I’m looking for some advice from experienced investors about an idea I have. I have never done a deal because I don’t feel comfortable working up the numbers, and I never know if a deal will end up being profitable. I know that experienced investors get approached by people all the time with potential deals, and they can easily and quickly analyze them. This analysis always involves a profit margin of a certain percentage, or a set number. What I want to do is get in touch with some experienced rehabbers/flippers in the Baltimore area and ask them to call me if they come across a deal that would still be profitable, but just not profitable enough to them. If they want to make $15K on a deal, and someone proposes one to them that would only net $11K, could they send it to me along with a workup of the numbers, and I would pay them. Basically they would be acting as a bird dog for less profitable deals. This way I could rely on their skills to analyze the numbers, I would get experience with a deal I knew I could make money off of, and they would make some nice money for just a little bit of their time. As an experienced investor, if I approached you with this offer, would you do it? If not, why, and what else would you be looking for? Thanks in advance.
Though I am by no means an experienced investor it seems we are in the same area and it may be helpfull for us to learn together.
I’m a numbers guy. I love running the numbers and I’ve found that I tend to be pretty good at it. I’ve even written a few software programs to run numbers for me. (no, I they’re not for sharing, they require editing the code to change parameters)
Anyway, if you were in my area, I’d be happy to partner with you. My problem is that I have the numbers, I find the deals, but don’t have the money or time to follow up on them. Hah!
Funny.
Good luck with that!
Stew
My problem is that I have the numbers, I find the deals, but don’t have the money or time to follow up on them.
I’m a little puzzled. Here you are saying you don’t have the money, yet in another post from today you say you have a mortgage broker than can find all kinds of financing for you. Did I miss something???
Yep, you heard right. My small business fell on some hard tiems recently and I am struggling to get financing for things because of income, etc. My broker is great at finding deals, but I still usually have to put up the cash for any rehab and holding costs. To do “stated income” loans where they don’t need proof of income, the best we can do is 95% LTV, which leaves me finding a 5% down payment.
So, right now I have exactly $0 (well, Icould probably scrape up $500 or so) to contribute toward the next deal, which leaves me a little stuck.
Sure, I can get 100% financing on the purchase. Sometimes I can get 3% concessions, but that leaves about $1500 in closing costs and maybe $2500 in holding costs and rehab if there is any. And that’s money I simply don’t have right now (a lot of it is sunk in that rehab deal I’m working on right now too).
In addition, I picked up some cash-flow properties earlier in the year and with the holding costs before I got those turned around, i was a bit in the hole, though they are generating about $400/mo cashflow right now, so that hole will very gradually get shallower (eventually…)
Explain things?
Stew
You can’t pull out any equity from your other properties, either?
I would say I have a sum-total of $25,000 in equity not counting the current rehab project. I’ve thought about doing that, but it would push my cash flow on those properties into negative territory and I’m not so keen on that, since I bought them for cash flow, especially looking at the closing costs on a 2nd mortgage or equity loan.
In addition, I am hoping to avoid going 100% leveraged; if the market turns down for a year or two, i’d rather not be upside down on properties that no longer cash flow and have no way out.
My personal residence is at about 90% LTV and the cash flow properties are around that mark too. None of them are exceptionally valuable real estate, though I got reasonably good deals on them. I started with about $5,000 maybe 18 months ago and have about $45,000 in equity counting the rehab I’m working on right now, though I have a bit of debt from the rehab project too (maybe $5000 on a Home Depot card) and a little from before ($6000 personal loan). If I can sell this rehab quickly, I will be in fine shape, but if it is on the market for a few months, I’ll be strapped to make the monthly payments. Worst case scenario, I can do something with the equity in another property, but I’m really hoping not to. But either way, I don’t have the money to put together another deal until this one is sold, so I do my best to help my broker market it and hope for the best
Ideally, if I had about $60,000 cash to do it properly, I could line up the properties in a pipeline and have one in rehab and one or two on the market while I worked on new deals. That would be ideal and i’d be thrilled to do it full time.
I really think I could do well with it, but don’t have the funds to give it a shot full time. It’s challenging for me to get off work at 5pm and go straight to the rehab and start work, not to mention the trouble i’ve had with labor not doing their job or just plain doing a poor job. Finding good help would invaluable, but my being around more often would also be huge. Time = money for me.
Stew
Just as an aside … If you happen to live in Texas, you wouldn’t be able to tap into any of your equity anyway (if you are 90%LTV). I believe in Texas, you have to have a minimum of 80%LTV in order to get a HELOC, et al, but I could be wrong. We are about 79.5%LTV in our personal residence and about 74%LTV in our investment properties. I look to mainly do Sub2’s and either rent or owner finance. However, if a good deal comes along that requires more cash than I have readily available, I’ll definately tap into my equity positions for it.