Hello guys,
I am a young lady and I have been looking into the REI business for a little less than 2 year now. I recently got approved for a hard money loan (70%, 14% interest, 4 to 5 points…). I have been working with a realtor that has tons of bank owned properties but I cant figure out a quick exit stratagey. Should I try and sell them to investors by getting the bank to take a discount and marking the price up a couple of thousand or should I just put them on the market and try and sell quickly buy offering little incentives and pricing them a little below market value. I have ideas but I need help from some of you men (LOL!) that are seasoned in the business. Any advice would be helpful and all advice is welcome. Ok… I’ll be waiting fellas …
You need to ask yourself a question…why aren’t all the other “investors” picking up these properties? You need to look at what it will cost you to buy into the property, then how much rehab work, for how long, and what will the house sell for when finished?
Can you carry the costs of the loan during the rehab process? Who will you sell these homes to? Why doesn’t the realtor have any of these answers? If they had buyers for these homes they should be more than happy to spend time with you to get a business plan together. It will only mean that they will sell more homes…You should also make sure that you have a very strong equity position in these homes BEFORE you buy them. Sometimes the profit margin in so small that you can easily lose the margin during the rehab phase.
Think about who would buy these homes, check out the sales prices for homes in your area and the marketing time, you may surprise yourself.
marc
Are you saying that it’s like nearly impossible to create good deals out of bank owned properties? Or are you saying that it will take a lot of work and due dilligence to find a deal that would make some good money?
“it will take a lot of work and due dilligence to find a deal that would make some good money”
That’d be the correct answer.
Thanks Marcus!!
I agree with marcus…it’s totally a numbers game. You can find some deals, just be very carefull in your due diligence to make sure you do not buy unless it is a really good candidate.
I didn’t mean to sound negative (although after reviewing my post it was), but having been in the same boat and talking to a lot of people about the same types of scenarios, there is usually something about a deal when , after careful review and number crunching, there was always something that popped up which made it look not so great. Keep your enthusiasm and keep plugging, it will happen for you!
I would calculate what the LTV is “after” the loan, which would include the points. When calculating, factor in if there’s a prepayment penalty (should be one) and then you shoud better understand your margins. After 20 years of sales and marketing, I know that nothing will move a product like building quality and THEN price. For example: If the LTV for your investment after points, etc… included reaches 80%, then be prepared to take 90% and finance the 10. The reason why you do this is to of course sell QUICKLY!!! The faster you “flip”, the better the return on your money. Most people don’t understand the “time” elelment involved in investing, real estate and otherwise. But don’t drop the price, be willing to negotiate the “terms”.
I hope that makes sense and wish you good fortune!
Sincerely,
J. R.