Ok guys. I’ve been on the sidelines LONG ENOUGH! While I’ve had a couple of rentals before, I’ve never had more than one at a time, so I still consider myself a newbe.
I just looked at a duplex and will probably put in an offer on Wednesday. Here are the details:
1740 sf 2br 1ba each side
needs: roof, paint interior and exterior, kitchen counters, new toilets, heat pumps (2), and gravel for the driveway
Asking price is $48,800 and this is a foreclosure. Area is decent, although this is a low-income area. Most of the houses on this street are single family and some of them are well-kept. Rents in this area are $575-$625. I should have no trouble getting $600. Section 8 list is a mile long here!
I’m thinking of offering $40-$42k. Fix-up should run $8-$10k, so I’ll be “all in” for $50-$52k and rent will be $1,200. Sounds pretty good?
That sounds like a very solid deal. Where are you located? Those numbers sound similar to the numbers I deal with in OH and much of the MidWest. Many smaller cities in fact have great cash flow. I assume you have some equity as well? How much is a realistic ARV? The best part about these deals is the multiple exit strategies. I am curious to see how this turns out, best of luck.
BTW write multiple offers… As the buyer you have the right to decide not to buy if your offer gets accepted as most wont…
In a low value market where the asset is so strong don’t play games shorting the deal a couple thousand dollars. Also pay your agent outside of escrow or as an add to the escrow and let the listing agent have full commission. On a 42k deal you’re talking 1260 more…
Doesn’t make sense to screw around and miss the opportunity and an agent who is getting all of the commission and still only doing half the work will be extremely motivated.
Hire an agent. Let him do the work. Pay him and get the profit. Work hard to set a deal with the agent. Think less about doing it yourself to save a few bucks.
Yes I do have an agent looking for deals. She brought me this one, but I was outbid! That’s ok, I’ll keep looking. I’ve got my eye on a 3/2 SF that looks promising. Thanks for all of the input. Next time I will write multiple offers like Michael said!!!
Michael Quarles, that is tremendous advice. Writing multiple offers and cherry picking the best deal(s) is the way to go.
What I particularly like is paying your agent outside of escrow. I have lost a handful of highest and bests recently. Then I find out a month later that the listing agent also was the buyers agent and the sales price was just above what I offerred. So what is happening is the agent is advising his clients so he can get the double commission.
We all know it happens all the time, I have been the victim far too many times but now I have a solution. Thanks Michael!
This is an REO. The property is being sold “as-is, where-is.” Rather than paying your buyer’s agent outside settlement, why not just use the listing agent from the beginning and let the listing agent get all the commission? The listing agent may even reduce his commission a little if he needs to make your offer more competitive than a slightly better offer with co-operating agents involved. Win-win, right?
Bank will want to use their own settlement attorney/title company, earnest money deposit is usually held by listing agency anyway, offers are usually evaluated based upon net to the seller so no face to face presentation is involved. Listing agent has to provide the addenda the bank requires with an offer. The buyer usually has to have a proof of funds letter and pre-approval letter to submit with his offer, so the buyer probably needs to have his financing already lined up.
I don’t see that a buyer’s agent brings that much to an REO deal. Maybe I am just experienced enough to be biased but I like dealing with the listing agent directly and having one less “cook in the kitchen”
Dave T your advice is typically 100 percent right on however this time not so certain.
There is no such thing as a Buyers Agents they are called SELLING agents and for a reason… Certainly an agent who is double ending a transaction is more motivated to see the deal completed however most “Listing” agents are not “Selling” agents. What I mean by that is they dont put people in their car and drive them around looking for deals instead they find sellers who want a for sale sign stuck i the dirt out front…
A new investor would be better served to find an above average real estate agent to point them in the direction of opportunity and then write that opportunity through the Listing agent… Playing the “Finding” agent a commission as well. As for trying to nickle and dime the listing agent out of a percent, which in this deal is less then 500 is stupid… Heck pay the agent more not less. You may not get better or more service however you will get more attention to your deal getting complete.
In the old days I use to offer the agents an extra 750 if the transaction closed on the contract close date. Understanding that most “Bonuses” are not considered commissions on a Broker / Agent independent contractor agreement so depending on the split relationship between the two that 750 could actually be 1500.00
As a Broker and former listing agent I too have too much experience to know that when a buyer asks for a reduction I show them the door and sell it to a buyer who can perform.
The mistake that the investor made here was they waited to make an offer in the first place… Anyone thinking about buying a house please dont think too long… Some bad ass real estate investor will cut your you know whats off and beat you to the deal.
Every contract I have seen allows a buyer to decide once they have an offer accepted whether or not they want to actually buy at the price they offered or at all… Therefor write the offer and buy some darn houses…
The bigger problem is that (assuming it is an REO) the investor would have been better served to have their own lead generation system in place and not have to rely on the MLS which at times can create a fire storm with over priced competing offers. Its much easier to negotiate a short sale or buy a free and clear… Heck a John Locke Special and Subject to.
As a Broker I can say with a lot of certainty that most agents are not worth the money they are paid. The system is flawed in that respect. The system is geared to offer everyone the same amount of compensation and we all know that someone who can hit 400 is worth more then someone at 275…
Which is why the powerhouse real estate agents become listing agents. Thay have learned that signs make money…