Posted by wil(socal) on February 04, 2002 at 17:56:49:
Thanks. Those are good suggestions.
Wholesaling - Top 10 Mistakes - Posted by Paloma
Posted by Paloma on January 31, 2002 at 09:56:34:
I’d like some opinions on the most common mistakes to avoid when wholesaling. From my reading I believe that two mistakes are:
Paying too much for a property (more than 60% FMV) and overestimating FMV such that rehabbers will not pay your price. It seems that underestimating the cost of repairs could also bite you. Please send me some more situations to avoid. Also, what is a general guideline for how much rehabbers will pay for a property (?70% FMV)? Thanks in advance for your advice.
Please do this - Posted by Bud Branstetter
Posted by Bud Branstetter on January 31, 2002 at 15:31:19:
Instead of asking for mistakes please rephrase the answers in a positive affirmative stance. As an example" Not doing your own due diligence to determine the value of a property and trusting someone elses opinion of After Repair Value." Would be phrased “Do your own due diligence to determine the value of a property after repaired.”
While we all have done things that we learned from experience could have been done better differently it would be better to make them guidelines to follow to be a successful rehabber.
Please post them when you finish.
Re: Wholesaling - Top 10 Mistakes - Posted by SCook85
Posted by SCook85 on January 31, 2002 at 13:13:47:
Top Ten Mistakes:
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Not doing your own due diligence to determine the value of a property and trusting someone elses opinion of After Repair Value
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Being a motivated buyer sometimes causes us to find ways to pay more so we can get a deal. I have done this many times and have tried to raise my ARV, cut corners on repairs, etc… to make a deal work. You need to stick with your original plan and not try to make a deal work because you want it so bad. The numbers are the numbers. You can’t change them.
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Trying to do to much at one time. I have put myself in situation where I had too much invnetory and not enough buyers. Don’t think about doing 5-10 deals per month until you have the buyers base to support it.
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Viewing amateur restorations/remodel projects as not needing to be fixed. Every home that I bought that had an amateur handy person doing the work always cost a lot more to fix then the ones that were just in bad shape. I’ve bought homes that had “new” kitchens but they were installed most likely by the homeowner who was reading manual on how to do kitchens. In the end all of their mistakes cost more to fix then if I would have just gutted it and started over.
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Beware of homes with bad floor plans. Although some rehabbers don’t mind doing a lot of work to their homes. Tearing down all the walls and reconfiguring the layout is something that we tend to stay away from.
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Homes on main roads are harder to sell then homes on the neighboring streets. I have had to reduce the prices of most of my homes on main roads just because people didn’t want to live there. Rehabbers tend to stay away from them as well.
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I have always had difficulty wholesaling 2 BR homes. I have never had a problem with retailing them once they are fixed up, but other investors prefer 3 or more bedrooms.
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Realize that as you go down in value, and down in quality of neighborhood that your formulas for determing your offer need to change. They need to get tougher. If you are in a neighborhood where homes are only worth $30k after fixup. A 70% formula will not work. I usually use a flat figure of subtracting $25k + repairs from the after repair value when I get into lower priced homes.
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Recognize the difference between a rental neighborhood and a homeowner neighborhood. Landlords and rehabbers usually have two different buying criterias. Landlords like little work and are concerned about cash flow. Rehabbers want something that they can resell.
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Don’t trust your buyers when they tell you that they have cash to close. They may be reading the same course as you. The last thing you need to do is wholesale a home to someone else who is trying to wholesale it. Know who your buyers are. Qualify them.
And one more for good luck,
- Take the first LEGITIMATE offer that puts cash in your pocket. You may get other offers, but they won’t always be legitimate. Especially adhere to this rule when you are dealing in worse areas. In good areas you can sit back and wait for more offers.
Happy Investing!!!
Re: Wholesaling - Top 10 Mistakes - Posted by Steve-DC
Posted by Steve-DC on January 31, 2002 at 11:55:18:
Paloma,
There isn’t a general guideline for what price rehabbers will buy at. They obviously need to make a profit, but some will do the rehab for less money than others. Obviously, the less the better for the rehabber, making it easier to bring them deals.
Here in DC, most of the rehabbers I’ve talked too want to make at least 30K on a deal…not really easy for a wholesaler, but possible. I’ve just recently found a few that will do a deal for 15-20K profit…guess who’s gonna get the first call from me when a deal comes up?
