I buy houses that need to be rehabbed. I DO NOT rehab them. What I have been doing is buying exclusively from owners. (NO realtors involved) I buy with cash so I can close in 10 days. The last one I grabbed was an absolute dump that had been owned by an 80 year old woman, I purchased it for $8000 (way under market) Gave it to a realtor and 10 days later it sold for $30K . Even at $30K we were 5-10K under market.
I’m closing on a “home run” tomorrow, through my advertising I received a call from a guy who was facing foreclosure. He actually had a lot of equity in the home but had let things go so long that he had no time left. I came in 13 days before the bank was sent to foreclose. I offered $110,000 (he owed about $97K) which would leave him with about $10K after the close. After he signed a P&S I had my realtor drive by. This house is in a very nice neighborhood and as I always do, told my agent to give me the “MOVE IT THIS WEEKEND PRICE” he came back with $185,000 in AS IS condition!! I had figured an easy $165K so the extra $20K was a nice bonus. Comps in the neighborhood are $210K - $245K. Not getting a lot of these, but when you do it’s a beautiful thing.
Leave money on the table for the next guy and ANYTHING will sell.
I don’t want to mislead anyone here. I’m not buying 3 of these a month. What I do is buy NO LOSE situations. Our market is changing and no one really knows where it will end up. The bottom line is I’m not going to risk $100,000 to make $10,000, it’s too tight. That kind of profit margin is this market is a recipe for disaster. Figure in holding costs. realtors, cleaning, ect. and your screwed.
My life became MUCH easier after I made my first $100K. I’ve said this before here, but it bears repeating. Once you have $100,000 in the bank, in cash, your life changes. It really does… Think about it. That house you may have passed on 6 months ago because holding costs would have eaten you alive now becomes a profitable investment.
You buy it for $45K and sell it in a couple months for $65K that $20,000 is a HUGE return on that investment. The CASH becomes a factor when you have another property already on the market or in the purchase stage and would have to pass on that $20K score because your too tight. I’ll always have a line of credit. I use that for big scores, were I can afford some carrying costs. The $100,000 is for all those $10-20K chip shots that I used to have to pass on. You’d be amazed how quick those chip shots get you to your next $100,000!!!
For a new guy you have to use credit. There’s really no other way around it. 2 years ago I was using options to control property, it worked great when things were selling fast. Now that the market has slowed options are tough because you need to find an end user FAST.
Just keep plugging away. The absolute best advice I could give anyone is DO NOT quit your job. If you have an income that is paying your bills, real estate investing should be all gravy. That is the single quickest way to get to your $100,000. I also didn’t buy a single thing for myself until I had $200,000 in the bank. I still drive a 1994 Ford Ranger, it runs great, cost me $2000 over 3 years ago, and I LOVE pulling up to look at a house in it. It sends a message that your just like the person selling the home. I’ve seen nit wits blow deals because they drove up in a Mercedes, or Porsche. Distressed sellers don’t like having the obvious rubbed in their face.
When your starting out you do smaller deals, as you build your war chest you get bigger and better deals, or just do more. You’ll get there, just stay disiplined and keep that goal in sight. I guarantee you’ll look back at this time with great pride. Think about it, your building a $100,000 bank account from almost nothing. When you learn how to do that… getting $100,000 to $1,000,000 is easy, it’s just time at that point. That may sound arrogant but it’s the truth. It’s absolutely no different than taking $10,000 and turning into $100,000!!!
One other thing… It’s funny you mentioned being on fire. That is EXACTLY how this business works. I’ve been doing this for a long time. The one consistant thing I have noticed is that deals ALWAYS come in 2’s and 3’s.
I won’t get anything good for months, then out of the blue 2 or 3 great deals appear, usually in the same week! It ALWAYS happens this way, I have no idea why. THAT is were having that CASH pays BIG dividends.
I’m still doing sub2 deals, I just look for higher discounts now. I don’t like to get into a house for more than 80% and I prefer houses that move quicker.
In all honesty, I am not really all that active in buying… I just do the deals others refer to me because I want to cash couple of houses first to have some capital, and I am having some personal/family expenses that are slowing me down.
When the market was smoking in Florida I was flipping and rehabbing. Now I have shifted my business to wholesaling and doing lease options. I have also integrated a short sale outsourcing service for Realtors in Florida that is showing good profits. I utilize option agreements to take some money out of the middle of the deal through simultaneous closes and the Realtor gets commissions on both ends.
My lease option business has been booming as sellers can’t sell and are happy to give me options and buyers can’t buy because of problems qualifying for mortgages so they are happy to lease.