Hello, I’m a newbie investor, and I recently had a talk with a big time developer, that told me that this is a bad time to be Rehabbing a house to sell because of the way the market is going at this time, ( a buyers market). Can I hear some other opinions on this? From what I have been reading, any time is a good time, if you do your home work, and stick to some important rules.
I think rehabbing to rent is more profitable right now than rehabbing to sell.
I think the best approach now is to buy at a HUGE discount, do not rehab the home, instead sell it at a great price to a buy and hold investor.
I have purchased 4 homes like this in the last 6 months. Here’s what I did.
First one was a dump, all these homes came from leads from my marketing so the houses were never on the market. (that’s big) Owner was an elderly pack rat, house filled with junk. Explained how expensive it is to clean these out and just talked with her. She never called a realtor because she was ashamed of the condition of the home. I bought it for $70K. The cheapest house in that town at the time was $125K and this house was bigger. Now here’s a trick for moving homes in slow markets…I offer the listing agent a 12% commission if the home is sold in 30 days, after 30 we drop down to 6 %. I told her to give me a listing price based on that. What this does is eliminates the typical realtor delema. They usually tell you what you want to hear instead of the reality. She came back with a 30 day price of $110K. SOLD IT IN 8 DAYS for $109K! That agent DOUBLED her commision on that sale, and she listed the incentive on the MLS for other realtors to see!!
The next few were all based on the same premise. BUY LOW. Walk away if you can’t, don’t fix anything, leave money (lot’s) on the table for the next guy and move on.
Combined, those 4 homes netted me over $90K in 6 months and I’m in New England. Housing is dropping by the month. Investers are still out there. If it’s priced right it sells, if it isn’t, it doesn’t.
Rehabbing, in my opinion, creates longer carry times, greater costs, and puts you in direct competition with the other 100,000 homes for sale out there. It’s very tough to beat being the cheapest home in a neighborhood. I’ll gladly leave money for the next guy if I get mine today. I think the advice your developer friend gave you is spot on. You need to find a way to stand out in this type of market. Being the lowest priced home will do that better than the best remodel you could ever do, and based on the time you have invested the pay off is huge with these types of flips (hate that word) My holding time on these 4 homes combined was…24 days, two of them sold first day on the market! That’s as good as it gets in my book. ALL SOLD WITH THE 12% COMMISSION INCENTIVE. It creates a feeding frenzy for realtors who are struggling now. Think about it, which house would you take your client to, the lowest priced with the best commision? Or the others ?
fdjake,
Thanks so much for sharing this strategy. I’ve been think the same thing. Increase the realtor commission and see what effects it has on showings. I’m glad to hear it works, I will do the same.
My only question in this is where are you getting your comps from? Do you have your RE license? Or do you pay a realtor a fee for the MLS listings.
One guy I had some conversations about RE said he has an agreement to get as much MLS data sent to him as he requests, and in exchange he agrees to list or buy every home that is sold via a realtor with this guy. Is doing something like this beneficial or a bad idea?
I don’t need MLS data for my pricing. I am NOT a realtor.
I’m not interested in what people are ASKING for their homes, I want to know what they are SELLING them for. That information is published weekly in my newspaper under real estate transactions.
I also browse local real estate agents sites for their listings. I KNOW what the number should be BEFORE they even get back to me with it.
I have them put the price on it as a check and balance. So far I’ve never been more than $5000 off. And if I’m $5000 heavy I go with the lower number.
It all comes down to REALLY KNOWING your market. It’s not rocket science folks. If a nice 3 bed, 1 bath, ranch house ordinarily sells for $250,000 in your market and you have the same version of that house as a DUMP then you can back out the price from there. Let’s see, if I buy this for $80K and put it on the market AS IS for $135K IT’S GONNA SELL. No doubt about it. Clean out the crap and move it!!!
Oh, and about the MLS data…If your paying a realtor 12% AND letting THEM price your homes, I’d imagine getting ANY info from them would NEVER be a problem. As I always remind realtors, there’s a lot more of YOU, than there are guy’s like me out there! (steady, consistant customers)
nice story
sounds like it’s easier said than done.
how in the world do you find these deals to buy that are so far below market that you can offer 12% comm. to a realtor and still make money?
