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Updated over 10 years ago on . Most recent reply

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John Montgomery
  • Real Estate Broker
  • Glenwood, IL
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Should I Wholesale or Look to Fix-N-Flip This Property

John Montgomery
  • Real Estate Broker
  • Glenwood, IL
Posted

Hello, All,

I'm a relatively new investor in the Chicago area and have come across a great opportunity in which I want to run past fellow BP members. Here is the info: It's a property just about to come out of probate and the soon to be owners just want to get rid of it asap. It's on a nice block and on two lots. I believe I can get the property for around $25K. The ARV is $135-$140K. It needs a complete rehab and I estimate the total will be around $50K. I would love to go with a fix-n-flip on this, but the problem I have is funding. I can't locate a lender that will want to fund the project without me having quite a bit into this. Should I A) Continue to look for a lender, B) Look to partner with another investor that can help fund and can split the profits with, or C) Look to wholesale the property since I can't fund it?

Any suggestions are appreciated.  Thanks much. 

John

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Matthew Lee
  • Real Estate Investor
  • Chicago, IL
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Matthew Lee
  • Real Estate Investor
  • Chicago, IL
Replied

@John Montgomery Congrats on getting close to negotiating your first deal...

I would say the most important thing is to "know your objective"...

There are a lot of great answers on this thread, but ultimately we are all making "shots in the dark" as to the best option for you because it's our perspective...

This is still valuable, but can become very confusing because you don't know each person's perspective...


MY Suggestion is to know your goal over the next 3-5 years...

I will let you know a little about my perspective...I am a Rehabber and Have Been Buying and Rehabbing over the past 8 years here in Chicago...I've been in your shoes...I wanted to be the Big Shot and rehab deals straight out the gate(Little to No Money & No Experience but a few REI Boot Camps- basically No Experience)...To say I've had a lot of Failures during my 14 years of being involved in studying REI is an Understatement...

If I was starting all over again, and my objective is to be able to build a robust REI Biz that can allow me to rehab 6-12 homes a year, wholesale 2-3 properties per month, and build a rental portfolio...I would first focus on getting good at one objective first...

Generally most people start out wholesaling because it doesn't require the money or experience rehabbing or landlording requires...

I would start with Wholesaling...go find 5-10 very good rehabbers and find out their Criteria for a Great Deal...Commit to building Value for them and ultimately a great relationship.

With this you will already have buyers lined up, you know what areas to look for properties in, and you can research public record and see what they are paying for properties on the acquisition(and also ask them, but keep them honest by researching public record)...

At this point become the best wholesaler to these rehabbers...you will learn a lot just in this process alone...How to evaluate Comps, Repair Values, Neighborhoods, etc...Which a great wholesaler will know how to do...It will make your deals easier to sell...

Ultimately I would see which one of these Rehabber will be open to the idea of partnering/mentoring me on how to get into that arena...They may even allow you to follow the progress of their deals...Every deal has its surprises and over the course of 10-20 deals you will get a real life idea of what those surprises are, and even understand the "reason why" you calculate certain contingencies into deals and also what are the most costly mistakes or repairs to look for and avoid on deals...The value of this Experience will accelerate your learning curve...

In my experience one mistake for a beginner can cost you a ton of money and even put you out of the rehab business.

There is no way you can learn all the mistakes you must avoid by reading a book or taking a 3-day training program. 

Also keep in mind the experienced investor will have tons of relationships in place that you will be able to leverage that will save you 10,000's in time, money, and trial and error. They are not going to volunteer all these relationships to you, nor will these people treat you like the experienced investor, but if they know you have experience from working under that investor there is a chance they will be more open to having a relationship with you based upon the experience of the other investor.

Hope that helps...

PS The best thing about a mentor in your local market is a great mentor will know the market well enough to know a deal without having to use guess work, they typically understand the little differences in neighborhood that might cause a radical drop in house values of homes that might look like deals, but are really "Money Pits". Good Luck Bro!

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