Finding Deals and Making Offers

Rehabbing & House Flipping
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Finding Deals and Making Offers

Chris Ferren
Homeowner · West Sacramento, CA · Member since 2010 · 16 posts · 0 votes

I'm current preparing for my first flip, and I'm getting all my ducks in a row before I do so. I'm working with a partner, and I'm planning on starting to make our first offers in about 90 days. Before we do so, I need to set up an LLC, consult with a CPA, and get all our financing prepared. My question is this...

How does one make offers on property without having a real estate license? By using an agent, you need to rely on them to do everything. They have to take you to the property so you can look at it and evaluate the deal and see how much money it will take to fix everything up. Most real estate agents will not waste their time bringing you to 15 different REO properties so you can write offers where you may not even get one accepted.

To follow up on this, even once I get my real estate license, it seems like a lot of spent time going to each and every house and evaluate every one to write an offer. Do any investors just write offers without looking and visiting the property? How does everyone else write offers? I've read blogs where people say they write 20 offers or so before one gets accepted. Are you visiting all these houses first and do a rough analysis?

Any time saving tips to be more efficient would be great when it comes to writing offers. Thanks

Chris FC

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Jake Kucheck
Residential Real Estate Agent · Costa Mesa, CA · Member since 2008 · 1k+ posts · 380 votes
15y

If you're not married to the idea of going after exclusively REO, you may find it easier to build relationships with agents in other parts of the distressed spectrum. For example, properties that are being sold due to divorce are usually equally motivated (if not more so) than REO, and are certainly easier to negotiate with. You may want to find an agent that specializes in these (I'm one of them), or a similarly non-REO distressed situation before trying to tackle an REO listing agent.

All of that said- be ready to perform when the rubber meets the road or all of your hard work building relationships will be for naught.

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  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    15y

    While I strongly advocate getting your license (for these reasons and many others), there are alternatives. Agents who specialize in working with investors are accustomed to taking buyers to lots of properties; in addition, they tend to be pretty familiar with all the REOs in a particular area, so they can cut the list down by knowing what your requirements are and what you're looking for.

    Another option is to work with the listing agent on each of the properties. While I'm not a big fan of working with REO listing agents, I know others here use this as their preferred method of making offers.

    As for making offers without looking at properties, I know there are some people who do this, but I'm not a big fan. I know my area tremendously well, and can determine in about 5 minutes if I want to offer on a property and how much (I know my ARVs and rehab costs very well); but, the condition of a property and the exact location (in a cul-de-sac, ugly houses next door, bad backyards, etc) usually make a huge difference in what I can offer. So, determining a realistic offer just by looking at a listing is pretty tough, even when you are good at this.

    Now, some investors will just assume worst-case scenario, and make lots of low offers, but there are a few problems with this. First, you may offer low on a property that you'd offer much more on if you actually saw it, but when the bank ignores your offer, you'll never know. Secondly, if you consistently make ridiculously low offers (because you're not looking at the properties), you'll start to piss off listing agents by wasting their time. And third, if you aren't familiar with a property and an offer gets accepted, you run the risk of having to back out of the deal, which will piss off listing agents even more.

    Again, some will disagree with me, but that's my take...

    As for time saving tips, writing offers is quick and easy once you get good at it. My wife (who has her license just for our business) can write up an offer for most properties in about 5 minutes, literally (some agents require special forms and that can take longer).

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  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    15y

    I agree in part with what J stated but will add that (at least in my area), success hinges on the relationships you build and not making tons of offers. Secondly, without a license, you simply go direct to each list agent/broker. Allowing them to double dip commissions is much more attarctive to any smart agent and as such, your potential future offer(s) are given serious attention.
    I do not have to walk tons of properties or make tons of offers. Through my contacts, I am informed of properties coming up and am allowed to see them before they are listed. I complete my DD and then if the deal is a deal, make the offer upon BPO approval from the bank.

    I still do not have RE sales license and have no intentions of getting one. I spend my time where it is used most effectively and that is working the numbers, looking at deals, and managing after acquisition. I leave the sales and acquisition commissions to the "sales people" which are my agents on my team.

