All Forum Posts by: Michelle Ellis

I am both a realtor and investor. I have a buyer client who purchased a property with owner financing in order to 'win' against multiple bids.  He will pay the property off in just 3 installments, the last one being at the end of this month.  What happens then?  I have helped folks with owner financed transactions before, but never have assisted someone where they paid it off so quickly.  There is no underlying note, it is a straight owner-finance situation.  

Do we need to have the promissory note released?  How?  Does an attorney draft something that everyone signs?

Thanks in advance!

Michelle, in Leander, Texas

I had a real estate deal go south and am being sued for half of the 'profits' by my former business partner. Only, there were no profits, in large part because he didn't fulfill his side of out bargain... Need a good attorney who can help me resolve this lawsuit without charging an arm and leg.  

Umar, if I were the one acquiring and flipping the land, you would be correct. But I essentially wholesaled it, leaving 'meat on the bone' for the end buyer. Full disclosure - I borrowed money from a friend for the option, earnest and inspections and after closing paid her back plus 10%. So my actual ROI is incalculably high (infinity), if you want to be fully accurate...

Why did I assign it instead of partnering with him?  He actually did give me the option of doing either, with a 50/50 split of profits if we partnered.  Honestly - I prayed and considered for a full 24 hours.  I felt that assigning was what the Lord wanted me to do.  In the end, the buyer was happy, seller was happy, and I am on to my next deal with over $40,000 (after paying back my friend and setting aside Uncle Sam's portion). 

Had I partnered with him, our projected profits were $140,000 within 12 months (including time to subdivide, build and sell 2 houses).  I ultimately netted $30k less than if we had partnered, but I received that money a year earlier, which means I can re-invest it immediately.  I'm confident that I'll double my money or more in the next 12 months, bringing me up to or past what I would have made partnering.

My next deal was just handed to me yesterday - by someone whom I helped in the past with no expectation of ever receiving anything back.  It's a simple, cosmetic fix and flip that will yield a tidy profit of $15k-$25k within 3 months.  And I wouldn't have had the money to invest in it if I had not assigned my land deal.

I find that when I take care of relationships and make decisions based on where I feel the Lord is guiding me, doors open that I never imagined. I'm excited to see what the next few months hold...

 I would not go around a wholesaler in a normal situation.  I have wholesaled properties myself in the past, and I greatly respect how much work it takes to find and secure a deal.  But this lady was so new she was messing the deal up in multiple ways, really messing it up.  I will make it right with her.  But there's no way this deal would have gotten done if she had stayed involved. 

Investment Info:

Single-family residence wholesale investment in Leander.

Purchase price: $208,000
Cash invested: $400
Sale price: $260,000

7 acres with pre-1968 manufactured home. Sellers wanted to sell quickly without going through the traditional listing process. I got the property under contract, then started to subdivide into 3 smaller tracts of land. Took it as far getting approval to go through the short subdivision process, while simultaneously searching for a money partner. Found the money partner, money partner wanted the property for his personal residence. I assigned the contract to him for $50,000 Win-win-win

What made you interested in investing in this type of deal?

This is my neighborhood, and I know it well. I have been researching with the county and city what can be done here for the last 2 years, so when I saw this property was available, I already knew the potential.

How did you find this deal and how did you negotiate it?

I found the deal through a wholesaler who posted it to a FB group. She was new, made a ton of mistakes, and eventually I terminated with her and worked directly with the seller, who already knew me from my newsletter that I mail out. I offered him $15,000 more than the wholesaler had it under contract for and he decided to sell to me even though his brother-in-law (realtor) was encouraging him to list it.

How did you finance this deal?

I spent just under $2500 out of pocket for inspections, option and earnest money, and then assigned the deal.

How did you add value to the deal?

The seller made it clear from the beginning that he knew he could get a higher offer by listing it, but he wanted simple. I made that my goal for him. I offered him a little less than he would have netted had he had to pay listing and closing fees. I added value to the buyer by thoroughly researching the property (well, septic, adding more electricity) and running thorough comps, including paying for a well inspection and getting the property through the preliminary subdivision process.

What was the outcome?

The seller was happy with the simplicity of the process, from contract to close. The buyers were thrilled to have such a great homesite plus investment opportunity (they plan to subdivide, sell 1-2 lots and build on the 3rd). I made $50,000 in 6 weeks. Win-win-win!

