Near a deal on a foreclosure(getting nervous) - Posted by Frederick Waller

Real Estate Investing Real Estate Gurus
#1

Posted by JoeKaiser on March 09, 2001 at 11:02:08:

This is a business about using your brain, not your back, and the last thing I would ever recommend to anyone is to “do all the unskilled labor yourself.” Frankly, becoming an unskillled laborer is way down on my list of things to do today.

If you took the same time and energy it takes to mask and pressure wash a house but instead invested it in researching your local painters, obtaining bids & references, checking credentials, etc., you’d likely end up with a painter or two who you can depend on (and at a price that makes sense).

And even better, the next time you need to paint a house, it’s a phone call away, period. We’ve painted the inside of 6 houses this year, all done well, all done reasonably priced, and all done over the phone. No surprises, no messes, no problems.

That’s where you want to be. This is one piece of the puzzle that is so easily figured out and handled. I can’t imagine anyone thinking about having to do their own masking and pressure washing everytime they need a house painted.

I suspect the people who read this board are more interested in becoming investors, not painter’s helpers.

Joe

#2

Near a deal on a foreclosure(getting nervous) - Posted by Frederick Waller

Posted by Frederick Waller on March 08, 2001 at 11:11:07:

I have an offer of $13550 on a foreclosure listed at $19900. Two houses on the same block, in good condition, and smaller square footage sold for $42900 and $47000. There were a couple of HUD properties that sold for $15000 and $20000 but they needed serious work. I am using $45,000 as an after improvements property value. A contractor gave me an estimate of $16,000 to fix up the property. $4000 of that was paint, and $3500 was carpeting. I will do the painting, and can probably find a work crew to do the carpeting for cheaper than the contractor.

The realtor just called me and told me that before the bank that owns the property would give me a counteroffer, they wanted to know how fast I could settle? Is that typical before a counteroffer is offered ? Also, the water was not running when my contractor went through so he said it could cost around $1500 if there are frozen pipes.

This is my first deal. The numbers look good. My intuiton tells me that this could be a good move. Any suggestions on how I proceed?

Should I pick up a buyer’s agent at this late stage of the game?

What types of contigencies are allowed on properties sold “As-is”?

Any suggestions on how to reduce the price of the fix ups ??

I have a hard money lender that will loan my 65% of the APV. I also have $15,000 on a Discover card, $5,000 Home Equity LOC, and about $6,500 in cash?

I am working with the listing agent? Should I pick up a buyers agent?

Any suggestions would be greatly appreciated

Fred

#3

Re: Near a deal on a foreclosure(getting nervous) - Posted by tony(whitneytrainer)

Posted by tony(whitneytrainer) on March 09, 2001 at 10:48:44:

make sure you have good comps, clean title, and a set price and don’t go above it. do as much work yourself and supervise the rest. Good Luck! Tony Y. Atlanta, Ga

#4

Re: Near a deal on a foreclosure(getting nervous) - Posted by Vic

Posted by Vic on March 08, 2001 at 16:20:35:

Fred,

I would seriously consider taking Joe & David Alexander’s advise below.

To answer your other question though, there really is no need to get a buyer’s agent involved now unless you don’t know how to fill out a purchase agmt. or you’re unsure how to proceed on this. Is the property listed? If it is, then I might consider using a buyer’s agent then (they can receive a commission from the listing broker), but otherwise no. So it really depends on whether or not you know how the process works.

But being that you had to ask the question in the first place, I’m guessing you might need some help. So all in all it might not be that bad an idea for you to do.

Vic

#5

Re: Near a deal on a foreclosure(getting nervous) - Posted by David Alexander

Posted by David Alexander on March 08, 2001 at 16:03:55:

$4000 for paint and $3500 for carpet…

What are they painting with gold inlaid brushes.

I’m having a whole 3,000 sq. ft. house done for 2/3’s that.

Listen to Joe… there are better things to do than painting and fixing houses… like doing more deals.

David Alexander

#6

Painters make $10 an hour . . . - Posted by JoeKaiser

Posted by JoeKaiser on March 08, 2001 at 14:47:29:

Let someone else paint the house. Every dollar you save painting it yourself will get eaten up by the time it takes you to get it done. When you’re financing purchases on credit cards, time is money.

