now before we went on those ten appointments... we did not at anytime worry about comps, are anything like that.... to me due diligence is immaterial at this time...

Do the numbers work... and are they motivated.... ?
If those two things are there... and as you get more creative.... Or create a system.... the deals will come...

So, on one of the appointments... we found a seller... they had a house (2/1)in the Boonies.... I'm not excited about this deal.... (don't like 2/1's and it's a long way from home) We actually took the 45 minute drive to the house.... Yikes... were there about 10 minutes.... There we made an offer to test the waters... 21,500.... Yikes, again cause... they didnt blink... lucky for me it was low.... (but, not low enough.... because they didnt quelch the deal... I broke a rule... and made an offer... they were asking however.... 35k) we had to get to something going... but, I'll be honest Making offers is not a good way to go...

(I suspect the house is worth... 39 - 45k as is needs updating... small brick house built in the 50's... could easily have 8k in it.... did I say I don't fix up houses.... no money in it as far as i'm concerned... )

Anyway, Nothing was said...

We went our seperate ways...

We met again at local whataburger to talk.... and we stood firm on the 21,500.... the mom... who's house it was has emotional attachemnts.... it's hard for her to sell.... We all left...

We all met again... (local whataburger)talked and decided the 21,500 would work... but, only if we were able to buy the adjoining lot.... They needed to get a figure in mind.... this could kill the deal... if they wanted something more than say a $500 or a grand or so... I don't care about the lot...

We met again.... (same whataburger)Inked the deal for $22,000... (Lot not included....) But, they pay closing costs...

We went down to the house to take a contractor.... and put signs out... Decided that "IF" we spend any money... it will be paint about $700 max... Carpet about $1200... and some bushes and plants upfront to give curb appeal... $200.... And the latter is actually the only place we will start....

We checked out the area... to see what stuff was selling for.... turns out 3/2 are selling for 78k.... The house we have is a 3/1... we were actually going into a bedroom door.... that was used as a second living area... So, cut it down to 1 living area and you have a 3/1 bath house...

I figure it oughtta be worth at least 59k or more... so....

So, Worse case we flip it make $2500 to 5k.... and do nothing... Sell it retail pay closing, down payment, fixup...
That would be about a 26k payday or so.... figuring 11k to cover the costs...

Now... The numbers... when your starting out.... Your screening the process is way outta wack... You gotta get alot of leads coming in.... And setting appointments with all of them you can... that have even the slightest possible thought of being motivated.... then you start talking to folks to get used to it... to get a feel for how it works.... to mess up and say the stupid things you don't want to in front of the real deals... And of course... "you will" say stupid things... You will reflect back on deals you could have bought... and hopefully not many... but, buy houses you shouldnt.... then You will get tired of going to houses... for the sake of talking to folks... So, You'll step it up.... Screen harder.... make them... make you get off your couch.... But, it all comes in time....

How do you shorten the learning curves... Mentors, education, and possibly partners...

Now, my student/partner did all the work... on this... had I been doing the deal... I might have missed this one.... as they werent your typical motivated seller... they needed us to meet with them 4 times to make it right... they wanted to know they were selling to the right people... Frankly, for me... It was too much time spent on the deal... My hours have been a total of about 6 and it isnt sold yet... typical house should be 3to 5.... But, in the beginning it'll take longer... Just the facts...

Now, how does this work out... number wise

Lets see..... 125 banditsigns put out... at about 3 bucks a piece... ( you can get them cheaper.. talking averages)

If it turns out it's a flip... for say $2500... that makes each sign worth... 20 bucks... flip it for 5k we'll double that to... 40 bucks each... Retail... about $208 or As Lonnie says "Good Enough"

Each seller... she talked to.... 10 of them.... each worth... respectively, $250, $500 or $2600 Or again... "Good Enough"...

Each time she had to talk to this seller (4 times).... before signing the contract.. again respectively... $625, $1250... $6500 (Outta this world.... for flappin' your jaws)

What about Hourly... Well... they put out there own signs ( I personally pay a buck a sign to get them out... ) so they spent about 4 to 5 hours doing that... You can get 25 to 35 out an hour...

So.. 5 hours.... 10 appointments total... an hour each tops.... (usually each meeting is 20 minutes or so....) So, 10 hours there and one the seller another 3 times at an hour each... and putting out signs to sell... visiting the property again... 2 hours.... probably another 3 in our future...

That's 23 total... not real efficient... And the goal is again 3 to 5 hours per house...

Again... respectively that breaks down to $108 and some change... $216 and some change.... or retail... at a $1,000 plus an hour....

Not a bad way to get paid while you learn....

Now... what I havent told you... is that 15 minutes after putting signs out on our way home.... we gotta call.... from someone prequalified for 85k... that is possibly interested.... we gonna have them talk to our mortgage broker befeo we show them the house...

Hmmm... we'll see....

Again... it comes down to getting toe to toe with sellers... And good things happen... don't get caught up in all the rest... till after you have a deal.....

David Alexander



 




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