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Author Topic: What's the Deal?  (Read 6009 times)

Offline alan281

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What's the Deal?
« on: March 11, 2004, 05:10:46 pm »
I wanted to get some comments on some of the seasoned investors here. I was trying to sell a property that I acquired through foreclosure to another investor who is planning to fix it and retail the property. I was a little surprised when he turned it down. I thought it was a win/win for both of us. I asked why so he showed me his calculations. BTW, itís a nice house in a nice neighborhood. I would even live in it if I can.

Property - $78,000
Closing   - $3,000
Flip fee   - $7,000
Repairs   - $4,000
          ---------------
Total         $92,000

ARV          <$106,000>
          ------------------
Profit        $14,0000.

Iím trying to figure out his logic here. Iím thinking where else are you going to double your investment in 3-4months? Or is this just greed?
Realtor & Loan Officer

Offline tedjr

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Re:What's the Deal?
« Reply #1 on: March 11, 2004, 06:36:31 pm »
It aint no quick flip deal . Retail at $106,000 and hope to net $100,000 at best. Then you pay a discount broker 4% and you net $96,000. What about carrying cost til it sells and taxes and insurance and closing costs on the selling side besides commission and title policy. Lucky to keep from paying several grand to do the deal. This is just a 10 second look at the deal. Be glad to look closer and help you figure it out. Why not repair and sell yourself if it only needs $4000 in repairs. That will only buy paint and carpet for most medium size homes.

« Last Edit: June 26, 2004, 06:32:50 am by tedjr »
Ted P. Stokely Jr

San Antonio, Texas

Offline Heather_Tx

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Re:What's the Deal?
« Reply #2 on: March 11, 2004, 10:22:37 pm »
Definately not a flippable deal IMHO.  You must realize you are looking to make half of what the rehabber will, and he is the one taking ALL the risks.  He will have to put up the repairs costs,  closing costs, holding costs... and anything unforeseen.... and there are almost ALWAYS unforeseens.  


 This is a deal you might be able to flip for 2K. In 6 months, after working more in the business.... you will understand completely.  You'll look back and wonder what were you thinking.... it happens to almost all of us.   And if they end up having to sell with an agent ?  Breaking even would be lucky.


  This is a stage you cannot get greedy in. Take it as a learning lesson and try to flip for 1-2K if you don't want to do the deal yourself....   and ask the new buyer to walk you through the deal if they don't mind so you can see how and why the numbers didn't work as you thought.   This could be a great chance to learn and make a little $$ too.  


 Hope this helps,
Heather Zaal

Offline alan281

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Re:What's the Deal?
« Reply #3 on: March 11, 2004, 10:39:42 pm »
Thanks for the enlightment guys! I guess it would have been a little more attractive if the investor didn't have to pay the flip fees of $7,000. He had to pay 2 birddogs to be able to get to me. I guess I will have to get hardmoney for the repairs and sell it myself  ???
Realtor & Loan Officer

Offline tedjr

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Re:What's the Deal?
« Reply #4 on: March 12, 2004, 07:29:31 am »
Been there done that. I just had two under contract with a wholesaler that the hard money lender would not approve. I tried to get another lender but ran out of time. The wholesaler only had a few days or so under his contract and after some extensions he still could not sell them. i became really close to him and wanted to help us both make a little money. I finally got yet another lender and closed on one of them for $3000 less (wholesalers fee) and was to close today on the other but sellers atty out of town. I actually had the good fortune to get it a lot cheaper  because the seller was fustrated with the wholesaler and me. I think the wholesaler made another really low offer on it with another buyer or something, Any way I got it for $15,000 less. It will be a really suoer deal If I can get it fixed and resold. It will take a lot of work and risk. I am on the hoop for $70,000 almost on it and $45,000 on the first one.

It is not an easy business for the wholesaler or the rehabber. Hopefully you can do well on your project. Double check all your estimates and closing fees etc. Hard money lenders are not cheap but the only way to go with bad credit and no money. I had to go to the pawn shop and borrow $500 to cover the closing costs on the first deal.
« Last Edit: June 26, 2004, 06:34:21 am by tedjr »
Ted P. Stokely Jr

San Antonio, Texas

Offline srb

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Re:What's the Deal?
« Reply #5 on: March 12, 2004, 08:18:09 am »
Sorry to divert the post, but I have a question for Ted jr.:

What do you mean when you say "hard money lender did not approve of the deal"? Does that mean his loan of 70% of ARV was insufficient to cover your costs or that he straight out did not think it was a good investment and refused to advance funds?