Whenever you’re paying more in fixup than the actual cost of the property itself, you’d better be darn sure your numbers make sense. Add $13,500 and $16,000 together and you’re already getting very close to retail value.

This is a big project where even if you do everything right (not likely), where the bids are dead on (not likely), where you get a full price offer (not likely), you’re not even netting $10k.

Fred, there are easier ways to make $10k.

Sign it up, call your fix up investor friends, and see who will take it off your hands for $6k - $8k more than you paid for it. They can take that $16k figure and reduce it by two thirds and actually make a profit.

Picking up checks is more fun than picking up paint brushes anyway, and every painter I know drinks more beer than he should. I’d hate to see that happen to you.

Finally, rehabbing properties financed with hard money loans and then lease optioning them isn’t such a hot idea. The cashflow get eaten up in the interest payments, and if you think rehabbing is fun, you haven’t lived until you’ve rehabbed the same property twice.

Joe

#7

Re: Near a deal on a foreclosure(getting nervous) - Posted by Kevin - Whitney Trainer

Posted by Kevin - Whitney Trainer on March 08, 2001 at 11:38:09:

Dear Frederick Waller,

From what you said it sounds like like you may stand to make a nice profit.

I’m Kevin Wessell. I teach the 3-day Purchase/Option, Lease/Option training camps for the Russ Whitney group.

The hard money lender idea is a good one. I think you are right on track. Usually, if the property needs significant repair, the hard money lender will pay you in installments as the work proceeds. Now there are many hard money lenders that will give you up to 80% of the value now, so shop around.

Fix up quickly so you can have income as quickly as possible…and pay for the fix-up from the hard money loan.

Then either sell quickly or do a lease/option. When you put a “Rent to Own” ad in the paper your phone will ring off the hook. So, don’t worry about being able to sell or lease the property once it is fixed up.

If your figures are correct, I would move ahead without fear.

All the best to you,

Kevin Wessell
Whitney Trainer

#8

Re: Near a deal on a foreclosure(getting nervous) - Posted by rw

Posted by rw on March 08, 2001 at 11:23:24:

Fred,

I have passed your post on to a few very astute Russ Whitney Trainers.

Look for an answer or some suggestions within the day,or so.

Keep up the progress.

Russ Whitney

#9

Re: Painters make $10 an hour . . . - Posted by Pete Whitney Trainer

Posted by Pete Whitney Trainer on March 08, 2001 at 23:53:00:

The last post was right…you can lose your shirt doing rehab if you don’t know what your doing. Most deals lose all the profits doing the rehab cause it eats up all your profit.To protect yourself, buy the materials yourself.Ask for the contractor price when you inquire about buying materials.Do all the non skilled labor yourself so you don’t pay skilled labor prices for non skilled labor, such as pressure washing, taping off things to protect from overspray, caulking,paint what doors and windows you can yourself, paint interior rooms your self cause they are not high and dangerous, and then go to like a Sherwin Williams paint store and tell the employee that you have a house prepped out and “paint ready”, do you know of a painter that will come and spray the body of the house for $500, labor only. The average spray man can paint the body of a house in about 3 to 4 hours.At $500 bucks, he makes about $125 an hour to do the body and you do the trim and the prepwork. This will lesson the cost of a $3000 paint job to about half that if you are willing to do the prepwork.

#10

Re: Near a deal on a foreclosure(getting nervous) - Posted by Vic

Posted by Vic on March 08, 2001 at 16:15:54:

Kevin,

Can you give us the name of someone who will do a hard money loan at 80%? That sounds awfully high. I’ve heard of 65-70%, but 80%? Is this true hard money lending where they loan based on property only?

Thanks,
Vic

#11

Re: Near a deal on a foreclosure(getting nervous) - Posted by fwaller

Posted by fwaller on March 08, 2001 at 14:01:01:

Are there any contigencies I need to make sure I put in the actually contract. The realtor has a letter of intent from me. Am I being a little nervous thinking about getting a buyers agent now ??

Also, the water was not on and the furnace was not turned on when my contractor went through. My contractor did say that the furnace looked good and the pipes were recently insulated so hopefully there will be know bursting pipes.

Give me some things I must do to make sure I am not purchasing a property with some hidden problems

Fred

#12

Re: Near a deal on a foreclosure(getting nervous) - Posted by Frederick Waller

Posted by Frederick Waller on March 08, 2001 at 11:35:57:

Thanks !!!