I am interested in hearing some of your opinions about a potential business model I want to start using. I have successful experience doing rehabs and flips in my area of SFH’s in my area. I have noticed that due to the high amount of foreclosures in my area some “distressed” properties are selling for ridiculously low prices. They would be perfect for investors because of the price except for the fact that in most cases they need to be rehabbed more then just carpet and paint. Many investors don’t have the time or resources to buy investment properties that need work. That is where I come in! What I’m proposing to do is buy these distressed properties, rehab them then sell them to investors still at a discount from retail. Basically a “turn-key” investment for them. This is the part were I’m looking for others on this boards opinions and insights on my model. Do you think this would work? What are some pitfalls I might fall into that I haven’t foreseen? Any advice on how I can make this run smoothly. Any and all advice good or bad would be appreciated. Thanks in advance.
What is the point and why would you want to do this after you have done all the work. you are overthinking on this idea
I agree with Brock…Sounds like you need to figure out which of the 3 you’ll be doing:
Act as a birddog and refer the property to an investor for a fee (i.e., earn small chunks of cash);
Fix up and sell (i.e., earn larger chunks of cash); or,
Fix up and rent out (i.e., earn cash flow and appreciation)…
When you say you’ll fix up and sell as a turnkey to an investor, you’re really just doing #2…
I think this is actually a great plan.
You already have experience in rehabs, so you know how to get these properties fixed for much less than a Dentist looking for an investment.
Your right on the money. That dentist does not have the time, knowledge or desire to get into 2 businesses. 1) The remodeling business and 2) The rental business. Knowing that your plan should work IF… and it’s a BIG IF…
If you can absolutley STEAL these homes, do quick cost effective rehabs, and leave enough money on the table to make them cash flow.
The other guy’s are right, there is a strong case to be made for just keeping these homes yourself. But…maybe the reality is you hate being a landlord. I know I do. It sucks, in plain English. With what your proposing you could turn these things and make money at the same time. I could see this becoming a very big niche in the next few years.
One of my all time favorite sayings is “Never underestimate the laziness of people” Your plan fit’s that perfectly. If your buying these things VERY cheap, worst case scenerio for you is YOU end up renting them out and building a portfolio of property which you hold until things get better. It will happen, and you’ll make a TON of money.
The key to this would be finding yourself a VERY good realtor who specilizes in rental property sales. You find and rehab the properties, he or she gets investors to buy them and you just keep turning and burning.
One last thing…If I were you, I would seriously consider keeping a few of the absolute best deals you find. You know the ones, nice neighborhoods, great cash flow and CHEAP!
Here’s another nice little gem for you guy’s.
Rent those homes to FIREFIGHTERS, these guy’s can usually fix ANYTHING, pay on time, especially if the home is in the city they work in, and the Fire house itself is the best advertising in the world. As soon as one guy moves out, there’s always someone else looking for a place to rent.
I have to agree with Brock and buff investor…
why put all that money and time in and then make such a small fee? You should just wait out the extra time and retail it yourself,
if you can’t “afford” to hang in that long then:
post all over the place that you can find the deals, do all the work and pay 1/2 the pmts. and partner up with someone. Then you can make it to the end. You would just have to have your new “partner” use his own credit to make sure you always get 1/2 pmt
Then if a “certain” amount of time goes by and you guys decide its not selling, then refi, take some profit and rent it out until market improves.
Then you move to next deal
I know an investor in Indy that does what you are talking about. Buys extremely low, remodels them inexpensively and efficiently, then has a list of landlords that she sells them to for rentals. She knows what types of properties the landlords are looking for and how they like them remodeled.
Thanks guys for all the insight, pro and con. Now to answer your questions… For those who wondered why I wouldn’t just hold the properties for myself, especially after I did all the work, the answer is this… I normally buy my rehabs via construction loans that have a balloon payment after six months, so I have to either sell the property or refinance it into another loan so I can hold the property. It’s a great loan program too. I can get 100% financing and that will cover the purchase price, all my rehab costs and interest payments for those six months. Depending on how well I buy the property I can also get the bank to give me the same loan except I won’t have the balloon payment. It will be a more conventional term loan. I use that loan for those properties I do rehab but don’t want to sell right away. Common sense dictates that I do keep some of the best deals for myself, but I’m not in a position were I can hold hundreds of properties (yet) and that’s why I would resell some of them to investors who want that simple “turn-key” investment. I have passive income coming in from my current rentals and lease-option properties I’m holding and thought this would be a way to continually create another stream of income.