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  • Steve L.
    Investor · Rancho Cucamonga, CA · Member since 2008 · 1k+ posts · 684 votes
    15y
    Originally posted by Chris Ferren:
    ITo follow up on this, even once I get my real estate license, it seems like a lot of spent time going to each and every house and evaluate every one to write an offer. Do any investors just write offers without looking and visiting the property? How does everyone else write offers? I've read blogs where people say they write 20 offers or so before one gets accepted. Are you visiting all these houses first and do a rough analysis?

    Man... maybe this business isn't as easy as Armando Montelongo tells everyone it is?!?!

    Sorry, I couldn't resist. Making money in this business is a lot of work like any business. We looked at probably 25-30 houses a week for 5 months before bought anything.

    J Scott and Wills advice is accurate. The only thing I have to add is, you're probably not going to find a real estate agent that will give you real accurate repair numbers though. What a lot of people do is ball park it and if they get close they pay a contractor to go through. Or pay a contractor to walk 10 with you and do it yourself.

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  • Jake Kucheck
    Residential Real Estate Agent · Costa Mesa, CA · Member since 2008 · 1k+ posts · 380 votes
    15y

    If you're not married to the idea of going after exclusively REO, you may find it easier to build relationships with agents in other parts of the distressed spectrum. For example, properties that are being sold due to divorce are usually equally motivated (if not more so) than REO, and are certainly easier to negotiate with. You may want to find an agent that specializes in these (I'm one of them), or a similarly non-REO distressed situation before trying to tackle an REO listing agent.

    All of that said- be ready to perform when the rubber meets the road or all of your hard work building relationships will be for naught.

    3Reply
  • Don Hines
    Investor · Little Rock, AR · Member since 2010 · 628 posts · 251 votes
    15y
    Originally posted by Chris Ferren:
    I'm current preparing for my first flip, and I'm getting all my ducks in a row before I do so. I'm working with a partner, and I'm planning on starting to make our first offers in about 90 days. Before we do so, I need to set up an LLC, consult with a CPA, and get all our financing prepared. My question is this...

    Any time saving tips to be more efficient would be great when it comes to writing offers. Thanks

    Chris FC

    Chris
    You have already been advised by the best here....but, it appears you may be getting your cart before your horse. LLC's are great. But, you night be spending time on establishing it in place of aquiring your first deal. I intend to have an LLC established before too long my self. But, I want to learn all I can while actually doing "it". There are some threads on BP that advises when LLC's are in order. If I talked to my CPA before I did stuff, he would advise against everything I want to do. I hope not all CPA's act the same; but, mine rejoices when I have a bunch of deductions. They represent losses to me which may lower my taxes. But, at this stage of my game, the more taxes I pay, the more money I have made.
    I don't know what the ratio is for my offers versus deals. I have made over 40 since August and have yet to score. I know I have missed a few deals by a few $hundreds$. It has tried my confidence in my self. I get annalis paralasis all of the time. As J Scott sez, I know the area well. I have learned how to comp a particular listing. To get a veiwing, I size the listing up in my spread sheet that will calculate the comps, soft cost, and I throw $20k at the rehab. If this calculates an offer that is within 80% of asking, then I tell my buyer's agent I am interested in a veiwing. After veiwing, I actually plug in my rehab estimates to calculate an offer.
    This is my system today. Like I said, I haven't been very successful in making a deal. I think I could be out of line with my repair estimates. So, I research daily to learn more about the offer.
    BTW...One reason I make so few offers is because my real job gets pretty demanding at times.
    Don

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  • Mike G.
    Rehabber / Flipper · Simi Valley, CA · Member since 2010 · 597 posts · 259 votes
    15y

    Don, if you've only missed some deals by a few hundred dollars, you can't be too far off. You might also want to look at what percentage of profit are you looking for in the deal. The standard flip calculation of (ARV times 70 percent, minus rehab costs) may not be feasible in your market right now. It certainly doesn't seem to be easy to get here in SoCal.

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