Investor · Orlando, FL · Member since 2012 · 431 posts · 106 votes
I'm having essentially zero luck the past few months finding decent rehab deals at numbers that make sense. Probably averaging twenty cash offers per week and batting a cool 0.00% so far. 250 offers without a single deal seems pretty unlikely so either the market is that tight or i'm simply being too cheap?
I know this topic comes up regularly but figured i'd start the new year version. What's working for you? MLS, direct mail, networking, probate, etc?
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
My deals are still coming from my direct marketing. The main issue in my markets is equity. My markets have so many properties with no equity. Unless I create equity (short sales, sub-2 holds, etc) the pool of sellers is too small.
You're probably being too cheap, but only compared to what others will pay. It may not make sense for you to change your buying criteria if the margins get too thin and risky. The main rehabbers in my farms are working volume and on incredibly thin margins by my standards. A house I need to buy for $85K, they are paying $110K for at trustee's sale. They are doing 5-10 houses a month. The smaller players aim for $15K-20K, even on the $200K+ houses. Just one major repair issue and additional hold time and the deal is toast. I don't get it.
Last year an agent brought me an investor buyer on an almost finished rehab. He paid $95K and gave the agent $1500 for finding the deal. He had the flooring done, for probably $2500 plus some landscaping. He listed it with the agent for $5% at $134K. They got lots of offers in the $125K range, but in the end they couldn't get the appraisal higher than $117K and finally sold at that price, after six months. That's not a deal I'd want. But the investor was using his IRA funds and even a few K is more than he had the month before. Those guys are everywhere right now. Someone with cash, building their retirement fund, not needing to make a killing (or a living), is the the real competition. Add to that the new buy-and-hold investors who think cash flow is rent - PITI. Their purchase prices really skew things too.
I'm at a crossroad about changing my buying criteria. My husband always accuses me of being too cautious and needing overly wide margins. My thinking is that I don't get burned by deals I don't do. But I don't make any money on the deal I don't do either. His point is someone with skills, experience and capital (me) should be able to adjust to the current market. Still chewing on that.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
Offering full ask then negotiating discounts after the fact is nothing new, the problem, at least in my neck of the woods, is that you often may not get the discount and thus have to back out which hurts your reputation. The second hurdle in my area is that most properties listed are at full retail so even a repair credit would not make it a good flip deal.
Lastly, many lenders and list agents have become wise to this tactic and ave verbiage in the contract to not allow for these inspection contingencies. In other words, complete your due diligence Before you write the offer.
I don't personally like the offer ask and try and get them down later strategy. I am proud of my performance history and use it to prove worthiness on offers I make. The sellers then know I am a guaranteed close.
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
Originally posted by Will Barnard:
I don't personally like the offer ask and try and get them down later strategy. I am proud of my performance history and use it to prove worthiness on offers I make. The sellers then know I am a guaranteed close.
I almost walked away from a seller who tried this on me a few months ago. They agreed to a no appraisal contingency and to no additional repairs (it was rehabbed). It was an investor buyer putting 30% down. They had sufficient funds to pay over appraisal and were aware it was going to come to that, since their offer was over asking. They started asking for all kinds of things during escrow (appliances, closing costs, etc). When I refused, they threatened to cancel at their agent's suggestion. I said no problem. Then the appraisal came in and they wanted to change the price. I don't know what they were thinking. I met all the terms of the contract and would have kept their EM in a heartbeat. The 30-day escrow was in my favor and I had back-up buyers and new, higher comps. My agent told me to concede. I said no and they performed. It was so irritating. Why sign a contract that you don't plan to perform on?
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
13y
Originally posted by Jeff S:
One deal recently presented to us involved buying a $375k FMV run-down property for $350k and spending $100k to $150k to add several bedrooms and a bath, as well as a kitchen upgrade and polishing the rest of the place up. The resulting property in this neighborhood would be worth around $800k or so. Obviously the rehab costs would have to be scrubbed, but at first blush it looked like there was plenty of meat on the bones. We passed, but only because we have plenty of other deals that we're more comfortable with. The rehabber bought the place and I'm interested to see what happens.
Jeff: Do you have any update on this project? I'm guessing that the time needed to permit and build out was in the rehabber's favor in this market.
Real Estate Investor · OR · Member since 2012 · 390 posts · 133 votes
13y
What a great topic!
I'll take those low/no equity deals all day and night because I love to lease option them. I just did two in Canton Oh that I could have sold 3x each---now I'm marketing like crazy to find the houses for the remaining buyers.
I enjoy doing jv deals with other investors in other areas also. To me half the fun of it all is the partnership and winning together.
I am still doing wholesale joint ventures with other investors and having fun with that but I think it's a lot more work than the lease options.
Investor · Memphis, TN · Member since 2013 · 171 posts · 49 votes
13y
What I would suggest is simply hit the streets, and search for vacants. go where others won't. Also talk to those investors who are slumlords. They are easy to negotiate with, basically because they haven't kept their properties up. I have deals rolling in t me by the bulk, basically because I will hit the streets, fly out, or pack letters to sell the properties.
Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
13y
@Will Barnard
they contact me from old letters, or they overlap into other areas like foreclosures, tax sales, probates and word of mouth. i use to do more but don't do any current direct mailings for sellers.
Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
13y
@Will Barnard
You're welcome.
I don't have a problem keeping the funnel full, no matter the economy, there are always foreclosures, always probates and always tax sales. I don't use bandit signs, and I do no advertising for sellers, and the funnel still stays full. sometimes total strangers call me, because they know that I'm a buyer.