We have our first deal about to go under contract. We are signing the contract with the seller this week (actually it was supposed to be this weekend, however its the holiday).
When you go to your database to contact you investors, what information do you share with them? So far, we have the comps for the ARV, tax roll on the place that shows tax assessments, tenant information including amount of rent and length of lease and what kind of lease, estimated costs for repairs, and particulars on the house, including information about the neighborhood. What else should a rehabber know to take this deal because this house is a steal and we want to make sure the deal goes through!
I would send as many pictures as possible so they can get a good idea of what condition the property is in. As far as comps and other information- if they are a seasoned investor, they will do their own due dilligence.
All the information you have will be helpful. One thing that is important in real estate investing, as well as in any type of business is marketing and presentation.
Here is an idea of what I use when putting together a presentation to an end-investor:
Rental comps (or actual rents if already rented out)
Projected profit (exit strategy)
Assignment fee
Putting together a nice, color presentation will give the investor more confidence that you’ve done your homework. If it is a seasoned investor, they will do their own due diligence, however if you’re dealing with someone new to investing, they may rely on the information you provide. Obviously in this case, integrity is of the utmost importance.
CONGRATS on getting your first deal going!!! Just that one step will put you head and shoulders above the rest. You guys rock!!!
Although different investors look for different information to make their decisions I would suggest developing a flyer on the deals you will be doing and having the following information on it.
1 Property address
2 Purchase price
3 Directions to the property
4 Repair costs
5 ARV
6 Information about the current tenants (how much they are paying and length of the lease).
This should be all the information most investors need to make a descision about them moving forward. The rest will be in their hands.
Do you guys disclose your assignment fee at first or just present it as part of the purchase price such as 150k property with 6k assignment, you present it for sale at 156k? I feel like if you did not disclose it right away it would make some buyers nervous, although i assume seasoned investors will know what the deal is.
Also, what do you use to make your flyers? I only have word, excel, power point on my comp.
If you do not own the property yet, you must disclose the assignment fee. The closing attorney or the escrow company will need to be made aware of how the deal is structured so they can set up the HUD statement properly.
On the initial flyer you are making for the deal, it is up to you how you break up the sales price. But, remember, the investor will find out before they close on the deal.
Well, yes they would find out when you sign the contract of assignment, however, I didn’t know if most investors waited… I feel like most buyers would want to know upfront.
My opinion on the up front part is that yes, you should disclose up front.
For one, as a wholesale, people expect that you’re making a profit. Unless you’re structuring a double closing, you’d want to make that known up front.
In addition, there’s a difference between purchase price $150k plus $6k assignment fee and purchase price $156k because the $6k will be due up front…not as part of their financing (at least that is how I’ve always structured my assignments).
Being up front lets the investor know that you’re putting all cards on the table and they’ll be more likely to both do more business with you in the future and refer others to you. Making $5k once is nice…but making it over and over is fabulous!!
In Microsoft Word there is a feature that helps you create a pretty nice looking flyer. You go to help, then type in a key word (like “for sale”). It will bring up a bunch of templates that you can work from.
If you’re emailing the fliers to people, I’d suggest converting it to a PDF first (just looks more professional). If you don’t have a PDF converter, there are several free ones on the internet. I used one called primopdf (the website is just www.primopdf). When you’re ready to turn it into a PDF, you just Print…but instead of choosing your desktop printer, you choose your PrimoPDF printer and it converts to a PDF file. Pretty cool. I think they probably all work along the same lines.
I don’t usually tell my buyers up front what I am going to make on the deal, and they rarely ever ask… I present the deal, and if they like the numbers, we move forward. They are aware that I am wholesaling it, and as long as they are getting a good deal, don’t care what I’m making.
Bring them good deals, and they will keep coming back for more…
When estimating repair costs for a wholesale deal, how do you estimate costs for things like foundation problems? We have a house that Comps really good and its very much in a “we care” neighborhood but they put an addition on to the house over a crawl space not a basement. The crawl space turns out to have an eroded support beam. The guy put money a couple years ago to put support posts in but it didn’t correct the problem. We know that to do some of these job that the addition may have to be jacked up a little to put the beam in. Also, the chimney is not up to living code. Its missing some bricks allowing air to come through into the house.
What would you estimate repair costs for something like this? We thought maybe 20k. What do you think? :biggrin