Buying Retail Properties to turn into Rentals

[Patrick Shea]

I am living and investing in ATL, well starting to invest. I am have identified my target area and the types of houses I am looking for, fixer uppers and turnkey. In the area I am looking I am able to purchase all cash and made 5 offers last week via the MLS and my agent, none of which got a counter offer and a few didn't even get a call back. On turnkey I am offering around 80-85% on the comp and on the fixers I am offering 60-65% of list which equates to about 75% of ARV with repair costs included. My struggle is that I know I can cash flow at List price. But I really wont have any instant equity. My plan is to buy cash upfront, get repairs done and tenant in place than finance so I can buy another rental. I will need to minimize the amount of money left in the property so I can continue to grow my portfolio. My driving goal is to cash flow. Based on how hot the market is in the area I am looking at, most houses sell at 95% of list price within 30 days, should I be offering full price and just slowly building cash flowing properties until the market cools off?

[Curt Smith]

Hi Patrick,  REad the doc off my profile, a file URL in my profiles first paragraph:  Buying a Bulletproof rental portfolio.

I also suggest you join the local REIAs.  The many years many deals experts are in the REiAs.  BP is great but experts see the value in face to face REIAs who help each other find deals and talk about what areas are working.

If you are finding it a problem? Then I suggest join the REIAs. I chose GaREIA because its the largest and has the most experienced investors flipping and buy and hold. My expertise is buy and hold, but I do a lot of REI education as well.

Specific to your problem:  stop using a buyers agent and call up the listing agent, easiest to find on realtor.com but zillow does show "presented by" on some ads.

Learn how to calc MAO (max allowable offer), call the listing agent, small talk, ask if the seller is flexible, why selling etc etc. Develop a relatoinship. Something that is imposible using a buyers agent. Its a relationship that will get you a call back; hey Pat,,, your offer is a bit low, you saw the house and know its a good house, if you raised your offer a bit, you'd be in the hunt. Pat what would you like to do?.....

To make a strong offer to the listing agent, do as many of these as possible:

- all cash offer, close in 2 weeeks

- NO INSPECTION period. Do you poking around during initial walk through. You need to be an REI expert, don';t depend on inspectors, contractors walking with you during an inspection period. You need to learn (at a REIA) how to look for issues, estimate rehab costs on a fast walk through. I walk a rental prospect in 15 min and know wht it will take to fix.

- If you are financing, say NO FINANCING contingency.  But you have to be solid financially and know the house will appraise to be sure your financing will go through.

- I do this often, mainly to build a relationship with the listing agent, never had one take me up;  offer $500 bonus to the listing agent, and that she gets the full 6%.  Remind her that your offer will make her MORE money.  :)  This is where using a buyers agent is killing you.  She makes 3%...  Plus you don't learn the inside info or get any biddin help.  Belive me!!!!  I've been told the high bid every time, yes every time!  Because I develop a relationship with the listing agent.  They are just people, bored, love to talk, they will tell you crazy things.  LOL!!  

Good luck, and above all learn how to make this fun, it will show in how you talk to sellers.  :)