All Forum Posts by: Andrew Holmes

A lot of bank with REO properties have put this rule in place where they wait 7 days before accepting any offer. It's just a way for them to create more offers by keeping this period open.

Also depending on how this home was insured there is a preference given to home owners before investors can buy these properties. It seems unfair but they are trying to encourage home ownership rather than an investor buying the property. 

Andrew Holmes

There are a few different way of find cash buyers but don't ignore buyers that finance properties. You should be looking for all buyers of investment properties.

3 Fairly Simple Ways

1. MLS - Pull a list of all buyers that bought pre foreclousres, reo, short sales or any type of distress properties. This fairly easy to do. In our MLS you can only get a list in PDF but a fairly easy macro program can feed it to an Excel list and remove the duplicates.

2. You can buy a list of cash buyers as well. 

3. Tax records: Search for all sales at your county and sort out cash buyers or ones that used private loans or other rehab loans. Depending on how much data is available in your county this can be pulled from the tax records automatically as well. You need someone to write a bit of code for you. 

Here in the Chicago area we are able to do so fairly easily by zip code. We pull all distressed sale buyers and cash buyers for the last 24 months. 

Andrew 

Congratulations to you on the first Cash Flow Deal after doing a bunch of wholesales. 

I thought I would post a few comments on this subject because so many investors have trouble with this subject. The reason in most cases that this is a difficult topic is mostly for 3 main reasons

1. Lack of confidence:

New investors and too gun shy asking others for money. Lack of confidence. I used to feel that way when I started investing. The reason was because I looked at it as asking for money not presenting an opportunity to invest in your deal. Now with over 760 flips and cash flow deal over the last 7 years it seems so silly but at that point it used to be scary.

2. Not enough research and data: Talk about how you cover the downside rather than just the huge returns.

Most investors tend to present how great the returns on their deal. Personally I feel that if you talk about all the research, study and data. Plus the mistakes and success of others that you have studied to build your investment system people will see your thoroughness. People with money worry more about risk rather than just returns. If  you talk about how you cover your down side more than all the money you will make per deal you will attract long term stable investors that want a fair return that people who are just chasing ridiculous returns.

3. Greed & Fairness: When a lot of investors are getting started in my experience they ask for too big a piece of the pie. If I look back at my personal deals some of the earlier deals seem comical because I gave away huge pieces in the deal even though I did all the work. Today it seem funny but it helped me attract a core group of supports and investors. It's okay in the beginning to be a bit more generous. As you grow you get to dictate the terms. The only bad part is that some people will become used to huge returns and as you start bringing your numbers down they will not understand that why now you want to keep more. It's okay in most cases. As you grow and with more experience you will have more and more people willing to join your deal. In the beginning you have to learn to serve to be the king later.

Now let's talk about places to find money.

First off are you looking for

a. Short Term Money (A few days to a year or less)

b. Long Term Money (2 years to fixed 30 year term)

c. Partners (Debt Vs. Equity Partners)

Places to find money

1. Big Bank (Chase, Wells Fargo Etc. ) Have limited options for most investors.

2. Small Banks - One Of The Best Kept Secrets In Real Estate (My Personal Favorite)

3. Independent Mortgage Brokers - Worth their weight in gold if they know what they are doing can be a huge ally to help you grow. (I am talking about folk that have a lot of relationship and are not tied down to just one bank. Specially a good commercial mortgage broker with a lot of experience can be great.)

4. Private Money & Angel Investors - My personal Favorite

5. Hard Money Lenders - Can be useful but not my personal choice rate and rates are way too high

6. Crowd Funding - A fairly sophisticated way of finding money but the ultimate growth tool. (May require SEC filing so get proper advice from a SEC attorney)

On an average after all expenses including carrying costs and cost of money plus a $ 7000 overlay for our over head expenses we look for net of $ 15,000 per about a 100K invested.

In reality we end up netting about $ 12,500 per $100K of sale price.

