For the past 7 years I have been Rehabing houses for resale. I buy off the mls and it worked good for awhile now times are changing . I belive I know my market pretty well and have never lost a penny but now its getting harder . I have a house under contract to be sold . All is well untill the appraisal come in 10k less than the contract price. I belive I priced it well . I had 11 showings in the first 13 days . This same thing just happened to my uncle who also flips , appraisal came in 10k less. 10k is a big hit in the pocklet and I dont know what I should do . I enjoy flipping but if this is going to keep happening , I dont think its worth it, to put that much money on line to be making less and less.
I work in the starter home price range in good locations , buyers just dont have any money , most need seller assist and now to top that off , the houses arnt appraising :banghead…
I need to change the way I do things , should I wholesale deals to buy and hold investers ?
or maybe buy cheaper city propertys- rehab-get rented - and sell turn key investment propertys ?
Whats working for you guys in this market? Im thinking wholesaleing b/c im tierd of putting so much money on the line , I just always like rehabing cause im good at doing the work.
But I need to rethink things . so whats working now , What should I do?
Why don’t you raise the price and hold a $20,000 2nd mortgage and charge interest to make it worth your while? You can always try to sell it off later or collect payments on it. Worse case scenario is they don’t pay you and you take the house back and resell it again.
Houses here - especially cheaper houses - aren’t selling to owner occupants. Investors are about the only ones getting them. A few months ago, houses in the <30k range would move a little. Now they’re just sitting and rotting on the MLS. If you were in my area and rehabbed cheaper houses that would be good for rentals, I know I would consider buying them for turnkey houses. I would be paying “investor” prices vice retail though. That just makes the whole process that much more difficult to still build in your profit.
For example:
We just bought a 2/1 for 10k. Needs maybe 2-3k of work and I can do most of the work myself. My problem is that house is 3rd in line right now and it’s just sitting there. If you were able to buy a house like that, fix it up, and sell it to me for 15-16k, I’d probably do it and my business would grow faster. On the MLS, if that same house was fixed up and there were actually owner occupants who could buy, it would probably go for 23-25k, but there’s no way I would pay that for it.
aaron- The 2nd mortage idea crossed my mind , I would need to hold a 2nd for 10k , which would be find with me .Getting it little by little is beter than not getting it at all.
I mentioned this to my realtor , and she though that it might be a problem with the 1st mortage holder . I said no I didnt think so b/c in a default situation, the 1st is excatly that - they get there money 1st. or am I wrong, is there any reason why this would be a problem?
And if I ask for a 2nd ,now I am asking them to pay 10k above what the banks appraiser says the house is worth. So they might not go for that . So I dont know its a crappy situation. I dont want to loose the sale and sit on the house any longer in this crap market but at the same time it hurts to loose 10k .
So it looks like the best way to go about this , is to hold a 2nd .
So how do I do this , what would be the terms , I guess terms that would go easy on the buyer would be best .
Low intrest ? long term? low payments?
Thank you all for your help, Dennis
Have you tried rent to own as an exit strategy? Would you consider self financing a home for someone. These are ways to get rid of homes in any market, but it does tie up cash. But that cash does not have to be yours that is tied up.
redhawk
Have you ever held a round robin auction? Works well with a little marketing. Also when in this situation you can lease to own for a year to carry you over then offer the house to purchase at the appraisail price. I would also reccommend not buying off the mls! Try finding deals that are at wholesale price or in short sale so you can buy low and sell higher. Do a little more research for your market so you don’t over improve the property, so the apprl. is higher than your asking price. Reasearch is key, then purchase price and sell price will take care of themselves.
Buying off the MLS isn’t necessarily a bad thing. ALL of our very good cash-flowing rentals came directly off the MLS. There are so many foreclosures out there depressing prices. At least where I am, almost all the foreclosures are on the MLS too alongside homes by regular sellers. So don’t discount the MLS. You can still get good deals there too in some places.
How about asking for an income approach appraisal. What’s the rents in the area? Maybe if the rents are there an investor won’t mind paying your asking price…