I am going to buy a house this month, here's how

General Real Estate Investing
61

Ok, I’m back. Sorry it took so long, but I have another biz to run and need to focus on raising cash at least once a month :mrgreen:

Anyway, since I last made a post a couple of changes have occurred.

  1. Sunderland:. asking price $33,900, my MAO 29,280, my orig bid 24,888, bank countered at 31k, I up my offer to 26k. Update: under contract with another investor at 32k

  2. Exeter: asking $54,900, my MAO 37,350, my orig bid 31,748, bank countered at 48k, I up my offer to 33k Update: Bank countered at 47k, not very motivated and slow to get back with me. I’ll stand on my offer and let them eat silence for about another week. Don’t want to be viewed as a motivated buyer.

  3. New Castle: asking $55k, my MAO 21,415, my orig bid 18,203, bank countered at 45k, I up my offer to 19k (might not get this one) . Update: Bank countered at 40k, still too high; I’ll let the bank eat silence on tis one as well.

  4. Burnt Leaf: asking $60k, my MAO 35,299 my orig bid 30,004, bank countered at 48k, I up my offer to 32k. Update: bank has not responded to requests for status, so I’ll back off on this one for about 2 weeks. again I don’t want to be seen as the motivated buyer.

  5. Cherie: asking $59,900, my MAO 21,940, my orig bid 18,649, bank countered at 56k, I up my offer to 19,500. Update: Bank countered at 50k, we’re getting somewhere slowly. I’ll hit them up again in about two weeks as well.

  6. Trenton: asking $59,900k, my MAO 29,330 my orig bid 24,931, bank countered at 31k, I up my offer to 26k. Update: bank is standing firm at 31k, I’ll stand firm at my offer of 26k and see who blinks first (won’t be me)

  7. Downs: asking $59k, my MAO 37,500 my orig bid 31,875, bank countered at 58k, I up my offer to 33k. Update: Under contract with another buyer. Sad cause I liked this house too… :cry:

The reason I don’t want to seem too motivated is because it makes the banks feel as if they are in control. Fortunately I too am in a slow market so I can take my time. Normally I would make offers and counteroffers about 2-3 weeks apart, so I’m doing ok. I also have not been able to find the private money as easily as I used too, and the last thing I really want to do is use my own.

As for the private money thing, I am still looking. I have gone to several networking events over the past few weeks and have only found tire kickers so far. Those folks that I thought could do it couldn’t perform when presented an opportunity. I’ll keep trying though, found 5 professional organizations to target in my search; a chamber of commerce, a dr association, an MBA association, a hispanic business organization and a internet marketing group. We’ll see how it goes.

62

I just read this entire thread from the start and enjoyed every part of it. I think even some of the contracting comments allow for everyone to look at different approaches. I can take things away from all views and hopefully use that to better myself and my investing. Although I’m still very new I am a bit curious about Brokovich’s flip.
$13K in 3 months with $63K of your own invested sounds like quite a risky play, especially since the house sold very quick and right before Xmas! What if the house sat for even just another month, two, three? Time is money, and you mentioned how Hassan was taking to long to make offers, but your wasting time with all your money tied up, no?

I think this post is allowing people to get a very in depth look at just one investor and the way he does it, right or wrong. I very much appreciate the time you’ve taken out to do this thread, everyone. Look forward to reading more.

63

both ways are ok to use; it just depends on your tolerance for risk and the amount of time you can afford to keep your own cash tied up. If I ever use my own money, I have to get at least a 200% return (yes, it’s possible).

Thanks for the comments

64

20% return in 3 months on my money. I will take that anyday. Carrying costs were $500 per month and covered my interest only payment on my money into it, insurance, and utilities. So even at 6 additional months I would still clear 10K. This doesn’t mean I don’t make mistakes. I have lost money on a flip. But I don’t have to rely on other money to do deals which is imporant as hassansr has found out, the well has run dry on those private sources.

65

:biggrin I like this idea… keep us updated. keep up the good job. good luck.

66

Almost starting month three and still no house…

Where did you go?

67

hello hassan … we’re all anxious to hear how your quest is coming along!

68

Any news?

69

Does anyone still think I was too harsh on hasssr earlier in this thread? I called BS and I believe I was right. I challenged him on a few things and he went away. I find no satisfaction in that by the way because it shows how badly newbies can be mislead. The reality is that this is a challenging endeavor, even more so today, and we don’t need a thread like this to lead people astray. There is plenty of houses out there for everyone and I’m willing to do what I can to help you get yours but you will never get there by following this guy’s example. Listen to Mike(Property Manager) and a few others on here and you will learn plenty. Good luck!

