wallstreet

[RockChalk]

I noticed your comments about RE investing. I am starting to get into this and I am very excited about working my first deal. A buddy of mine a long time ago got Carleton Sheets program and of course never did anything with it, so I borrowed it and went through the whole thing.

I was wondering about your website, what is the url? I'd like to take a look at it if possible. I am still extremely new at this and just now learning ways to locate REO's and other foreclosures. I live in KC and the investor market is pretty flooded right now. I have inquired on at least 20 properties and the bigtime investors have already snatched these up. Guess I better be more timely. I am trying to figure out how to get the info as soon as it hits the market, instead of waiting to see it in the classifieds.

Since I am just starting out, I am looking to get rehabs and rentals w/ very little down. Not a lot of cash on hand, a little bit of equity in my own home, but other than that, just trying to figure this market out.

Thanks
Matt

[Sports-Plays]

I know I'm not wallstreet, but I believe he may echo these thoughts.....Carleton Sheets is not going to help you. I have had the most success going to my local sheriffs dept. and getting a condemned home list. The list will have homes that have absentee owners and homes that are condemned due to wear and tear and lack of maintenance. Get a real estate agent to run a CMA on the properties in the area of the home and make an offer of 50% less than the CMA says. You will be making 10-20 offers before one gets accepted, but once it does, you are looking at some nice cash that can help you purchase a better rehab property with more profit margin. The biggest key is submitting offers. You WILL submit alot of them before one gets accepted. Go to your bank or any bank for that matter and get a list of REO's and make offers on them. Do it at the same bank for awhile and you will notice that after your first deal with that particular bank, they will be throwing offers at you!
What I do to maximize my profit is figure in the cost of labor for the repairs into the purchase price. Some people like to do the work themselves, but you will lose money if you do that. It's all about the first deal, after that, EVERYBODY involved gets a little quicker and gets you your money quicker too. The contractor works twice as quick, the agent works twice as quick, the title lawyer works twice as quick. It's easy, more people should do it. Good luck, listen to wallstreet because the guy is a financial stud!!


the ham mer

[wallstreet]

RockChalk,

Alot of what SportPlays says is right on the money. He is right about how Sheets program is for the beginner and the things he and I talk about are for much more advanced investors. I dont consider myself advanced that much, but going to the sherrifs auction and looking at NOD lists and pre-foreclosures is more advanced than Sheets.

I started with Sheets like 12 yrs ago..and I think he is great as fro motivation and for basics. I still like watching his infomercial and seeing what people have done. Keep in mind that for every 5 he has on his show, there are 150 that are struggling.

I would recommend watching Sheets program..find what interests you. I would recommend narrowing the scope of investing and see what you LIKE to do. You gotta see past the money to know what it takes to get the money. I would also recommend against getting caught up in the education market..that means there are 100 people out there willing to sell you a program, teach you at a boot camp or mentor you for a big fat fee. What I think is best (I have paid for some things, maybe into total 1500 bucks for education) is to research all the types of investing..so say there are MultiFamily properties, SF properties (to rent out) there are rehabs that SportsPlays and I do, there are Sub-to investing or Lease Option investing, there are flips and bird dogs and mobile homes..foreclosures, short sales..all sorts of things. Find out what you like to do and what interests you..then either buy a book at Barnes and Noble or somewhere local and read up on it. Then if you need a course go to ebay and find one.

Also, and this is a big must..find a local real estate club in your area and go to a few meetings. Get to know people who are investors and learn from the speakers they have and the groups that meet. Then research more and learn how to use resources out there (things SportsPlays was talking about) and then jump in. There is a point where all the research wont do you any good until you go out and make offers.

I will post my website addy, but I only want it up for a few minutes, so I will give a time EST that I will be back and post it..then I will take it down quick. My site is not for selling anything or for money, rather advertising for my niche in real estate.

Questions? Ask away!

[RockChalk]

Thanks

Thanks to both of you for answering my questions. I appreciate it. I did what wallstreet said and looked over Sheets tapes and I think I have found the few areas I am interested in. I think that is important to narrow down my focus.

