All Forum Posts by: Adam St.Marie

Hello All,

We are getting our first house underway and I am looking for some feedback regarding appraisals. To explain the situation; we are hoping to develop neglected communities by lining up buyers for our homes, financing the projects and designing the properties with the contracted and lined up buyer. Our buyers have the same vision for community restoration and understand their commitment. So our aim is to create a team mentality with the buyers to pursue common vision. 

But the big question I am facing now is that in these communities the comparable properties are all over the place. This is in Zion, Illinois for those wondering. It is Lake County, but not really the part of it many people are drawn towards (possibly because the Cities building ordinances are very difficult to adhere to and have regulations that even the high end north shore Chicago cities don't implement.) Unfortunately this has led to the most run down and vacant houses North of Chicago, perhaps in the Chicagoland area period. I should probably verify that before saying it but from what I have heard this is true. (Someone feel free to correct me if I am mistaken.) 

If my buyer is going to get a conventional loan will I still have issues selling the home? Our profit margins are only 6% on the whole so we are not marking it up like crazy and the cost of building is itself at cost (which as a GC myself is not a good idea but this being the first home we are pursuing in this style I am willing to do what I need to get it off the ground and learn from it. Whether good or bad.)

If the conventional loan is not attainable due to lack of comparable properties, does anyone know of alternative solutions? We are willing to rent it/lease it if needed and the buyers are willing to do that as well as we have previously discussed in our contract. Would we be able to transfer title and put a mortgage on the home in time? This property and project was financed with cash if that may influence anyone's advice.

Thank you for the help!

Alex, 

Sorry I left out the response to your question. We would be operating on a cash basis as well. 

Thank you both for your feedback! Alex, excited for where this takes you and hope to glean some from your knowledge!

Valerie, yes I agree the envisioning is difficult. I would imagine that the marketing strategy would be the thing that targets the right customers. This particular strategy would be one of a number in the tool box. In terms of envisioning a finished product I have a 3D home design software that allows me to produce that very efficiently and also provides the building information that I need as a contractor  which helps make my process for bidding any of my projects much more streamlined and has actually helped close deals when I am 30-40% more expensive than my competitors. I am able to actually capitalize on people's inability to see what could be. A good way to achieve this would probably be a solid website and portfolio of before and after photos. 

I believe that the way to change communities can only be done with like minded people. I will not be targeting customers who purely want "the American Dream" so to speak. So part of the strategy would likely need to be done in relationship with local religious groups who are also interested with transforming their communities. I am about to endeavor on this actually in the next week. We have the first house targeted and our first customers lined up. We are just trying to work out the intricacies of the transfer. This is the part that I need some council on. We need our customers to sign a contract and make a deposit of some kind that would go against the sale of the home but be non-refundable if they back out. The main issue isn't in getting them to commit to the move, they brought the home to us in the first place, the issue is with how we transfer it and when. When will their current home sell and close? How long will we be holding the other? If our money is tied up in the second house how do we close it out in an efficient manner so that we can move on to the next home? 

Feedback on this would be much appreciated. Should we close in cash and refinance on the house after we do the work then transfer the mortgage to the new homeowner? Is this possible at all? In a way would this be the same as doing a subject to loan only we are acquiring it somewhat on our terms? I feel like there are considerable amounts of negatives to this thought process but I seem to be either uneducated in this field or blind by hope haha. 

Thanks to all who read this. 

I have been pursuing multiple strategies for flipping houses and being able to pursue my goal of restoring neighborhoods. Along this line of thinking my investors and I have been considering builder financed projects. I am still trying to wrap my head around the details of this strategy and I am posting in hopes that others may have gone ahead and have some of this sorted out. Here is the concept that I am considering.

We are currently targeting middle income families. When a family in this financial bracket needs to move they do not have the money in their savings to be able to purchase another home especially if this home needs some work.  Are there companies or systems out there implementing a strategy that would incorporate a contract stipulating something along the lines of, "We will acquire this mutually agreed upon property, buy and renovate it with our investor capital and sell it to you (the customer) for x amount which is inclusive of our profit."? Obviously the sale of their current property needs to be worked into the contract in some nature. 

My thought being this would create a market of more personalized and targeted customers who, with the right marketing, would come to me for their projects. It is similar in concept to the "Fixer Upper" show only as far as I understand they do not finance it. 

The issue I have here is the complication of the contract structure and understanding how to protect myself and my investor and still render a great service to my customers. Also acknowledging the necessity for the customer to have personal skin in the game, that may not be 10% down but needs to be significant enough to them that they do not back away and we are caught with nothing. The deposit would be kept. 

I am curious as to whether I will find myself targeting a market that has been overlooked previously. Families looking for custom remodeled homes and the financial backing to make it happen while they are still in transition from their current residence. This may be a way to secure the questionable part of real estate investing which is, "Who will buy it?". Since the buyer is lined up and the flip becomes a team effort I would be able to consider reducing the profit margin on each home opening up a range of home buyers I couldn't previously reach while guaranteeing my investors x% ROI.

Question:

1) Is there anyone out there doing this that would be willing to shed some light on the intricacies of it?

2) Maybe this should be first: Any thoughts on whether it is a good idea or a bad idea? (The goal is to make decent money but not incredible money. At least no yet. I realize there are much more profitable ways to invest in real estate but the goal is to transform neglected communities and make decent money along the way. I believe that scaling it in the future and diversifying will be my main money maker.)

3) Do I need a relationship with a mortgage broker to transfer from my ownership to the new home buyer that would make it a more fluid operation instead of waiting for financing to clear during the project. 

4) Would it be best to have my investor pull a loan on it and then transfer that to the home buyer? (We were going to just operate on a cash basis initially.) 

5) What am I not considering that I should be? 

Any input is appreciated. 

Good question. I am trying to research the same thing. I know you didn't get any feedback but have you come to any conclusions since?

Thanks,

What level of quality were you looking for? I know some high end guys but for a mid level I have another guy I would recommend. Feel free to private message me and I can see if we can help. 

Hi Rebecca,

Yes I am buying in Lake Geneva. I am definitely open to Burlington as well. I would prefer to stay in the Lake Geneva area and presently have a pretty specific target of home I am looking for. Do you operate in this area? 

In regards to General Contracting I am still operating as a licensed contractor in this area and the northern suburbs of Chicago but I am looking to stay within 20 minutes of Lake Geneva in order to better manage my projects. 

Feel free to call me anytime to chat and discuss specifics. 

(I am trying to get my contact footer under this. Let me know if my contact info isn't included.) 

Hello,

I am just getting into real estate. I have been a contractor for nearly a decade. My passion is to see my city be flipped. I am hoping to be able to accomplish that one house at a time then get into one business at a time down the road as capital increases. I really appreciate you all as I have already gleaned an amazing amount of information from the forums and the podcasts. 

Godspeed..

Adam