70

Brockovich:

I do not think you were too harsh, as you said anyone can make low ball offers and get rejected. I also disagree with trying to finance the deal. It’s not like we are talking about a $500,000 property. By financing the deal he is cutting into his share of the deal he is working so hard for. IMO he should use his cash and get the deal done, with the times we are in with the credit markets I don’t see private lenders lending out money either, but I could be wrong.

Hassan I have enjoyed the thread and the step by step process you have shown. It shows how much work actually goes on in this business. Good luck!

71

I think there was a lot of shotgunning involved here. You don’t have to put out 10 lowball offers at the same time and hope that one gets accepted. Hassan seemed to be going about things backwards from the way I do it. I don’t go around trying to put things under contract unless I’ve already got financial backing in place. Seems like he was way too strung out trying to throw out so many lowball offers hoping something would stick and also trying to meet with so many private investors.
On the property we have under contract now, we went from looking at it for the first time, to submitting the offer, to under contract all in 5 days.

72

It definitely looks as if Hssan put the cart before the horse. He could not find financing for one property so what would have happened if all of his low-ball bids were excepted??

73

It won’t take long before you get a reputaion among the RE community of not being able to close the deal. Getting the financing lined up is first priority in my book. Then you know what you can and can’t do.

74

Amen to the last three threads here. I too don’t waste time. I find something I like, make an offer, negotiate to an agreeable price and close the deal with my money. Done.

75

I really just don’t like wasting people’s time. I know if I can afford to do a deal. I don’t go into banks asking for a loan if I have nothing to put down. I don’t ask my Realtor to show me ten houses if I don’t intend on buying any of them. A lot of times, I’ll drive by houses first to see if I’m even interested in them before I have my Realtor take me inside. I’m not going to waste my time driving around town looking at places on my own if there’s no possibility I can do anything. The result is that people know I’m serious and able to close the deal on the places I look at.

76

Justin, I am the same way. I feel if you cry “WOLF” to many times when you are ready to “Pull the Trigger” and do a deal no one will want to help you.

77

Ok, here’s the update.

After several weeks of back and forth with the banks I have finally come to agreement on one of the houses that I have been targeting:

Cherie: asking $59,900, my MAO 21,940, my orig bid 18,649, bank countered at 56k, I up my offer to 19,500. Update: Bank countered at 50k. I let them think about it for a few weeks and the stood firm on my offer of $19,500. New update: guess what? The reo realtor called me on Monday and countered at $21,000, I accepted at a price of less than what i was willing to pay!.

The next step for me is to have two of my contractors take a hard look at the property and really let me know what the bottom line will be. If all goes well with the estimate and the title is clean I’ll be closing on April 10. I’m giving myself that much time so that I can verify that the property is what I expect it to be and doesn’t cost more to repair than I am willing to pay. I also have not yet secured the type of private lender that I am comfortable using to fund the deal, so I need some more time to work that.

I did locate 3 private lenders thru networking at real estate investing events, but since they are all pretty well experienced, I probably won’t work with them. More experienced investors tend to want to have much more input into what I’m trying to do, want higher returns than I am willing to pay (they want 20% or more) and want their funds back within 12 months, which is a deal killer in todays market as it eliminates my ability to sell with owner financing or on a lease to own basis. If I can’t secure better lenders I’ll have to either close with my cash or wholesale it to another investor.

I already have two investors in mind that are interested in buying deals where the cash on cash returns are at least 20%. That being the case, their monthly and annual math for the deal would need to look like this:

Est Rent $900 x 12 months = $10,800 (year)
Tax $92 x 12 months= $1,108 (year)
Insurance $54 x 12 months = $650 (year)
Total Net Income $754 x 12 months = $9,042 (year)

$9,042 / 20%= $45,210 which is the most that the buyers can pay in total to get the deal to work for them.

[b]To take it further and get to where they need to be:

Buyers max cost $45,210[/b]
Less repairs $11,280
Less Closing Costs $1,200
Equals Buyers MAO $32,730 (what I’ll sell it to the investor buyer for)
Less my cost $(21,000)
Equals my est profit $11,730

The numbers here are different because the investors are cash buyers that would hold the house as income producing inventory; not to flip it.

As for the rest the statuses are as follows:

  1. Exeter: asking $54,900, my MAO 37,350, my orig bid 31,748, bank countered at 48k, I up my offer to 33k Update: Bank countered at 47k, not very motivated and slow to get back with me. Update2: bank countered at 45k and I raise my offer to 34k.

