I was watching flip that house, The investors stated they buy about 20 houses per month. How are they doing this? Any ideas?
If you live in or near a target-rich environment, have a staff of people with everyone doing specific jobs and doing them well, and a fine-tuned, solid marketing and advertising plan, those numbers are perfectly realistic. Not to mention, when you’ve been doing that kind of business for so long in one community, you just get known as the guy to call when you have a fixer for sale. It takes time, though.
Right now you’re probably thinking, “Man, they must spend all kinds of time just driving around looking at properties that they never buy.” Well, I know of one small group that doesn’t even go see the property until they have a contract on it, because they require sellers to come to them in their office.
I’d be surprised to learn that your TV guys actually rehab all twenty each month, though (my guess is that they wholesale a number of properties), but I suppose anything is possible.
20 houses a month to rehab is not difficult but as Paul said, it takes a staff and smart marketing. 20 houses a month as rentals seems more difficult as revenue wouldn’t be sufficient to support a staff or a lot of marketing. An experienced investor who is in the groove of things might have an easier time finding 20 a month-- alone.
With rehabs, it’s selling all 20 a month that’s the hard part!
They spoke at our local REIA group and explained how they sell them. Basically they do two things:
They owner finance the properties and in 3 months they sell the notes to a note buer at 92%
They sell to landlords at 80% financed first and they hold 20% second with no payments or interest paid in 2 years. This allows landlords to cashflow till they have to refinance of course
They were offering new investors in our local REIA group 10 houses packages offering their 80/20 loans and tried to convince us that at 13% appreciation over 5 years, they would be making hundreds of thousands. The funny thing is that San Antonio does not see 13% appreciation yearly not to mention that they mainly buy in the bad, cheap neighborhoods in town and these will not see much appreciation.
Over all they are not clean investors, but I am not sure how they are finding these properties since I never see ads by them in town.
I’ve considered selling my rehabs with owner financing. It would be very similar to rehab to rental (money-wise) without the management. Here is why I don’t do it…
Equity would be tied up and would be “working” to deliver returns between 6-10%. That’s nice, but if I “cashed-out” the equity by selling it and had $60,000, I can reinvest in another rehab that would make another $60,000 inside of a year. That’s 100% return and a very conservative one relative to what’s possible. Not to mention, growth would occur at a much slower pace as a result of having money tied up. I’d be stuck doing XX rehabs a month when I could be doing YY rehabs a month. Owner financing might help a property sell faster (1-2 months) but it’s not worth the opportunity cost. Even giving an 8% discount in 3 months isn’t worth it.
Selling to landlords in ‘rental neighborhoods’ is always a viable option. That should be considered before one buys a property to rehab.
Don’t drink the Kool-Aid at the REIA meetings in San Antonio!
Back in September/October I was signing up 3 houses a day by myself. I was able to do it because everything was done online.
But it goes beyond that. I was getting such a huge response from my marketing that I made it a policy to not even respond to people who had ANY questions. If they didn’t respond to my marketing with: “Sounds great, where do I sign?” Then I wasn’t interested. That made the process easy and fast which in turn made it possible to do such large numbers.
Unfortunately I wasn’t quite so good at reselling them. These weren’t bargain basement deals and so they didn’t sell themselves very easily. In the end I decided to tone down the purchasing because I didn’t want to have hundreds of houses for sale and nothing selling.
If you had access to private lending and you are not investing your own money then why not? Also, when selling on owner financing you are selling above market value. And when you sell the note, you simply discounting the extra amount you charged the buyer.
I wonder if they are wholesaling or putting them under contract, but not buying for rentals. Some investors I know “buy” 10 properties a month, but they really mean they’re putting them under contract and wholesaling or keeping for a short term flip.