The reason is that I am also trying to work with Jaydon at Streamline Funding (I remember you saying that you were also working with them) and wanted to know how they approved/disapproved of a deal?

Thanks,

Balaji.

PS: BTW sorry if those deals I sent you before did not work out, I will do more research in the future before I send you leads !! I learnt a lot after I had sent you the info !!

Offline tedjr

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Re:What's the Deal?
« Reply #6 on: March 12, 2004, 10:37:09 am »
Balaji:

According to their appraisal they only appraised at 70% of the rehabbed value. They wanted the 70% to include the $3000 commission to them and all closing costs and 4 months prepaid interest. They sais they were marginal deals. I was also told the same thing when I got the one under contract for $15000 less and was told that it was too small and to find bigger deals that would help cover the $3000 in points. They did fund the condo I did but shorted me several thousand on the rehab and costs. It appraised at $56,000 as is and the loan was only $35,000. I  am not complaining about that loan because I agreed to it and knew upfront what I had to do. With my credit and Bk I am lucky to be getting a loan at all.

Jaydon has done as agreed on this new deal and the funds are there ready to close on Tue when the sellers atty comes back in town. Also Jaydon's appraiser  believes the value to be higher on this house. He only preapproved me for $100,000 and this deal is taking $70,000. I doubt i can get another deal for $30,000 and he may not approve another anyway untill this one is sold or at least fixed and ready to sell. He has done several other deals and believe he is growing and getting other investors to come on board. He has also started offering discount brokerage and a buyers agency service for his clients.

The other house I did was with an investor from Ca that I nagged almost to death until he funded the deal. He is a great guy and i appreciate all he  has done for me.

Hope all this helps with your deals with Jaydon and others.

« Last Edit: June 26, 2004, 06:35:49 am by tedjr »
Ted P. Stokely Jr

San Antonio, Texas

Offline srb

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Re:What's the Deal?
« Reply #7 on: March 12, 2004, 10:53:10 am »
Ted,

Thanks for the reply. I believe you said "pre-approved" but I was only "pre-qualified" by Jaydon (upto $200K). If you could, please help me with these numbers:

Now, if you want to put $0 out of pocket, then I believe the numbers should look like the following:

Loan = 70% of ARV
Points = 4-5% of loan amount, so 3-4% on a ARV basis
Prepaid interest for 4 months = 5% of loan amount, so 3.5% of ARV (at 15% APR)
Closing costs, atty fees, appraisal, title, inspection = $2000

So, on a 100K house, we are left with only 60K for purchase & repairs.

Even for cosmetic repairs (paint, carpet, appliances, landscaping etc.) it costs around 10K for a 1000-1500 s.f. house.

Doesn't this mean that us looking for houses at 50% of ARV is a bit too unrealistic considering that other investors buying with cash might offer more?

I appreciate any help with the numbers. Also, I am looking for my first deal, so if you feel like you are short on funds we could maybe partner up.

Thanks,

Balaji.
« Last Edit: March 12, 2004, 10:55:32 am by srb »

Offline tedjr

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Re:What's the Deal?
« Reply #8 on: March 12, 2004, 11:01:59 am »
There are deals out there. Some even in MLS. Actually all three that I have done were listed in MLS. The condo was already sold to another investor who could not get the funds too. I do not mind the marginal deals where you pay out of you pocket for some of the fees and interest. The more rehab the less you can pay for the property.

Jaydon too wants at least 2% investor cash from the buyer into the deal. Here again the pawn shop has all my gold and a bunch of my silver. I have some bb cards too but they will not take at pawn shop. I need to sell one of these asap. I also have a vacant lot that I only owe $1200 on that is for sale. Maybe we can do a deal together. It would be better to discuss that in a private message or email.





« Last Edit: June 26, 2004, 06:37:47 am by tedjr »
Ted P. Stokely Jr

San Antonio, Texas

 




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