  2. New Castle: asking $55k, my MAO 21,415, my orig bid 18,203, bank countered at 45k, I up my offer to 19k (might not get this one) . Update: Bank countered at 40k, still too high; I’ll let the bank eat silence on tis one as well. Still waiting for bank to get real, I’m upping my offer to 20k. I noticed that they lowered asking price on MLS to $49k from $55k and that it was originally priced at 70k; meaning that the bank really is interested in moving this one.

  3. Burnt Leaf: asking $60k, my MAO 35,299 my orig bid 30,004, bank countered at 48k, I up my offer to 32k. Update: bank still has not responded to requests for status on my offers. I’ll stand at $32k and have re-faxed the offer and left the realtor another message as the property is still actively listed at 60k.

  4. 3867 Trenton Dr, Snellville, GA (FMLS # 3788896): asking $59,900k, my MAO 29,330 my orig bid 24,931, bank countered at 31k, I up my offer to 26k. Update: bank is standing firm at 31k, I’ll stand firm at my offer of 26k and see who blinks first (won’t be me). b]Update: reo realtor called and said that its under contract as of March 2. Pending close date is March 25. I liked this one too, sad I couldn’t get it. I’ll monitor to see if it actually closes later in the month.[/b]

Obviously it’ll take me awhile to get the deals I want, but as i said before, there’s no rush. what I will need to do (and have been doing) however is look for some more houses to make offers on. I’ll have that list out shortly.

As for the process of trying to find other sources of private funds, I have joined 2 business organizations and am considering joining a couple of stock and mutual fund investing meetup groups here in the atlanta area (for those of you that don’t know what a meetup group is, its where people with like minds meet to discuss their goals and needs). The goal here is to meet folks with money to invest that are not as demanding as the seasoned real estate investors I’ve been dealing with that demand too much.

Talk to you soon…

78

most realtors can do this. do a google search for the term ‘flat fee MLS listing’ and your town. In GA it costs between 399-599 depending on how much support you want for the 90 days its listed.

79

I guess I need to explain a little more whats going on for the naysayers out there.

In this biz the last thing that you want to be is a motivated buyer, especially in a market where values are still sliding backwards. That being the case I take my time in making offers, however I do it consistently. Yes I will lose out on some houses, but that’s ok, becuase the ones I do get will at a cost that makes sense for me. In the case of the one I just got under contract, if I had just accepted the first counter offer that the bank made a few weeks ago, I would have lost out on several thousands of dollars in potential profits just cause i couldn’t wait a few weeks.

When making offers to banks you have to realize that the competition has dropped off drastically due to the fact that most potential buyers are not cash buyers and can’t qualify for an investor loan. Lenders have raised credit score requirements so high as to that it’s hard for folks with decent credit to cash in on a deal. At the same time these wonderful lending institutions have had the bone headed idea of closing those same potential customers lines of credit which has had the effect of reducing good credit scores as their percentage of debt usage has now been forced way up; narrowing the pool of credit buyers. What I’m trying t say is that you are now for the most part only competing with cash buyers, of which there was never that big a pool to start with.

When I make offers I know the max that I am willing to pay and I never exceed that amount. To get there I have to wear down the seller til I get the number I want. I’ll make offers every other week on the same house until I get there. I don’t just those on one house but several, knowing that some sellers will accept, some wont (and so what, someone will). It takes a while but it does work.

When you consider the fact that there really isn’t too much I can do about the topline value of the house, I have to target the cost as aggressively as possible. In this case time is my friend

btw, if any of you guys think that just making 10k on a retail deal is good money, you need to go to a seminar… :biggrin

80

Hassan,

At this point you have NO FINANCING IN PLACE. It does not matter how many accepted offers you get and how great a deal you get on each offer because as I said above YOU HAVE NO MONEY TO BUY.

Also, you are completely wrong about there not being any cash buyers. Now is the time when cash buyers are coming out of the woodwork.

http://www.dailybusinessreview.com/Web_Blog_Stories/2009/Mar/Cash-backed_buyers.html

At this point I am agreeing with brockovitch. You are full of BS. This thread has been entertaining but at this point you have shown yourself to be nothing more than a tire kicker wasting the banks time, the realtors time, and people who have been following this thread’s time.

To everyone reading this thread. Do a search on the name propertymanager and follow his advice. He is out there earning a living buying real esate. Quit wasting your time following somebody who has done ZERO and acts like he has the ability to be picky about who he will ALLOW to do his financing.

And for you to make a joke about somebody thinking a 10K profit is good is ludicrous. It just goes to show how much you don’t know.