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Updated about 9 years ago, 11/13/2015
My mentor offers my first deal
so, some people I attend church with told me last year they were investors. I shared I wanted the same , so they let me use their real estate book. Last week, they offered to wholesale to me my first deal.
Question: do I need a real estate agent?
Facts: they have a contract with the seller, there is a tenant scheduled to move out Dec 4th, the sellers agent still has the sign in the yard and I can't see the property without proof of funds. I will be using hard money! I need comps and other info, should I get an agent?
Lastly, why would I ever need an agent to buy from a whole seller or anyone?
#3 All Forums Contributor
- Lender
- Lake Oswego OR Summerlin, NV
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#3 All Forums Contributor
- Lender
- Lake Oswego OR Summerlin, NV
@Dottie W. before you get too excited I would talk to a HML.. me being one I would not lend to anyone who is new ... who has as poor of credit as you do etc.
this is a private money deal probably friends and family if you want to do it.
- Jay Hinrichs
- Podcast Guest on Show #222
Agree with @Jay Hinrichs, this looks like a friend and family (or fools) deal.
My suggestion is to continue to educate yourself until you realize why this is not such a great deal and why other motivation like paying off your car with HML is a bad idea.
@Dottie W. Please find a GC. pay him for his time and ask him to give you a ball park estimate for the cost of the job. This could potentially save you thousands of dollars. This house looks like it needs a lot of work.
I'd also contact a realtor and ask him to run a CMA on similar properties or at the very least get 3-4 different comps.
In regards financing, HML can be very expensive. You need some skin in the game if you want this financed. You will need a down payment as well as 6-12 months of payment reserves.
What's the house worth fully rehabbed? You could easily be looking at a $50k rehab project on this one, it's not habitable in its current state and probably is pretty close to being a tear down. Needs siding, roof, windows, kitchen, sheetrock, floors, paint and I've only seen a few pictures. Unless the ARV is $100k run away.
Congrats on wanting to make your first move. However, this appears to be a huge project and more than likely just a tear down. This is not a project I would recommend for a first time.....actually no way I would even want to tackle
Fortunately, I imagine your HML will kill the deal by not funding the project
I'm not an expert at Wholesaling, but I do have extensive knowledge and experience in mortgage banking. Why would you even consider a hard money lender? You look like you are getting way in over your head. You need to pull back and get educated first before you get your self in a big mess!
I'm new to this as well. However, I agree with several others on this post, this deal sounds and looks like a bad one. Ask the mentor why his he or she handing this 20k deal over to you. I'm sure you're a very nice person and people just want to give you things, but I'd still ask some more questions.
Run, Run far far away. Just by looking at that house you can tell it is pretty much a rebuild. You need all new siding, a new roof, new windows - you are looking at $20-25k on the outside ALONE. Unless that house can sell for $150 after rehab then you should run away. Your first project should not be so complicated nor should the margin be so tight that you could use money. Also, there is no such thing as a free lunch, no one gives anyone $20k that easily.
That house looks like it needs to be bulldozed. The land is likely worth a lot more than the house. Please reconsider this deal.
Walk away from the house fast!
I'm glad that you are stepping out and purchasing a property, but I have rehabbed a couple of pre 1930 homes and they are not a walk in the park! Just from the pictures and what you've stated, that is a complete tear-down! You already mentioned repairing floors, walls, ceilings, windows, shutters, siding, a heat pump, and cosmetics! I will add that a 1928 home without any previous updating is going to need plumbing, electrical, roofing, foundation, and landscaping work too! Maybe the land is worth $20K. Maybe!
You said that you attend church with them, well this is an issue that you need to very, seriously pray about! Better deals are available! Keep looking!
Hi everyone! The hard money called me today and he said before he will loan me the money, he wants to see it first, so we are going this Saturday at 10:30am. I don't think he will lend me the money only to loose it on something that won't sell but then again, I dont know what I'm doing. I respect all of the input I'm getting and I'm listening but I still need to go through the motions. What I'm saying is, I need to practice analyzing this house, walk through it to see if I can identify what needs to be done, try to figure out how much it will cost to fix everything or tear down and do new construction. This is the closest I've gotten to hard money, last year he told me they reached their cap on lending for the year, so I get to find out what he's looking for. If this doesn't go through, I will learn a lot, if this does go through, I will learn a lot. I don't want anyone to be mad that I'm going to try to swim across this ocean but it will definitely be a lesson for the books. I know I can practice on something less messy but this is what I got for now. So ladies and gentleman, grab your snacks, I will either crash and burn or you will be like "no fzbging way. So who all thinks I will crash and burn🤔 FYI - the land is worth $20k and I'm using hard money because my score is 600. Question: if I did a complete demo, would hard money sign on for that? ((Let it rip))
I guess you'll need to ask your Hard Money lender that question. I understand that HM was for quick/short jobs (less than 3ish months) - I didn't know they would go a whole year. We get construction loans through a regional bank. Have you talked with them? The rates will likely be more favorable.