How does anyone find deals. By asking for them!
I have an old friend who became a millionaire in real estate. He used to tell me all the time…
“Kid, how the hell are people going to sell you their house cheap if they don’t even know you want to buy it!”
Simple but true. I target my advertising directly to these people. I don’t waste my time with banks, realtors, lawyers, all these people know EXACTLY what a home is worth. Did you ever get a GREAT deal on a car at a car dealer. No you didn’t. You didn’t because he’s an expert at knowing what that car is worth.
Now having said that, if you can deal DIRECTLY with owners who have been in these homes for long periods of time and have lot’s of equity it stands to reason you should be able to buy some of these homes at a good discount, especially if they need extensive repairs. I not giving anyone my secret sauce, sorry boy’s. But I will tell you this. MARKET TO YOUR TARGET. Elderly people have homes that need work. They also have needs that most realtors won’t get involved with. Like picking through a lifetimes worth of junk to get at 3 things some little old lady wants to keep. Or finding homes for the 15 cats she has in the house. Or, transplanting a tree her late husband planted. You can’t make this stuff up.
As far as the 12% commission goes. If your that tight on your buying vs. selling price your doing some thing wrong. The difference in that commission on a $100,000 sale is $6000. I’ll tell you what, I’ve had homes sitting on the market for up to 6 months, either way I end up paying out the $6000. At least this way I get my money out faster. If $6000 is going to make or break me, I shouldn’t be going ANYWHERE near that deal.
Wouldn’t be allowed to do what??? Take a 12% commission check?? Or send MLS sales data to a client who just gave them their last 4 SOLD IN 10 DAYS LISTINGS.
Yea, I now a lot of realtors who wouldn’t do that right now! Give me a break. Or maybe you were talking about selling homes that aren’t rehabbed?? No can’t be that because EVERY bank owned home on the MLS say’s “AS IS, NO DISCLOURES, MUST HAVE PROOF OF FUNDS.”
It’s not classroom, it’s called 20 years experience investing through every type of market, the good, the bad, and what we have right now, the ugly.
Markets like this are ripe for this type of buying. People assume their home isn’t worth top dollar because they let it go without any upkeep. Now they want to sell, everything they see on the TV is telling them the market sucks. They call me and I go over, make them a cash over, close in 5 days, I’ll pay for the moving truck. Here’s a check made out to you, I’ll drop it off at my lawyers, you can pick up the rest of your money in 5 days. (99% of the time these people actually ask me for MORE time, 5 days is too fast) Sign here…
Do you think I’m buying a lot of these homes from Doctors, Lawyers, Engineers or Rocket Scientists?? No, can’t say I’ve run into any of them. These people are not sophisticated. What I do see is people who are sick, elderly, have no money to pay the sky rocketing property taxes on their home, no money to fix the roof that’s leaking, or the boiler that needs replacing. People getting divorced, people who inherit homes and live out of state. Lot’s of people who just NEED to sell. If you can’t buy homes in THIS market for 50 cents on the dollar you need to find some other way of making money.
I’ll go one better…you send me a PM and I’ll give you my realtors web site, YOU contact him and ask for yourself. He just sold a house I bought in Roanoke VA. Purchased for $8000 (yes, you read that right $8000) and sold in 10 days for $27,000. I did nothing to it!!! I don’t know what “class room” your in, but in mine, an over 300% return on my money in 10 days is as good as it gets!!
Don’t accuse people here of lying just because YOU can’t wrap your mind around a concept.
No I don’t know any broker that would allow anything other than the usual commishon amount to be used, its called ethics. Where are you finding these deals with a low enough or no mortgage that would allow for these types of purchases? This is kind of an old stratagy that really hasn;t been applicable in todays markets. How were you paying cash, private lender?? Where you re-selling or re-fi and renting out? Is so for both what was your holding time? Sounds fishy still… By the way I’ve been into this for 17 yrs. The things you are talking about would have been MAYBE possible for a brief time say in the late 90’s but for a short time and not in all markets. Do you sell book and tape courses? by chance.
