All Forum Posts by: Allen Fletcher

While out networking my partner and I started talking to an investor that is looking to get out of being a landlord. His properties were once really nice, but as he has aged he has been unable to keep up with the properties as well (he is over 80 years old) and now his rentals have become the slums. After doing our due diligence with the surrounding area we have found that his properties really are the blight in the neighborhood. We are discussing buying the properties, but how do we go about changing the reputation of the properties? We have funding to totally gut and remodel them, but we will be in a crunch if we cannot get renters in quickly. Anyone have any tips for helping us fix the reputation of these units?

Thank you for the advice,

Allen Fletcher

@Crystal Salton

It sounds like you have done your homework. I think you just need to sit down and write a draft agreement with the seller. If you want to create a decent draft go find a loan contract from a car you recently bought and follow it as your basic structure. Take that to your seller work over it together, then take that to your attorney. After your attorney looks over it and says it is good, print a final copy and sign it.

Hope it all goes well,

Allen Fletcher

@Tom S.

@Crystal Salton

If the first mortgage lender will not allow a second mortgage, you should see if you can structure the seller financing as a cash loan instead of a mortgage with the seller. If this is the route you need to take then you need to make sure you put that into the loan agreement with the seller.

Any thoughts Tom?

Allen Fletcher 

@Ramar Price

The key to finding buyers in general is to go out and talk to people. Your cash buyers are the other investors in your area. If you want to get a list of cash buyers go to where they are and talk to them. You will find them working on houses, at REI meetings, here on BP, and on their business websites (try searching for we buy houses on google).

Allen Fletcher

@Crystal Salton

Have you spoken with the seller to determine if they carry owner financing?

If the owner is willing to carry a note, then talk with them about all of the details you mentioned. I have found that as long as you pitch fair terms and a fair interest rate sellers will accept. If you want to have a written agreement to show them, type one up (or get one made by your attorney) and make sure that it has a "DRAFT" watermark in it. Read and discuss it with them, answer their questions, make changes to it, etc. The more you involve the seller the happier they will be about the agreement. Just make sure that you are the one that guides the discussion.

Good luck on the negotiations,

Allen Fletcher

@Randy Born it depends on your lease contract. One of the things that I always put into my contracts is a clause that states that amendments to the contract can be made by following a predetermined process and getting all the signatories to sign the amendment. In your case see if you have that clause, if you do you draw up an amendment that calls out the original lease contract as being necessary, get it signed by everyone, and then attach it to the original. If you do not have that clause in the contract then you may have to sign a whole new lease contract with all of your tenants. If you go this route make sure to add the clause for amendments to save you problems in the future.

I hope this helps,

Allen Fletcher

@James Jacobs having a business entity between you and your real estate is essential. There are a couple of posts in the blog on this. Here are a couple that I read recently:

Business Structures

Bad Structures

The only reason you would want to put the LLC in your wife's name is if you are going to be working with the government. Government agencies have quotas for the number of "disadvantaged businesses" they have to work with on different projects. I cannot think of any reason that you would want to work with the government in real estate (unless you plan on seeking real estate development contracts from them). If you are going to stick with the standard methods of investing (wholesaling, flipping, buy and hold, etc.) there is no real advantage to putting the LLC in your wife's name at this time.

Hope this points you in the right direction,

Allen Fletcher

@Rey Delgado Remember one thing about the 70% rule, it is a guideline that helps you determine if a deal is profitable our not. If you are looking for your first deal, consider the 70% rule an unbreakable law. If you are experienced in real estate you can adjust the rule some according to your experience.

One thing I would do is ask the wholesaler how they came up with that number. Have them show you the analysis they did to determine that price. If they have not taken into account the cost for repairs, then you know that they have missed the point of being a wholesaler and you should look somewhere else for deals until you gain some experience.

You could also try to negotiate with them to get the price down to where you believe the price should be for your profit.

Hope this helps,

Allen Fletcher

@Edward Nelson take some time to look up "We buy houses (insert your city here)". Pay attention to bandit signs. Talk to contractors that are working on homes while you are out for a walk. The people that buy using cash are usually investors and will be blanketing areas with advertising. Respond to their advertisements and talk to them.

When you talk to them, ask questions that will get you a list of the things that cash buyer looks for in a deal. Focus on things like type of house, neighborhood, types of renovations that they do not like to do, etc.

Once you have done this you have created a profile that will help you identify if that investor will buy the deals you find. The one thing to remember about being a wholesaler is that you are hunting for deals for another investor. The best wholesalers are those that hunt down the deals that other investors want and then treat those investors well. If you do this, you will be successful.

Good luck,

Allen Fletcher

@Chris Vogel Your business plan should be based on three things:

1) What you find fun and interesting

2) The strategy that will help you meet your long term goals

3) Filling the needs in your particular market.

It seems to me that you have already answered the first question, you want to flip homes. This is a good first step. You have identified what interests you now you need to do a little digging in that investment method for your particular area.

You ask about which investment strategy is best, in reality that can only be answered by you. If your goal is monthly steady income you buy rentals, if your goal is to increase your annual income and you do not care if it is steady flipping and wholesaling may be the areas you want to focus.

Once you have defined the first two parts of the strategy you need to look at your market and figure out which market needs you can fill with your desired strategy. This may require you to tweak your plans a bit, but you can always find niche that fits you in almost every market.

The most important thing to remember in all of this is that your investment strategy is a living breathing entity. As your tastes, goals, and market change you may find your investment strategy will change as well.

Good Luck,

Allen Fletcher