All Forum Posts by: Adam Johns

It's a beautiful house, I don't think anyone will dispute that.

How is it priced relative to the comps? One thing someone told me a while back was that things like stainless steel appliances and granite counter tops don't necessarily add value, they just make the home sell quicker (I'm sure that's a statement that could be debated at length). If you're priced too high above your comps, that may be a big part of it.

Other than that, I'd say hang around at the open houses and ask for input from the people looking at the home without sounding too pushy. Also, maybe get your realtor to talk to any of the buyer's agent that he/she may know pretty well and see if they have any feedback on why buyers are passing on the home.

@Ashley Pittman

As I understand it...

$100,000 ARV * .7 = $70,000 - $10,000 repairs = $60,000 sale price to investor

So your goal is to get the contract for somewhere under $60,000, the difference being your profit.

However, there is a lot of debate on how hard and fast this rule is. What I have learned from reading several posts about this topic is that it comes down to knowing your buyers. Some will buy at higher %, some don't use a percentage at all (like J Scott, who says he just decides how much he'd like to make on the deal) and buy-and-hold investors may just be happy with getting some equity and cash flow that makes sense to them.

I hope that helps some.

Thank you for the repies, all.

@Ned Carey

Your point is well-taken, and I appreciate the words of encouragement/advice. I think my only apprehension is the fact that I'm very new and any value that I can offer is speculative (edit: I see you address that in your blog post, just read it and it shed some light, thank you again). I have done A LOT of learning in the recent weeks and believe that I have the basic skills to find and negotiate with motivated sellers, but I'm unproven and will likely need help with most of the steps beyond agreeing to a selling price.

I guess I just wanted to know how others would feel about the proposition of of becoming a sort-of unsolicited mentor.

But in the end you're right; it won't cost me a thing to find out. Not even the stamp, since I have his email address!

Long story short(ish):

I was driving around looking at some houses the other day and came across an unoccupied home that was FSBO with a website that lists FSBO houses. Out of curiousity I wrote down the address and checked the listing when I got home. The home was priced a good deal below FMV, which led me to dig a little more. From records on the tax assessor's website, I managed to figure out that it was bought as a foreclosure, so I did a search and found out that the current owner (actually, an LLC) owned about 15 other properties in the county. All of this leads me to my questions:

As an experienced investor whould it strike you as odd if you got an email from a random newbie saying, "I am interested in getting into REI and saw that you own several homes. I was hoping that we could meet for lunch sometime so that I could learn about your business and see if there is anyway that I could help you out while I learn the business?" or something to that extent. I would have no problem approaching an investor if we met an an REIA or by some other organic means, but I'm curious as to how someone would react under the above circumstances. Would you bother to respond, be open to it, or be apprehensive?

I look forward to insites. Thank you!

@Ashley Pittman I've always assumed that finding the sellers was where the value-add was for the wholesellers. I guess I never considered wholeselling REOs since most of the shrewd cash buyers will probably beat you to the listing since they probably have established relationships with the listing agents. I'd love to hear if there's an angle to this that I'm missing though, since I'm new, too.

As far as not wanting to hunt for sellers, you can try to get them to hunt for you instead. Set up websites, bandit and/or vehicle signs and ads on craigslist, etc to let them find you. You will still have to wade through the responses to find the truely "motivated" sellers and get them to agree to the best deals, but you don't have to necessarily write 10000 yellow letters/post cards and knock on doors.

@Ibrahim Hughes Thanks!

I knew that those details are different everywhere, but at least I kind of got the basics out there for anyone who sees these auctions and thinks they're grabbing up land for pennies.

It might be worth reading up a bit on these sales. The property owner usually has a set amount of time (3 yrs is what I think is common) to pay off the lien plus your bid interest. After that amount of time, the lien holder can usually start the process to have the deed go to auction, where the property itself will be sold and your lien paid off. The process and recourse is different for each county/municipality, so it might be worth a trip to the tax assessor's office to take someone to lunch. Even if you never get the property at auction, there may not be many buyers there and you can get a decent return on buying the liens. The other angle is to try to contact these potentially distressed property owners to buy their properties and pay off any liens. Disclaimer: most of what is above is based off of one book that I read quite some time back, so take it with a hefty helping of salt, but it should shed a little light nonetheless. Overall my message is as always, read up on it, it might be for you and it might not. Learning something new never hurts anyone though.

@Jessica Soares

No, I have not used HML, but I'm sure you can find a few people on this forum that have used them successfully. There is also at least one podcast dealing with the subject. I agree that it seems intimidating, but I think if I had a good deal with more than one exit strategy I'd give it a shot.

As far as keeping current financing in place, the specifics would have to be worked out with the owner, but some may be willing to take a small amount of cash upfront in exchange for you getting payments current (if behind) and paying off the balance when you sell the property.

This can also be intimidating because of DOS clauses, but I've seen quite a few people say that they do these deals frequently without having the loans called.

I'm not an expert on any of this, just some things I know a little about that sound like they might work for your situation. As always, do some reading and consult with experts. Learning new ways to do business is one of the things that interests/excites me most about REI.

@Michael B.

I was obviously a little hasty to throw the HOA on the wrong side of the equation, and considering that it's about 20% of the rent, that was a costly mistake. Thank you for jumping in there and setting me straight!

I didn't consider that the HOA would cover maintenance costs. It sounds like the 50% rule is probably not a quick answer to this deal. You can check out this blog post:

http://www.biggerpockets.com/renewsblog/2010/06/30/introduction-to-real-estate-analysis-investing/

which will give you a good idea on working the numbers. I think that most people use the 50% rule as a good way to make sure they're being someone generous to themselves when figuring operating costs so that they don't find themselves stuck with a big bill when the worst happens.

If possible, talk to the current owners and/or other landlords in the area. There are always factors that the rules don't take into consideration.