You and your buyer should'a gone to the auction..

Hi Realty Check,

Very nice deal. Let me ask you about an ethical dilema I've been thinking about (this is not a critique, just an honest question). Is it morally right to make $30K and not give anything to a seller?

Perhaps I'm not thinking about investing as a business (but as a charity), but did you have these throughts in the beginning? If so, how did you deal with them?

Btw, I'm a total newb with no serious deals under my belt and I'm also an Agent.

My personal take on that question is whether or not the homeowners are taking any risk. If I'm taking all the risk and the homeowners are taking none, then I doubt I'd give them much more than moving expenses.

OTOH, if they're walking away from $200k in equity, I'd be hard pressed not to give them something. I think it's all situation-dependent.

In Realty Check's example, he's expecting to net $30k, but only after investing almost $90k (he said full cash payoff + closing and repairs). To risk $90k to make $30k is only a 30% return, and he's assuming all the risk. What if it turns out there is an underground oil tank that's been leaking for 20 years? What if the sellers decide at the last minute to dump Quickrete down the drains (I've seen it)? What if the septic system needs to be replaced?

If any of that sort of thing happens, there goes a huge chunk of his profit. All of that needs to be taken into consideration. When all is said and done, if Realty Check decides to throw the seller a thank-you, more power to him.

Mine wasn't a big deal, but it was from MLS, which is amazing in my area because 95% of MLS deals are bad. The listing was for a lot in a very hot area for 95k, but you had to read the text carefully to see that it was actually two half lots (45x60 and 55x60 or so).

I learned about the deal Friday at 4pm. The agent said she was leaving at 5pm to present offers because she already had well over asking. We wrote an offer for $115k, sight unseen for a non-contingent cash close in 7 days with the thought to flip once we close.

Friday afternoon of the closing, there was a cloud on the title, so the closing was delayed. We wrote an amendment to extend to Wednesday. I found a buyer that Friday, just before the seller signed the extension and we did an assignment for 15k plus my fees. New buyer closed for us and we got paid on Wednesday.

Hi Ya'll,

I'm very interested in investing as a career. I was just wondering how you get the money to buy and flip your first house. For example: If I find a 3br, 2bathroom for 50,000 that needs about 10,000 worth of upgrades, where do I get the money to do that? Do we take out loans or is finding investors easier?

Now, If I do sell the house in 1 month for 100,000 hypothetically does the title company or the bank refund me the money or what?

I am a college student and would love to do this a career and would just really appreciate any assistance.

Thanks

Got to www.reiclub.com and you can read as many articles and listen to endless audios as you want to.There are countless other websites also.

Though I'm a newbie myself, I can tell you that the hardest part of RE investing if FINDING a deal. In other words, your job is to find a house that will sell for 100K after you do the repairs.

As part of finding a deal, you'll have to figure out the repair costs and with these in mind, make an offer on a house.

In your example, if you find a house that is listed for 50K, and presuming it needs 20K of work, you'll have to determine if it will sell for 100K after you are finished with your work on the house.

As part of the step above, you need to determine the holding costs and figure those in your profit. If the holding and closing costs are 10K, then your profit will be around 20K

(50K purchase + 20K rehab cost + 10K holding/closing costs = 80K)

100K net sales price - 80K = 20K profit

You'll get your check from the title company.

Thanks for the break down of system. I really appreciate it. My only other question would be can someone just go out there and buy a property and do what we've stated above? Are you involved in flipping properties?

Also, if the house cost $50,000 and I assume that the repairs cost $20,000, would I be able get a $75,000 loan to cover the price of the house as well as the renovations?

Thank you

In my understanding, to get 75K loan (50K purchase and 25K repairs), you will have to go through the hard money lender. These lenders specialize in rehab loans - the percentage is higher than that you'd pay for a conventional mortgage and the term is usually 6mo-1 year, however, they'll lend money based on the future value of a house.

You can expect to pay close to 15% interest, however. Some lenders will expect a monthly fee and some may be able to roll the monthly payments into your loan balance. As you can see, your 25K profit may evaporate rather quickly if things don't go as planned, that is why this business is not without risk.

From my understanding, conventional lenders will only lend based on the appraised price, which in most cases is pretty close to your purchase price. So you may be able to save on the interest, but you'll have to come up with costs for repairs.

So... to break it down for you even more, hard money is quick (usually 1 week closing, will give you money for purchase AND for repairs), but will cost you dearly. Conventional mortgages require that a house be in semi-livable condition (in other words, if the home is in a rough shape, some lenders may not lend you money for it), it takes longer to close on a loan 20-45 days, and you will not get money for repairs (though you might with some), however, your rates will be much better.

I'm looking for rehabs myself but am a newbie. My goal is to sell a few foreclosures, build the cash reserves and THEN start rehabbing.

Most non-Agents should really start wholesaling. That is, find 100K ARV house for 40K, sell it for 50K to a rehabber and make 10K in the process. Find 7 houses and now you can start rehabbing yourself.

Not really true...

You can get conventional, hard money, or owner financing on almost any deal if you know where to look. While some HML do charge higher rates, most are just a little over what you can find conventionally but with less paperwork and shorter terms.

In a true investment your purchase price should be well below AS-IS market value... that is the goal of an investor... buy below market value and market value is where an appraisal should come in giving the real investor an equity position at purchase. Most investors have the ability to have repairs performed below standard cost providing another point of potential profit.

Depending on the exit plan, hold or sale, other factors come into play on the total ROI.

You are actually thinking in the Traditional real estate mode with the added HML applied at the Usury end. Real investors think far more creatively in purchase mechanisms and many of us never actually put money out of pocket for the initial purchase, removing the need for any form of loans from any source for that element of the investment transaction. OPM (Other Peoples Money) is the key to many transactions and not talking about HMLs.

My most recents deals:

purchase fixup costs
30k
33k
38k
26k
30k

My most recents deals:

purchase fixup Sold Gross Profit
30k 10k 62k 22k
33k 4k 62k 25k
38k 5k 62k 19k
26k 5k 62k 31k
30k 14k 62k 18k
157k 39k 310k 115k

Total gross profit $115,000 my net will be around $100,000-$105,000

These five properties were all bought in the bad areas of town, in the slowest real estate market we have had in 17 years. I do none of my own work, and havent owned any of these homes for more that 5 months,

This week I bought a 2 unit for 30,500 and sold it a day later for what will be a 9,000 or 10,000 profit depending on whether I can assign it or if I have to do a back to back close. I liked this deal because I actually had my selling paperwork done before I had even completed my purchase paper work.

$9,000 net profit for looking at a home for 15 mins, and if I have to close, I will do so with my buyers money.

Eric Medemar
www.TheMillionairesBlog.com