I am smart enough to know how these info tape things work and the successes had. Like you said, it was very informative to myself, being totally unaware of RE investing and what it was about. For the experienced, I doubt it would benefit much.

What is a NOD report?

No big deal on your website, if you are not too inclined to put it out in the open I totally understand. No big deal.

You mainly focus on rehab's is that right? How much profit do you usually look for in a property before throwing out a number?

AND, do you get any appraisals of before and after scenarios b4 you make offers?

Thanks much.

[Sports-Plays]

Again RockChalk, I don't mean to answer a question intended for wallstreet, but I love discussing this stuff.

As far as appraisals go, that is the #1 indicator of whether or not you purchase a rehab. Let me repeat that to indicate the importance.....Appraisal is the #1 indicator!!!!!!!

Let me give you a VERY basic situation:

You have a list of 10 homes that are potential rehab properties. You narrowed down the list from 25 that you got from bank foreclosure lists, REO (real-estate owned) property lists, sheriff condemned homes list, THE LOCAL PAPER CLASSIFIED ADS (amazing deals to be had there), etc. Anyway, you have a list of 10 homes. You have found an agent that is willing to help you get all relevant info. (CMA's, title isssues, new schools or commercial buildings about to be put up). Of those 10 homes, you find that 4 of them are in your price range based on the CMA. The CMA will tell you what the AFTER REPAIRED value is in that area. So, House #1 (when repaired) sells for around $95,000. Because it is a distressed property, they are asking $70,000. A common mistake is that many novice investors ONLY see the immediate $25k profit. They don't realize, however, that there is the cost of repairs, insurance while you own it, agent commission, and most inportantly holding costs. It may take you 6 months to sell it, so you must factor in that monthly note until you do.

Anyways, 70K for the house. You should then hire a contractor to come out and give you an estimate for ALL of the repairs and a ballpark timeframe for completion. (Of course, you may want to consider doing the work yourself, if you have the time, to learn more about repair estimation. 2 houses down the line, you will be able to walk through a distressed property and calculate, with fair accuracy, the cost of repairing it.)

In this example, we'll assume that you use a contractor. After the inspections and deciding what you want replaced, the contractor tells you it will cost $16,500 for all repairs. So now, including 3 months holding ( at say, $750 per month) you will need to spend $18,750 to get the place fixed and sold.

Adding $18,750 to the purchase price of $70K, you only show a profit of $1,250. DON'T DO ANY DEAL THAT DOESN'T NET YOU AT LEAST $10K. (Believe it or not, I learned that from Mr. Sheets)
So the whole idea comes down to this....SUBTRACT the $18,750 from the purchase price!! $51,250!!! Will they accept the offer? Probably not the first time, maybe not the second time...but guess what, remember earlier when I said you have 4 properties...If you submit 2 offers on all of them, you will normally have better than a 1 in 8 chance of getting approved!!

Now you bought that house for 55K out the door and you go ahead and put $19k into repairs (maybe you wanted to add a hot tub, or a built in basketball hoop, or you wanted to throw a little more money into the kitchen, etc.) and you have yourself a home that will sell for $95k (closer to $100K because it's the nicest home on the block now that you've done so much to it)

You have made a profit of $21K - $26K in 3 months. Once you get 2 or 3 deals done, you can start working on multiple homes at the same time and you are looking at $300 - $400K per year!!

The moral of the story....APPRAISALS and SUBMITTING MULTIPLE OFFERS MULTIPLE TIMES is HUGE!!!!!

Sorry so long-winded!!!

The Ham mer

[RockChalk]

Hey, I love any advice offerred to me. You got me so worked up now I want to get my snow shoes on and go out and find me some properties. LOL (supposedly its about to be a blizzard here)

I had thought about doing rehab myself, but i have now heard from several people that is best to contract it out. I will take that into account as well.

One final thing, and not trying to sound too stupid here, but what is a CMA? Country Music Award? No, I know it is some sort of appraisal, just never heard the CMA term ya know since I'm a rookie.

