Mainly, I’m lazy, so since I have access to the MLS I just do it that way. I search on “handy”, “must sell” “rehab” “wants out” “will finance” “foreclosure” “bank owned” “corporate owned” “estate” etc.
We tried calling ads, calling boarded-ups and other ways, but at least I know whomever lists their home is at least already thinking about selling.
If you don’t have access to the MLS, I found you can get almost the same info from a few good realtors - you can find them by calling the “handyman” and “foreclosure” ads in the newspaper - usually, there will be 3-4 names that keep coming up. These realtors specialize in the “good deals” (read rehabs), and will usually send you a list of similar properties for a couple of weeks. You have to keep calling them and reminding them that you are still alive and still want their lists, or they drop you off if you don’t buy anything for a couple months.
I also keep track of all the offers I make, and I make the offer again once a month or so. The one house I have a contract on was listed at $65K (about $10K under market) about 90 days ago. We put an offer in for $40K, was turned down. A month later, they dropped the price to $58K. We did it again. Turned down. Another month, they dropped the price to $55K, we offered $40, they countered at $45 - and we took it. But it took a long time for the “counter” offer to come back - after they saw that their house is still empty, and two or so contracts fell through (no financing). We can close quickly, so that’s a big plus.
Well, five weeks ago, we began our real estate career. Had some bumps (previous post) and disappointments, but it’s finally paying off - and now it’s snowballing so fast we don’t know what to do! We thought at first it seemed impossible to find deals - now we have too many! We’ve decided not to look anymore - until we see “just this one more”…
The homes I mentioned before - none of them closed. One was pulled at the last minute by the “investor”, the other the lady decided she was not emotionally ready to sell the home her mother had passed away in.
But now, here we are!
First, the biggest lesson we learned - have all your team at the ready! It’s hard to build a team when you’re already running behind! We found financing, a title company, appraiser, handyman/contractor (very trustworthy, and a partner to boot), inspectors (for our own peace of mind on the first deals), roofers, carpet people, etc. but it’s all a cr*pshoot until they do the first one for you.
Closing this week - 3/2 Purchased at $42,000, resale value $65,000, not a rehab; new roof, etc. Section 8 tenant, paying $750/month. Our loan - 75% LTV at 8% = $363.85/month (PI) + $100 (TI) = monthly cash flow of $750 - 483.85 = 286.15. May sell it by the end of year once lease is up - don’t like the area much; depends. Closing costs rolled in to loan - $0 down! (Oh, OK, we paid $100 deposit)
Should close next week - Contract at $48K, 4/2 zoned for duplex, needs roof, good wood floors, comps at $90K (for duplexes) or $75K (for SFH). Will borrow $62,250 from bank (same deal as above), 8K rehab, and probably resell for quick cash (hate to do it - should split into duplex and keep - also has room to build in the back, already zoned - if I can sell another for quick cash, would consider holding long term). If we sell: Cash at close: 11K - 8K rehab = total $3k. At sale: $75K - $62,250 = $12,750 => total $15,750. Minus $100 deposit.
If we revamp and rent as duplex (assume rehab will cost all of borrowed funds)- (2/1 each side), can rent for about $650 each side: total income $1,300. Mortgage payments on $62,250 = $520.68 + $100 TI = $1,300 - 620.68 => monthly income of $679.32.
Fire damaged duplex. 2/1 & 3/1. Only one room has damage from fire; the rest has damage from firefighters. Need re-roof in that room - the rest looks new, no leaks. $15-$20K rehab. Comps: SFH at $75K. No duplexes sold in area in past 5 years, although there are some. On water. Huge yard. Contract price: $28K. Can borrow: $56,250. Cash after rehab = $8,250. Rent 3/1 for $650; 2/1 for $600. Total monthly cash flow: $1250. Mortgage payments: $470.50 + $100 TI. Total income: $1250 - 570.50 = $679.50.
Last, but not least, this one we may partner through an investor - too many at a time for the bank - comps $70K (seems to be the going rate in the neighborhoods we work). Contract price: $45K. Needs roof resealing (Bahama roof) and two ceilings (bathroom, back room) need fixing. Evetything else in great condition, even central air, new water heater - doesn’t even need much paint! Does need tile/carpet. Appliances still in working order. No damage inside. Yard needs work - mostly hauling “stuff” out. Estimated repairs: $6K. Total cash needed: $51,000. Total cash out: $19,000, split two ways, $9,500 each - still not bad.
Will let you know how they turn out. Keep your fingers crossed for us.
BUT be careful you are new and I would recommend doing one at a time until you get your feet wet and have some success.
Now some people are going to think I am negative but I would rather you succeed one at at time than do what I did.
I got too carried away when I started (by the way I did not have this website when I started) and I said the same thing you did “just this one more” But things happen sometimes and it got ugly.
PLEASE don’t think I am trying to discourage you as I am not. I want you to succeed beyond your wildest dreams. But you have to learn to walk before you run.
Good Luck!!! Keep us posted on your success I hope to learn from you.
I completely agree with you. It just seems that we are getting contracts accepted, so we decided to play. We’ve only got $100 into each deal, so worst case, we lose a couple hundred. And we overestimate our repairs, and have a contractor/handyman/partner to boot. We’re trying to cover as many bases as possible, and still play (getting over analysis paralysis was tough, so maybe we’re overcompensating??)
It’s a conventional bank, that has an “investor” loan. They will loan up to 75% FMV, for purchase and/or rehab. Only thing is - you must have excellent credit, no blemishes. We’ve established a pretty good relationship with them. It’s the only bank I know that would do this for us - we’re kind of guinea pigs. And, there’s a limit to how many you can have out at a time - the higher your credit score, the more you can do. However, I have been diligently tracking down the Fannie Mae HomeStyle Investor Mortgage (with limited success) and as soon as I get any good answers, I’ll share. I was given 4 names today from Fannie Mae of lenders who “participate in their program” - and not one had a clue what I was talking about!!!
Carmen,
I have the fannie mae regs on them, the list of lenders who supposedly do them, etc etc. So far, NO ONE that I’ve talked to is doing them yet - too much servicing. I have a local guy who says he has a lender who will do one of that same nature … let me ask if he can handle your loan in the Miami area and email you.
Great meeting you guys Saturday!
Carol