i would like to know where should investors look to purchase houses? Is there any software available to help calculate what you should pay for a property and where to find them?
once you find a property, what’s the next step.
i see a lot of vacant homes that are not listed as for sale. how do you find out about these properties and do you send the owner a letter of interest? what’s the procedure
thanks ( a newbie)!
As far as software for making an offer, I made an Excel spreadsheet that calculates everything. I only need to put in two numbers, the ARV and the repair costs. The spreadsheet calculates everything else, including broker fees.
Finding properties is the fun part of REI. It’s kind of like going on an imaginary shopping spree, especially if you’ve already been pre-approved with a hard money lender. I’ve had mixed success in using different websites that advertise only foreclosure properties, including Realtytrac.com. Alot of times their databases are outdated so when I would go to make an offer on a house, it would already be sold. Plus alot of these websites are $30 per month.
I recommend driving through your target neighborhoods and jotting down addresses of properties of interest. Once you have a list you then go to your county tax appraisers office and find out who the owner is. Luckily, mine is online. I just type in the address of the desired house and it will tell me how much it’s worth and who the owner is. It also gives the owners address, even for abandoned properties. From there, you just mail a letter and see what unfolds. It’s pretty exciting. I’ve had a lot of success going about it this way. You could also befriend a realtor and have them give you MLS listings for a desired price range. Of coarse they’ll want you to use them to make offers or re-sell the property. Good luck.
thanks for the information. you appear to be upbeat and excited about re.
how do you word your letters and what if the person doesn’t respond?
have you expereienced this and do you continue trying to pursue that particular property?
You’ll find that RE is just like any other type of business, if you’re going to make it work then you’re going to have to be persistent. I mentioned that I use letters to contact people with. This works very well. Some people respond quickly. Some never respond. The tricky part comes when you have to haggle with the homeowner about how much they’ll sell the house for. Everyone will always want top dollar for their home. But your advantage is that if you’re targeting abandoned homes you can haggle because of the current condition of the property. Just remind the homeowner that their house is a little run down. Basically my letter states the name of my company, what I do as an RE investor (which is buy property), a reason why they should sell me their house, and all of my contact information. But I recommend getting your lender lined up before you start mailing letters, because when people respond to you you’ll have to act quickly. Good luck and have fun.
You referred to making a Spread
Sheet in your above post in stead of using a
Software. Would you please give the details
how you do it and then add the ARV and the
amount of Repairs.
I have a question regarding the quote above… Since I am new, as my name implies, is the process different in getting pre-approved? In the research I have done, a lot of HML’s dont have the same requirements for lending out monies as say regular banking institutions. The way I understand it, I thought HML’s looked at the ARV to make their determination. If I am correct, then how can you do it before hand?
Am I missing the mark here? ??? If i am please correct me, because I dont want to make any unnecessary mistakes.
Any input would be great…
HMLs are typically used when you will be holding the property for between 6 months and a year. If you are going to buy, fix up and hold for rental, you might use a HML for the purchase and fix up phases and then refinance for long term. If you are going to purchase for rental, it would be less expensive to go ahead and get a “regular” mortgage in the first place, but then you will have to put some of your own money into the property for the down payment and fixup costs. It really depends on what your goals are for the property.
You are correct in your statement that HMLs look for different requirements than mortgage companies for their loans. HMLs typically look mainly at ARV to determine how much if anything they will loan on a property. They don’t ususally care about your ability to pay back the loan, because they will only loan up to a set percentage (usually 60 percent) of the ARV and if you default on the loan, they will have gotten a property for pretty cheap. A mortgage company on the other hand wants to know that you will be able to repay the mortgage. They do not want to own the property, they just want their money to make more money. If you default on the mortgage, they will have a property that has a much higher debt to value ratio (sometimes up to 95 percent) and it may be a property that they cannot get their money out of. Everyone wants to make money, but no one wants a lemon that they cannot sell.
Hi SD Newbie,
In response to your question about my quote, you seem to understand what I was saying. The bottom line of doing quick flips and rehabs is to use other people’s money. The only way I’ve figured out how to do this is to use an HML that’s willing to loan money based on the ARV. Dont be discouraged if it takes awhile to find a lender that meets your criteria. Look for up to 80% ARV with no down payment and no prepayment penalty. Also, look for the lowest interest rate possible with as few points as possible. Once you find a good lender and you form a close, trustworthy relationship with them, you’ll be on your way to being an RE mogul. Happy new year!!
Mr. Humston., You’ve really got some great ideas. I’m really thinking about rehabbing some houses and reselling them. Do you think getting grants and trying it that way would be better. or how can I go about getting started.
The question about getting grants to do rehabs is something I’ve rarely heard of. I know it happens and I’ve heard of people doing it. Some cities offer grants as an incentive to beautify the city, so investors have this opportunity. But my thinking is that if you can secure a loan, fund a deal totally with other peoples money (such as with a bank or HML) then you really don’t need a grant. It would probably be too much red tape. But if you find out any info I would be interested in knowing the specifics. Good luck.
Hello, I am seriously interested in getting into the rehab business and have been researching the topic for a while now. I’ve read books that mention that in order to be sucessful in the rehab business, you need to acquire properties at approx. 70% of their listing prices. However, other authors that advocate other aspects of making money in real estate claim that it is very unlikely you will be able to acquire properties at such deep discounts, especially if someone is in financial trouble, why would they be willing to take 30% off the table?
I’d like to get a response from the others in the forum whether these deals are possible for someone who can dedicate a fair amount of time to this business and secondly, what the best methods and financing techniques are for securing these types of deals. Thank you.
No one selling you a house is going to give you an intentional discount. It might happen if they don’t know the value of the home or if they are extremely desperate to sell (motivated). But when I make offers to buy I generally offer 80% of the LIST price. I make sure to only make offers on houses that are listed 30-40% below the market value, because they need major repairs.
there is a house for sale through a local realtor co. i contacted them in regards to the price of the house. my contact person says the price is to high.
i want to know if you are able to make an offer on a house that is being sold by a realtor? i have looked up the owner and wonder if i am able to go that route.
Re: your question about going around the Realtor to make the seller an offer, the seller still has to pay the 5-6% commission that they signed on the contract with that Realtor. No matter how that home is sold (even if the seller finds his own buyer), that commission must be paid, unless they signed a different kind of contract, which is unlikely. However, you could contact the seller and ask them when their contract is up and submit the offer the day after. However don’t even go look at the property until the contract is up, even if you saw the home during the contract period the commission is usually still owed for a 6 month period after the contract expires if the buyer has seen the property within their contract period. (IL)
We can make money in this business WITHOUT going around behind the backs of a Realtor. Realtors can be an asset to you and the seller. I have had Realtors that at first thought that what we wanted to do was not a good deal for their sellers, but they later called me and asked us to make an offer.
If the numbers don’t work, go to another deal. We don’t have to be unethiical or illegal in order to make a good profit.
Mack must not have been able to tell, but I am a Realtor. If you read my last repsonse on how to go around a Realtor, you’ll notice that I wrote that you really can’t. It’s called a “contract” and it covers the Realtors ( and rightfully so, why would they put 6 months of marketing the property, open houses, etc, etc, etc,) just to have someone go around them, I was just trying to be objective but at the same time educate you on the facts surrounding a listing.
You have ask some good questions! I am proud to say you have had some great answers. Some (REAL) people get their feelings hurt easier than others! Having said that, we have a great bunch of people on this forum.
I don`t think anyone would try to steer you wrong! I try many different approches to buy and Sell! I have had some success with my flyer! You may want to try something like that!