I'm grateful for your advice and wallstreets. I am serious about trying to make this work for me as secondary income until maybe I can make it a full time deal. I might fire off some more questions to ya in the future.

Thanks again,
Matt

[RockChalk]

One more quick thing. Do you use an agent or broker for both buying and selling the properties? And if so, do you negotiate a rate with them knowing they can list it for you to sell?

And, do you use the same person to both buy it and sell it?

Thanks

[Sports-Plays]

CMA stands for Comparitive Market Analysis. Your agent will use this to determine the average price of homes in the area of the property you are buying. The figures are strictly derived from the most recent sales.

What you use as far as an agent is up to you. Call many agents and find one that genuinely WANTS to talk to you about this. If they just answer yes or no questions, they really aren't interested in helping you. You may want to call a firm and ask to speak to their newest agent. They will be much more willing to help you and create a long-term relationship.

Keep the questions coming my man!!

The hamm er

[wallstreet]

H ammer,

Good pointers and great discussion. I love rehabbing and I like the topic.

There is a formula I use that has worked and that many rehabbers stick to, it is in relation to an offer price.

You should stick to the following formula-

Offer Price= ARV (after repaired value) X 70% minus repair costs

So say that 95k property that H ammer discussed..here is my offer price-

95k X .70= 66,500 -16,500 in repairs= 50k offer.

Will you get these offers accepted? I dont know, but you can only offer what is affordable.. that formula might seem crazy, but is it really??? Not at all.

When you factor in buying and selling costs (real estate commish, title costs, any transfer tax that you have in most states) you are into the property about 10k or so.. and holding costs are higher than what H ammer said, at least for me. Included in holding costs are insurance (which is more costly than your typical home owners insurance..since the property is vacant. My current property it runs about 1500 a year) taxes, utilities, loan interest, interest if you borrowed the rehab funding, misc expenses too, like your cell phone, any advertising you do etc..

So if you stick to that formula you have a better shot at succeeding.

The property I have now and is on the market, I am asking 164,500- so my offer price was what??

164,500 X .70= 115,150- 30k in repairs= 85,150. I offered and got 82k. The property was listed for 105k..

How did I get it for that low??? Simple, I offered the bank (it was an REO) a closing within 2 weeks. They had another offer on the table for 10k more but the people would have to go traditional financing and the bank knew that the property wouldnt qualify in its current condition..so I got it. And I closed fasttttt..


How did I close fast? I used a hard money lender..that topic is for another day, but it is crucial in your success..

One other thing.. I wouldnt hire out any repairs that you can do yourself..and get bids that are realistic..get many bids..and know what a fair price is. I have a pal who works for a builder in the area and he has connections to GOOD workers..they came in fast and got finished fast..they have a reputation to uphold and have a relationship with him. I pay this guy a percentage of the profits when I am done..

I would also low ball every offer by more than you expect is reasonable.. you get an offer accepted and you wonder if you could have gone lower...so never leave cash on the table.. It took me a while to get an offer accepted, but if I can sell this sucker I will profit about 25k...

So I enjoy it but I sure hate the selling part...I want to be done and move on. I do one at a time for now, but may build up into more at a time..but not at this point..

The best thing you can learn is location..where you buy will determine if you sell or not..the one I bot is not in the best of locations and is moving slowly...so it is a lesson learned, but location is more important than any other issue.

Oh and my market is too hot..there are 100 people doing the same thing I am, so maybe where you live it isnt so competitive..but for me it is..everyone and their mother is an investor..

Hope it helps!

Oh I am not sure we said NOD= Notice of Default....it is a notice that a person going into foreclosure gets from the bank and it is published in most states..

[RockChalk]

WOW....

It's saturday and I feel I have been in school all day taking notes.
And my Jayhawks played like a high school team today. Guess they cant win them all on the road. They were 17-2 on the road in conference their last 19.

Guys I truly appreciate the ideas and formulas etc.

I have heard of hard money lending but really dont have a clue about it. If you are ever bored, I'd like to hear the details. No big deal though.

Again, thank you very much.
Matt