First of all… I DONT’ SELL ANYTHING…(but houses.)
That means NO BOOKS, NO TAPES, NO DVD’s, NO SEMINARS, NOTHING!
Second, If you have been in this business for 17 years as you say you have (I find that fishy, to be honest) You would KNOW, that there is NO “usual commission amount” some agents get less some get more. According to your logic an agent who took a 6% commission over a 5% would be unethical. Or how about the 2 1/2% commissions used by For Sale by Owner sites. I guess any realtor taking that 6% commisssion has ethics problems because others take a straight 2 1/2%.
My listing agreement has a PERFORMANCE incentive in it. I PUT IT THERE, not the agent, ME. If I wanted to give an agent a 20% commission there is absolutely nothing stopping anyone from doing that. If I want to write in there that he can only show the house on the first Tuesday of every month I can do that too. It’s HIS decision whether to take the listing based on those conditions.
I literally pay for these properties with a bank check drawn on my account. In other words CASH. I’ve been in this business a LONG TIME.
Anyone worth his salt could and should have seen this mess coming 4 years ago. I DID! I sold a bunch of rentals when things where INSANE! I had multiple higher offers on 3 family houses THE DAY they were listed. THAT TYPE OF MARKET CAN NOT LAST. I am sitting on cash, I am using it to market to my target audience, and BUY these properties. I done this all before. Anyone here remember 1991?? Same circus, different clowns.
I notice you haven’y taken me up on my offer to contact the listing agent. I wonder why??
Here’s how the last one went… You can confirm every word of this with the listing agent. In addition Roanoke has all it’s property tax info online so checking out my story should be as easy for you as accusing me of lying. An elderly lady in VA. calls me, she has a home in Roanoke that has been cited by the city for minimum housing violations, uncut grass, roof leaking, basically a dump. She needs to sell it. It was left to her by HER parents. She has done NOTHING to the home in 40 years, and I mean NOTHING. I go to Roanoke to meet her. The home is a disaster, but structurally it’s solid, working heat, electric and water. She’s asking $13,000. I offer her $8000 because the house is filled with junk. I explain to her that she can pick up her money in 5 days from a local attorneys office. She agreees that with the work the home needs and the city breathing down her neck she has to sell. $8000 DONE DEAL.
The same day, I have my realtor come by. I tell him. Here’s the deal, I want you to give me a listing price on this house that will sell it in 30 days. IF… let me repeat that, IF it sells in 30 days I will double your commission to 12%. After 30 days we go back to 6%. It’s up to you, the money is there, you just have to get this house sold to get the bonus. ( The 12%-6% is written on the listing agreement) My realtor, being a PROFESSIONAL, listed the 12% / 30 day bonus on the MLS for other agents to see (that’s why they call it an INCENTIVE.) Try to stay with me here. So he basically split the commission with a BUYERS agent each getting 6%. The stategy works. A buyers agent had a client looking for a rehab rental. He paid $27,000 (buyer to pay ALL closing costs) I happily pay the realtors a whopping $3240 commission and I pocket a nice neat $15,769 for a 10 day turn. So basically I took $8000 out of the bank and put back $23,769!!!
I’d be more than happy to provide you with the address and realtor info. But I guess finding out you were wrong sort of hurts.
Listen, this guy has made up his mind that this doesn’t work. IT DOES.
It ain’t rocket science, low prices and increased incentives to realtors GET YOUR PROPERTY SOLD! I can’t believe I have to explain this.
Notice I let the AGENT price the home? I did my research BEFORE he even got there. When I first had contact with the seller I immediatley starting getting data on comps in that area. I don’t waste my time with people who want 80% of what their house is worth. It’s too tight. I want to buy at a 50% or greater discount. I’m not living on this money, it’s all gravy. I’ve spent a lot of time getting to this point. You have to buy when the market is giving it away. If I can’t steal it I don’t buy it. Very simple.