Lessons learned? Challenges?

I learned that I absolutely love land development research and consultation. I have found my real estate niche. I'm already involved in 3 more small land development projects in just the last 2 weeks since the closing. Helping property owners net more (sometimes almost double) what they would have if they had just listed the property is so rewarding. And if they just want to sell as-is, I and my partners can offer them fair market value and a simple, stress-free closing process.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

When I was considering doing this deal myself (subdividing and re-selling 3 lots), I worked with Jack Lieberman, a hard money lender. Phenomenal guy - he even came out to the property and gave me his opinion, which helped me tremendously. I look forward to working with him in the future. He also does traditional loans.

David,

Like Ali said, in Austin it's getting more challenging (though not impossible) to find rental properties that cash-flow.  However, there are many surrounding areas 15 to 30 minutes away that still work - Kyle, Buda, San Marcos in the south, and Cedar Park and Leander in the north.  Cedar Park and Leander are in the growth corridor.  San Marcos has a state university that results in a consistently strong rental market.   There are also areas in the east - Manor and Elgin, but appreciation rate is very low.

As for the expense of flying to see properties, looking for and locating a property can be done mostly via email and internet, with the final selection taking place in one trip over a weekend, if it's planned well.  I did this for a buyer from England who was here for SXSW.  He stayed for two days after the event ended, and we found him 3 properties.  

I don't do property management, but I recommend my extra-local buyers factor that cost in, because it saves a lot of headache and problems in the long run.  However, I have heard of some investors who have the comfort level and experience to manage properties from a distance.  So, it really depends on you.

Best wishes,

Michelle Ellis, TruBlue Properties

As an agent, I would go into the MLS and find out. Do you have a realtor who can do this for you? If it hasn't been very long since a sale, sometimes there's a delay in the public record being updated, so you can go to your County Appraisal District website and check if the old owner is still on the record.

Michelle

Ellis

Cyndi,

You want a win-win for all parties involved.  If the property can obtain a higher price by selling it as a tear-down/lot value rather than a rehab, then that's what should be done.  The builders I work with have a *general* rule-of-thumb of paying 20% of the total sales price for the lot.  For example, if the new house will be sold for $1,000,000, the highest they'd pay for a lot is $200,000.  In the hottest areas of Austin, I've seen them go as high as 25%.

I ran into a situation like you're describing a few months ago.  As a rehab, the most I could offer the sellers was $150,000, due to old roof and extensive foundation issues, among other things.  As a tear-down (i.e. lot value only), I easily wholesaled it to a builder who paid $180,000 (that included my fee).  The elderly sellers netted more, I netted a higher wholesale fee, the builder was thrilled to get a lot within 5 minutes of downtown, and the whole street will benefit from the dilapidated, abandoned house being replaced with two new homes (duplex/condos).   

Don't worry about pricing it out of the range of rehabbers; if there is a lot of new home building going on in that area, then you should not have a problem selling it to a builder.  

Also, I agree totally with Jean--get it under contract, giving yourself plenty of option period to shop it around to the builders and re-negotiate if possible.  The market will decide the value.

Let us know how it goes!

Michelle

Real Estate Agent

TruBlue Properties

Austin, TX

512-203-0516

Gerard,

An early welcome to Austin!

Since most of your questions are finance related, I would encourage you to speak to one or more lenders in Austin who are experienced in investor loans.  I have a few whom I've worked with and would be happy to send you their info.

When it comes time to purchase a duplex in Austin, you'll find out that the market is very hot for duplexes and has been for awhile.  When they are priced well, it is not unusual for there to be multiple offers (sometimes over 10) within the first day or two.  In spite of this, I've had success finding off-market duplexes for my clients who were using financing and could not compete with the all-cash, no option period offers that many duplex listings are receiving.    

That is to say, there are duplexes available, if you are open to searching off-MLS--i.e. marketing for them yourself, or networking.

Wishing you a safe trip and pleasant transition,

Michelle Ellis

TruBlue Properties

(512) 203-0516

 Uday,

Esmeralda was my first broker; now she, Harold and I are all over at Keller Williams.  I used to attend the Thursday meeting you mentioned until I got too busy with transactions.  They were helpful when I was first starting out.  I wish you all the best!

Michelle