The bottom line is that is takes research and market knowledge to get a sense of what a “deal” looks like, number-wise, in your area.
Check out this post by Mark-NC, posted last August. He explains how he was making offers on wholesale candidates in his area that weren’t getting accepted. He had to learn what the rehabbers in his area were looking for and adjust his offers to accomodate that.
http://www.creonline.com/wwwboard/messages/arc_2001/arc_42/42367.html
Good luck, hope this helps,
-Steve
Re: Wholesaling - Top 10 Mistakes - Posted by Rob FL
Posted by Rob FL on January 31, 2002 at 11:17:31:
Some of the mistakes I have made in wholesaling are:
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Buying in bad areas. Makes them harder to sell.
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Not thoroughly verifying your numbers especially if the house is in not concrete block or has less than 3 bedrooms.
Hope that helps.
Steve- qualifying buyers comment…? - Posted by DHill
Posted by DHill on February 01, 2002 at 17:15:49:
Steve,
When you say to qualify the buyers… what steps do you take to do this? Would going for a closing date that is relatively soon be one method of qualifying (ie: they’d balk at the suggestion if they didn’t have the funds).
Thanks!
Slightly different opinion… - Posted by Ron (MD)
Posted by Ron (MD) on January 31, 2002 at 17:09:40:
[Other readers: Steve and I both work in Baltimore. He wholesales and rehabs, I just do rehabs. He makes about six times what I make 
Steve,
My experience has been different in a couple areas.
First, you caution against doing houses with poor floor plans. This has been a non-issue for me. One example that comes to mind is I have done several three bedroom houses where you have to go through the middle bedroom to get to the rear bedroom. Another example is a three bedroom home that I did where two of the bedrooms were separated from the bathroom by the living room and dining room (i.e., to go from these two bedrooms to the bathroom you had to walk through the dining room and living room). Initially, I kind of braced myself for negative comments from prospective buyers, but they were very rare.
The other difference I’ve had is with houses on busy streets. Frankly, I prefer these houses. I sell my homes exclusively via my sign in the front yard. More folks see the sign on a busier street. Secondly, some buyers like to be on the main drag because they want to be near the bus route. Finally, I promote my inventory on flyers attached to my sign in the front yard. People see the sign, grab a flyer and call about other houses, on less busy streets. (FYI, I’ve done houses right on Cold Spring Lane, Hilton St., Frederick Ave. and Edmondson Ave…all with pretty good experience.)
Ron Guy
SCook- Making offers - Posted by Gambit NC
Posted by Gambit NC on January 31, 2002 at 14:21:07:
Steve- I have your course and love it, but have one quick question. When you make offers are you simply sending the owner’s a letter of intent? What format do your offers follow? How do they look? Thank you!
Re: Wholesaling - Top 10 Mistakes - Posted by wil(socal)
Posted by wil(socal) on February 02, 2002 at 04:10:32:
He did not say how he got his buyers, especially when he got started. Do you know how?
Re: SCook- Making offers - Posted by SCook85
Posted by SCook85 on January 31, 2002 at 19:39:33:
Gambit,
I usually use contracts because it is what the sellers prefer to see. Letter of intent is something that I have used and will use it when sellers will accept it, but my ratio of accepted offers was much less when I used letters of intent.
Steve
Re: Wholesaling - Top 10 Mistakes - Posted by Steve-DC
Posted by Steve-DC on February 04, 2002 at 08:16:56:
Wil,
Here’s a few suggestions that other’s have used to find buyers:
-Try running an ad in the paper…
-Networking with other investors…
-“Follow the dumpsters”…find out who’s rehabbing that house and call them. Ask the workers who their boss is and call them.
-Ask realtors that you know who the big rehabbers in the area are.
There are many more. Be creative.
Hope this helps,
-Steve
Re: SCook> Why need of bank - Posted by wil(socal)
Posted by wil(socal) on February 03, 2002 at 12:23:19:
Why do you need a bank when you are just going to flip it without rehabbing?
Re: SCook- Making offers - Posted by wil(socal)
Posted by wil(socal) on February 02, 2002 at 11:17:42:
When you use the Realtor’s contract, do you cross out the part, if any, where it says it’s not assignable? If so, do you initial it yourself only or the buyer must initial it also? Or do you just attach an addendum?
Thanks