I’ve done it, been doing it, and will continue to do it. If ANY of you doubt what I say. Call a realtor you know and ask them about an incentive plan like the one I use. Not ONE of them will tell you it’s unethical. Paying for performace is what built this country.
Onedeal sounds like he’s got a fitting name!
First, there is no such thing as the usual rate for commissions. I f you ask any realtor, commissions are all negiotable. Also, I am buying one for for .50/100 on the dollar that needs $10,000 in repair costs and am bought another for .35/100. This market right know is ripe with these type of deals.
Ok, Ok. if its working for you fine. I don’t know of too many markets where buyers are waiting to buy houses in 30 days around here even priced right your looking at 6 months maybe more. Its been that way for about 2 yrs now. So youre says the reason agent can’t sell houses is because of lack of commision not lack of buyers? I belive nation wide they’re are agents leaving the business by the droves because of poor sales.
I do know one thing FOR SURE.
There is no way you’ve been in the real estate business for 17 years. You may have THOUGHT about the real estate business for 17 years, but no way IN it.
Your posts are laughable. Are you trying to tell people here that with 17 years experience as an investor you never knew that agent commissions were negotiable??? Hold on, I just fell on the floor laughing.
The funny thing is YOU said MY methods might have worked years back, are you kidding me??? Your unaware of commission’s being flexable yet you KNOW my method doesn’t work. Yea, OK, something doesn’t work here all right. I think it’s your theory. See mine isn’t theory, I can PROVE my results, there’s a big difference.
Your next point is even better. You say you can’t sell a home in under 6 months??? Where? The Ninth Ward of New Orleans? That home in Roanoke sold to an INVESTOR in 10 days!!! I N V E S T O R. There were 3 other homes like it on the market for $35,000. He saved $8000, THAT is why it sold in 10 days. On a house in that price range that is a HUGE percentage savings for that investor. I left some money on the table, he saw that, an bought FAST!! See the plan here??
I NEVER said houses aren’t selling because of commission. RE-READ my post. I think you like making things up. What I did say was by using a performance incentive and an aggressive price you can make your property stand out to hungry real estate agents.
Just the fact that your still bickering about this after I offered you concrete evidence tells me you have no idea what your talking about.
And one other thing…the reason agents are leaving the business is THOSE agents thought it was EASY money. My agent has been doing this for 25 years. He’s seen the good and the bad and makes money in either market. He, like ME, CHANGES strategy when the market changes. You may want to think about doing the same. Your missing the entire ship, never mind the boat on this one.
Dead on fdjake. I actually hadn’t thought about this strategy when I bought a house last year for $7500. I wanted to do the rehab at the time to learn more about the craft of doing rehab as it was only my second flip but if I found another deal comparable to that today I would exercise your same strategy. I will try anything once. I too have continued to buy and sell in this market. The rehab I started Monday I bought for $17,500 directly from the bank(owner is in bankruptcy) short sale prior to sheriff auction. ARV is 90K and I plan on listing for 80K after 30K in rebabs and holding costs. I have been successful with this strategy as buyers/lookers see the value I provide by pricing it under market value. Anything in that priceline doesn’t begin to compare. Even in a difficult market this strategy has been working for me. My last three houses have been under contract within 60 days and I’ve closed within 90. I have a good relationship with VP of the bank and this was a condemned property they did not want to take possession of as the city would have then started abatements against them for the problems. 57K was still owed against the mortgage so they took a serious haircut to eliminate the problem. Bottom line there are plenty of deals to be had but most of them materialize in less than conventional ways. This guy is nowhere close to an experienced investor. I have been doing this 10 years and am still learning something new everyday. Prior to rehabbing, I was buying multif family units for long term holds. I am leaps and bounds in front of this guy. This guy is good for my ego but not for advice.
though i HATE the thought of paying a realtor that kind of a commission, OF COURSE they will sell yours first.
I have had realtors tell me to my face that they wont even show a property for less than 3.5%. But i think that your strategy is good! Realtors in michigan anyway can make whatever you want to pay them. Unethical? YES! but a good strategy.