Rehab Myth or Truth??

Rehabbing, Fix and Flip, Rental Properties
1

Hi,

I am new to the process but have been doing tons of research before I purchase my first property to flip. I met with a realtor the other day who works with many types of investors. One thing he said to me has spooked me a little away from moving forward with my flipping. He told me that if you use financing to flip a property more than once or twice the banks put you on a “list” (kind of like a black ball list) and no matter how good my credit is, I won’t be able to get a loan because they know they wont make money off of me because I will be paying the mortgages off so quickly. He then went into an hour conversation how lanlording and buying houses long term was a better investment. I personally don’t have the desire to be a lanlord, I still want to flip homes but I am concerned about his comments. Have any of you ever experienced this?? ???

Sam

2

Hey Oceans,

It’s “Landlord” my friend. Why are you listening to a Realtor? And I love realtors but…Realtors are a vehicle – not an end to your means. If you believe them then tell me, how are people making money in real estate?

Don’t let one person put an end to your dreams. Learn your market, do your research and most important – Get started.

My best of luck to you – you need to pay more attention to more than one person. I’m glad you found this area.

3

That is rough. A good agent should be your partner (not necessarily money partner) and possibly a mentor in a deal. They should help provide the analysis and market knowledge to make themselves worth their pay. I work with a lot of new investors. Unfortunately, I have a huge list of new people who want to flip properties, but some don’t want to follow the steps.

When you’re looking at a rehab, you really need to know the area first. If you’re looking all over town, you aren’t focusing. Next, you need a good money partner or loan and an exit strategy. You also need a reliable general contractor or list of contractors because you have to know your real costs before you put an offer on a property. After a fair amount of deals, you’ll have a better idea of true costs.

Most new investors just want to start driving around looking at houses without having a plan. I’ve seen impatience get the best of newbies because they just want to buy a property without doing enough research. You can find a rehab property, but it will take time, patience, and proper planning.

4

I so agree with these replys. If you listen to all the negative things naysayers preach you will become mired in self doubt. Listen to the positive things those investors around you are doing. learn, follow, revise, perfect, teach. Besides if youre worried incorporate and get a buisness line of credit and use it. you guarantee the debt but it will never see your personal fico period.

blessings

Brian

5

There will always be someone to shoot your dreams down. If the realtor knew so much about making money on property she/he would be doing it, not just helping others to buy them.
I have rehabbed and sold a home and acted as my own GC with only the knowledge I gained from years of reading. I had a great designer helping me.
I just asked a question about firewalls in apartment to condo conversions on another investor site. They had the nerve…get this…to tell me I didn’t know enough about construction. They said I should only do what I know. Then they suggested I look into financing options which had nothing to do with my firewall question. I can pay cash so I don’t need financing or discouragement. Instead of giving me a simple answer they went out of their way to discourage me.
If we only did what we know none of us would have learned to read, drive, or anything! You have to jump in to learn. Do your own research. Draw your own conclusions. Talk directly to bankers. I never heard of blacklisting for flipping but if one bank has the practice, switch banks. Most bankers love a customer who pays money back quickly.
Don’t be afraid to tell a realtor you are paying them to see real estate, not for their opinions. Don’t sign an exclusive contract. Try to get several realtors working for you. Make sure your realtor knows they can be replaced and that you will buy from the realtor who brings you properties fastest. Realtors need YOU. Without you they don’t make money.

6

Be careful about your attitude with the agent or anyone else on your team. The best ones also don’t need you to be successful. Good relationships are based on mutual respect and you should value the opinion of a market expert. You don’t have to be overt about letting an agent know you don’t need them and can use someone else…that’s obvious. The reason you’d choose that particular agent is because they know the market and will be a good addition to your team.

If you’re cocky and nonchalant with these professional relationships, you could lose out. A good lawyer, agent, contractor, CPA, property manager, etc. are all part of your team. None of you may “need” each other, but you bring each other success.

7

Where’s this list at? Are we living in some kind of communist country? Who has the blackbook? What kind of Dr. Suess world is your realtor living in?

8

I bet they keep this ‘blacklist’ right next to the ‘permanent record’ that they apparently compiled on my behalf in High School. Lord knows I heard about things going on my ‘permanent record’ alot when I would act up in school.

9

“Oh and I like my agent and think she’s pretty on the ball… but, as my wife has reminded me (and no offense to agents out there), agents are basically upscale waitresses/waiters. They’re there to provide a service to us… shuttle us around to look at houses, fill out paperwork for us.”

“Don’t be afraid to tell a realtor you are paying them to see real estate, not for their opinions. Don’t sign an exclusive contract. Try to get several realtors working for you. Make sure your realtor knows they can be replaced and that you will buy from the realtor who brings you properties fastest. Realtors need YOU. Without you they don’t make money.”

I like Dee’s response to this nonsense.

If I’ve said it once…I’ve said it a thousand times; “watch were you get your advice.”

That goes not just for the agent giving erroneous information…it goes for knuckle heads here on REI who know absolutely nothing about agency, or what an agent’s function is (no offense to knuckle heads here).

I’ve got 8 sales in the pipeline, 12 hot prospects & 150 total prospects. As Dee’s so aptly pointed out…good Realtors don’t need people with attitudes.

Some dipsy-doodle acts like I’m an upscale waiter…they get dumped. Someone doesn’t respect 15 years experience, education, and knowledge…they get dumped. Someone comes off like “I’m paying you to see properties, not for your opinion”…they get dumped. It doesn’t happen often, but when it does…an agent is best advised to get rid of the problem before it grows.

People talk big in an internet chatroom, but in the real world…the only agents who’ll work with ‘Mr. & Mrs. upscale waiter comment’ are 3-6 month desperate newbies.

Moreover, agents talk. Someone treats them disrespectfully, word gets round…pronto.

Someone wants my expertise…they better act accordingly. Last time I checked my license it didn’t say “dump here.” I need a client who thinks I’m a “shuttle service” like I need a homemade root canal without anesthesia.

Some of this is terrible advice…especially if you’re a newbie!!!

-Infowell

10

Did you ask for more details? Who told them this information and do they have documentation? I’d want to hear this sort of thing directly from a bank president (who had not been drinking too much spiked eggnog). Maybe you can speak with whomever provided the information to get more details. Often, the details get lost and you end up in a quandry like this one.

I think it’s odd for the agent to move away from a potentially profitable business because of this advice. It doesn’t make much sense, actually. Maybe the agent is speaking about title seasoning issues?

Until you track down the source, we could be guessing all day.

11

Infowell and Dee are telling you right, don’t mistreat realtors because they can be a great asset to your network. Infowell said it best.

12
If you're cocky and nonchalant with these professional relationships, you could lose out. A good lawyer, agent, contractor, CPA, property manager, etc. are all part of your team. None of you may "need" each other, but you bring each other success.

Excellent advice, Dee! Not only could you be losing out by doing those things, your reputation can be severely, and permanently, damaged. Word can spread quickly, and you can actually find it tough to get your foot in the door with any reputable lawyer, agent, contractor, CPA, PM, etc.

As Gary Keller says, your reputation is one of your most valued assets.

13

Good point. It is tough finding a good lawyer and others, especially if you are new. New people should not feel bad if they are referred out when they meet the big players. As you build your business, you’ll meet good professionals while networking or they’ll come to you.