If you're going through with this, I would encourage you to visit your local REAI group and see if there's a person willing to partner with you; a person who has a construction background. While I admire your moxy, I'm afraid for your checkbook; construction subs will take advantage of you if they think they can (apologies to any honest subs out there). As a GC, we have seen more than our fair share of good ones and bad ones.
As for your credit being poor, you might think about other ways to build your credit like a pre-paid credit card that will report to the credit bureaus.
Good luck.
Oh and, what ever estimate for time and money you come up, double both. It will take twice as long and will cost twice as much. I guarantee-freakin'-tee it.
You should compartmentalize various people in your life. Your friends are not your mentors. If you have a 9-5, your coworkers are not your investment advisors. Your family members, in most cases, are not your personal trainers.
In almost 100% of cases your "mentor" is not someone you should be buying a contract from. If anything, they should be teaching you how to get a contract. They should not be profiting by selling you a contract. That's not a mentor, that's a parasite.
run away. The most important part of a flip is knowing the after repaired value. If you can't accurately figure that out on your own, you should not even consider flipping. It helps to get started and get in the game, but you also don't want to scare off the hml. If he sees you are as green ad you appear and can't tell him what it is worth fixed up, he my not want to consider lending to you in the future.
If the land is worth 20k and the house needs demoed that is not a good deal at 19k. The demo will be much more than 1k and you are not at a point to rebuild a house.
You mentioned the house was for sale before? What was it listed at?
Do you have a general contractor lined up? If not plan on spending several weeks interviewing ones, waiting for quotes, and then waiting for them to schedule the work to start. Figure that time into your HML costs.
Is your HM lender going to quote you prices on all of the repairs needed? Sounds like you are depending on him to say "yes" or "no" to the project and that will be how you decide if you will purchase the property.
Your list of what you think it needs is very short and I'm going to go ahead and say very incomplete. It was built in 1938 so it will probably need an electrical upgrade (look at the wire running to that light in the kitchen!), it will probably have asbestos somewhere (insulation or flooring), and most certainly has lead paint. And I'll give it a 99% chance that it has major mold somewhere. You'll need new appliances. The list goes on and on.
Why haven't you posted all of your numbers yet? Let's see your budgets for: rehab, holding costs (loan interest, utilities, insurance, etc.), and closing costs.
hi guys,
You all are amazing. I love all the feed back. Some of you are right on point. To answer a few questions, I'm not using a bank because they wouldn't approve this or my credit. #2 yep if he is going to give me the money, I want to do the project. The HML is a realtor and broker. #3 I got the comps from the sellers agent. #4 I haven't posted my numbers because I'm trying to figure them out. Keep in mind I would t see the place in person for the first time until Saturday because someone lives there. I'm not opposed to a full demo, maybe I will go with that because at least you can control prices more on new than you can on surprises. Everyone has to start somewhere and remeber, I've been trying to learn what a good flip looks like. So when they came to me with this deal, I'm like, let's do it! The house has been on the market for awhile and is listed around $28k. I'm not trying to pay more than $10k max. I dont understand why people would say a demo and rebuild is too much, I have 2 family members who are not in real estate, but got married and built their home, why can they do it but not me? If I said my score was 800 and I was going conventional, what would you say about that? If the only thing I get is a one on one with the hml, that's an opportunity. Why am I not attending an local reia? Because the closest is 4 hours away and they always meet during the week. I am a full time LPN so I can't just commute to these meetings. If I could create a virtual Reia I would but I'm way to new. If someone can send me a link on what to look for, I will walk away from this deal. I have a teachable spirit but I'm also fighting analysis poralisis. Here's the property- 917 Johnson Rd, lynchburg,va.
people you have been on my mind for days. 99.999% of you suggested, warned, and demanded I not do this deal so guess what.... I called the hml and canceled the meeting with him. I told him I didn't think the deal would be the best project to start at this time and I will call him in the future when I'm ready to do business. I then contacted the mentors and told them this deal was more than I could do with my work schedule and inexperience. I thanked them for the opportunity and wished them luck. Lastly I emailed the realtor and cancled the Saturday appointment. They thanked me for being timely and asked I keep in touch. I want to thank everyone for the soft nudges, tomatoes and paint balls. I appreciate all of you!!!
Signed.....still a newbie🙂
How old is the house? depending on what year it was build you may have a money pit on your hand i.e. nob and tub wiring, lead paint, asbestos removal etc. I would really be carful with this one. Get someone to look at it with you that was construction background experience.