real estate deal analysis

Devil's Advocate: http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/

The article I posted was a discussion on multi unit family rentals, not homes. I agree that buying a home for its evaluated price will usually being you a worse return that any other investment vehicle.

I learned that if you correctly evaluate and estimate the cost of repairs of a home from a motivated seller you will on average, if you play your cards right, get a cash on cash return of 30%.

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I've been watching a project manager go through the process of "rehabbing" a home for the last 4 months. The purchase price was around 30% under market value and the construction and repair costs were around 40% of the purchase price. I think the end result will be a 150-200k profit. WIll post pictures if anyone's interested.

I'm more interested in the marketing side of finding these deals, and negotiating a buy contract with the intention of selling that interest to someone who rehabs.

On October 20 2013 08:39 GameOverNoob wrote: I'm more interested in the marketing side of finding these deals, and negotiating a buy contract with the intention of selling that interest to someone who rehabs.

Seems like kind of a middle-man that good REI's won't use bc it's added overhead to something that depends largely on finding value in the first place. Every added middleman is a tough sell to people like that imo. Then you have the super rich whose time is worth more than finding the deals themselves, but a lot of those kinds of people could easily plop their money into REITs for their real estate exposure and call it a day. Not sure there's a large enough share of people who would find a service like the one you are thinking of useful.

Also, if you yourself put the time and effort into finding the deals and negotiating a buy contract, why not make the purchase yourself? I suppose I like the idea of selling the "value" to an investor if you are bearish on housing and just want to be on the commission side. I'm not a real estate investor just trying to draw some conclusions. Thanks for the article link.

On October 20 2013 17:39 thewh00sel wrote: Show nested quote + On October 20 2013 08:39 GameOverNoob wrote: I'm more interested in the marketing side of finding these deals, and negotiating a buy contract with the intention of selling that interest to someone who rehabs. Seems like kind of a middle-man that good REI's won't use bc it's added overhead to something that depends largely on finding value in the first place. Every added middleman is a tough sell to people like that imo. Then you have the super rich whose time is worth more than finding the deals themselves, but a lot of those kinds of people could easily plop their money into REITs for their real estate exposure and call it a day. Not sure there's a large enough share of people who would find a service like the one you are thinking of useful. Also, if you yourself put the time and effort into finding the deals and negotiating a buy contract, why not make the purchase yourself? I suppose I like the idea of selling the "value" to an investor if you are bearish on housing and just want to be on the commission side. I'm not a real estate investor just trying to draw some conclusions. Thanks for the article link.

Investors will pick up properties that hit a target price, specifically less than 70% of the "after repair value". I live with one of those investors, and he'll buy anything in that target price range as long as it's in the city that he works in. and if you've become a reputable wholesaler, the deal will be picked up over a conversation and then closed for the buyer within 10 days.

Wholesalers have to good at a lot of different skills to be successful though, namely appraisal (comparing properties within an area that have similar features and sizes) knowing a good contractor who will accurately evaluate the cost of the repairs, and construction if applicable. (the skill being relationship building, i guess), research (you need to have access to direct MLS which is only available to real estate professionals), marketing (you have to get these motivated sellers to sell to you), and finally, and maybe most importantly, negotiations.
someone said "if you're not embarrassed about your offer, you're offering too much"

It's not easy, but nothing worth while is.

I like it for it's high income and because it demands informal education. Also, It's a well rounded job, that touches on most aspects of business.

It's in your best interest to buy the property and do the rehab yourself. The people who don't buy and rehab themselves are usually under funded, or don't want the hassle.

The house i'm in now was purchased for 500k, redone for 200k and will be sold for 900-1.1

If there was a wholesaler involved, he would have profited 15-20k.

If a wholesaler wanted this deal for himself, he'd have to either have 1m cash, or financing for almost a million. And if you're doing the rehab, you're acting as project manager, so you can't leave the city.

where is the risk for the wholesaler? nothing? just have to be good at what you do?

There may be risks if you don't find a buyer.

Someone quoted "I have a rehab property under contract at 41 cents on the dollar with approx 15-18K needed in repairs, and my last day of the due diligence period is next Friday...I truly do not want to cancel and would take a lower assignment if needed, just to get the deal closed. What am I missing? Does anyone have ideas that I haven't tried or should I just cancel this one and move to the next?"


I guess the answer is no. At least where this person is doing business.

There is a possible risk for the wholesale. The seller might demand an earnest money deposit that is non refundable.But, from the people I've been listening to, they've found ways of never having to do it.

http://homebuying.about.com/od/buyingahome/qt/EarnestMoney.htm

I have gotten that site's newsletter for over a year now and I occasionally find some great articles there. You are describing a lot of what I want to do when I finish college, (even though I don't need a college education to do it.)

I had an instructor at my first school (community college) that taught a course on Real Estate Investing and was an advocate for wholesaling as a means to get started in real estate. There is a lot of money to be made, but depending on how you conduct your business some wholesaling practices can be considered dishonest.

Looks like an interesting guide, I look forward to reading it.

Thanks for sharing.