wholesaling outline...critique please! - Posted by EWest (MI)

Posted by Brent_IL on March 20, 2002 at 21:56:18:

Disclaimer: I’m not a true rehabber. The only non-gardening tools I own are a screw driver, a hammer, and pliers. I avoid them all, especially the gardening ones.

I think the challenges you will face will be substantial.

From your repair questions, I got the impression that you don’t have a construction background. I’m not sure that the limited time that you have available over the next six weeks (Fridays) will be long enough to get up to speed.

If your quest for a hard money lender is successful, you’re looking an acquisition price of around $4,000 to $8,000 paid for a full rehab candidate with an ARV of $50,000.


1 - Your friend’s broker should be teaching him how to use the MLS service. If you don’t make unreasonable demands on his time, he may as well practice on your requests as on any other.

2 - Sold comps are a good indicator of FMV when you’re comparing apples-to-apples.
Make sure the parameters match the property under consideration and the comps are current. During a normal market in northern Illinois over the past few decades, houses have actually sold at between 91% and 96% of listed FMV; this doesn?t count bad original listings. It’s hard to know if a given property has “promise” until you get a handle on rehab costs. I just read a post at http://www.creonline.com/wwwboard/messages/86169.html that gave some guidelines. If you search the archives you will find others. KentC once posted some costs as ?Waste line $3000, Kitchen $8-15k (call it $12), bath $5k, carpet $2500, linoleum $800, walls interior $1000, paint interior, $1500, paint ext $1500, furnace $2k (CHA)-$8k (northern basement boilers or the like), doors $500, misc unexpected $2000, landscaping $2000.? I copied the costs, but not the URL. In my area the costs are slightly higher.

3 ? When you?re looking for houses that can be wholesale flipped to another investor at a profit the primary source is bank REO?s. They are unlikely to respond to an offer that has exit contingencies for anything other than clear title.

4 ? I?ve found that detailed free estimates are done by the companies charging the highest prices to homeowners. Their market is not rehabbers. Sometimes inexperienced workers looking for their first customer will go into more detail. That said; many good tradesmen will give you a quick estimate if they have the time. It?s more convenient to reach them by phone in the early evening. As has been posted hundreds of times, you need to get good referrals. Home Depot once gave me the number of the roofer who bought the most roofing supplies from their store. He not only met me at the house, he spent ninety minutes explaining why, based on his overall construction experience, I shouldn?t buy the property. The cost for saving untold thousands of dollars was $35.00. He told me to mail a check to his wife.

If you accept the premise that your wholesale buyers are going to want an amount equal to the amount of repairs as their profit, subtracting $25,000 plus profit doesn?t give you a whole lot to work with.

5 ? When deciding if you can make money by doing part of the work yourself the considerations are time and the ensuing holding costs, and ability. Remember that your buyer would rather do most of the work so he can pay less for the property. Joe Kaiser wrote an article on ?Maximizing Profit With A Prehab? in the How-to section onsite.

Best of success with a daunting task.

wholesaling outline…critique please! - Posted by EWest (MI)

Posted by EWest (MI) on March 20, 2002 at 19:16:09:

Ok…I mentioned a few days back that I have a very modest plan in mind for the next month and a half. I want to find 1 property, put it under contract and flip it for a quick $3000 or so in order to pay off a couple bills, purchase either Bronchicks or Cooks(leaning towards Bronchicks at the moment) wholesale course and Bronchicks Corp. course.

Here are is the way I have invisioned it going(I get a lot of time to think, I sit on a forklift 11 hours a day, 5 days a week, just not a whole lot of time to actually get much done other than that)

*Remember, I only want to get 1, maybe 2 deals done…not looking to set the world on fire.

  1. I have a friend who just got his realtors license but he is busy getting things going for himself right now so I do not really want to bother him until he gets comfortable at the company he just started workin at this week but you can trust me, I will be using him every which way I can once he gets going. I would like to work with a realtor as much as possible to do this deal with…does sending a fax to them describing what you do work well or would I be better off by just calling or heading to a couple offices this friday(only day I get off before late afternoon)?

  2. Once I find a property that looks like it has promise is it possible to have my realtor run comps(excluding any new builds the last few years?) for me and would they be a reliable figure?

  3. Get it under contract with contingescy(sp) such as inspection, getting clear title…actually using bronchicks contract.

  4. For an estimate of repairs is it a good idea to take a contractor with me that will offer free estimates(if I can find one, shouldn’t be to big of a problem I hope) or should I just follow Steve Cooks advice and subtract $25K + my profit(the houses I will be dealing with for this deal will more than likely run $55K or less ARV.) Or should I call around to local rehabbers and/or contractors and ask what a complete rehab can expect to run on a particular house? How do you suggest I go about it?

  5. Now I got the house under contract, approve of inspection, have about 3-4 weeks to close, time runs out and I find myself stuck with a contract I was unable to assign because I messed up(payed a little to much, bad area, whatever)…I don’t want to have to walk on my seller(I can not get traditional financing at a bank right now due to some credit problems I am taking care of) I was thinking of finding a hard money lender who will lend based on the property. Seem to be having a hard time finding a lender however, everyone insists(well all 2, still looking) on a credit check and want decent credit.

I do not really want to rehab myself at the time being, but am definitaly interested in it eventualy. Is there any profit to be made by purchasing it with a hard money loan and doing some basic fix up or will the interest, points, holding, ect… eat up all my profits since it would not be a complete rehab?

If things go correctly in a month or 2 I will have got a house under contract, ran my ads, did my advertising and flipped it to another investor or really ambitious handyman with the funds to follow through on the purchase and have a nice little profit in my lap to get me moving in REI.

Any suggestions would be appreciated.