Our average flip is around $ 210 so net amount are about $ 24,000 to $ 25,000.

Auction.com is like a lot of the other sites. The starting number really does not mean much. I believe in the last 4 years we have purchased about 72 or so properties from them so I don't have any complaints. 

Just like with any other auctions be careful and keep a wide margin specially if the property is occupied. This is specially true if the property is in a county like Cook county or it can be even more scary if it is in Chicago. 

The city of Chicago has some very unique challenges when you buy a property with an existing person in it specially if they are tenants. If they have an bonified existing lease by law you have to pay them $ 10,500 to move if you want to break their lease. 

Yes $ 10K. I know it's shocking but as per the Chicago ordinance if they are not aware of this you are obligated to tell them their rights. 

In the suburbs it not as crazy but buying in some counties can be pretty crazy depending on how easy or difficult it is to get people out. If you going to invest on a large scale at some point you will have to deal with these things if you happen to be in one of these areas. Still every time there is a problem there is an opportunity on the other end of the problem. We have done very well with auction but I say that they are all home run deal I would be lying. There have been goofs so please do your homework. 

Auction.com can yield some great opportunities if you are persistent and if you do your homework. Make sure you are familiar with the game. People will bid up the property and then realize that they got up in the moment. Properties on these auction keep coming back over and over. We have won properties after bidding on them as many as 15 different times so be patient. This is a game of nerves and your greed can kill you so let it go if the number go beyond you pre set limit. 

Andrew.

Nick based on your numbers. I think it is tight at the first pass. Here in Chicago it's easy to flip condos in the City in the downtown area. In the suburbs flipping town homes work really well. But flipping condo's in a suburban building is very difficult at least in today's market. 

We have done about 65 condo flips over the last 4 years but still you have to watch your numbers. 

Your Deal based your numbers

First things first. 

How much do you want to make from this flip?

We look at $ 15K per $ 100K invested after cost of money is taken into account. 

I am assuming your comps are goods so here is how I would look at the numbers. I am basing my numbers on sale price of $ 300K and rehab of $ 20K allowing for a bit of over run in costs. You can adjust the numbers. I am assuming hold time of 6 months and $ 1200 overhead costs of holding each month this included taxes and HOA. I don't know your exact cost so these are just my numbers.

Jeff: We have several meeting in chicago every month. We are the largest real estate investors association is chicagoland area and proud to say the most active in terms of number of deals per member. 

We have over 480 members and we started the group back in Jan 2015. Already as a group our member have bought over 680 properties since Jan 2015. 

Website is Chicagoreia.org

Ms. Elizabeth: 

Just a suggestion please absolutely do not do this loan. The point and rates are hard money rates it's a very bad rate for you. 

The type of loan you should be looking for is a HomeStyle Renovation Loan your rates will be 5 - 6% and may be 1-2 % closing costs that is it. The numbers you are looking at will be very tough do do unless you have a huge margin and it's a flip.

Another place to look for money is private money lenders. Friends or family or other investors that will lend you money at 10 - 13% fixed rate secured with a mortgage and  note. 

Here are few thoughts. 

1. What is the reason you want to invest? (Short Term Or Long Term)

2. What is the goal Flip or Cash Flow?

3. If it's a flip then how much is this property worth once you have it rehabbed? How much is your all in cost including hold cost and cost of money?

Based on the just the numbers you posted it's not a good deal.

It's great that you putting so much effort in making offer but remember that don't do a deal just to do a deal. It needs to make sense for you. It's great that you have the foresight to post some of the details before you got in the deal. 

Hey Garrett: You will not be able to do a traditional residential 30 year loan in an LLC. There is another option but it is expensive in terms of rates.

Here are the 3 options.

1. 30 year loan - Quit claim the property from your LLC to your own name. Please check with the loan officer that you are going to use before you quit claim or do anything. Almost any lender that does residential loans should be able to help you. Then once your loan is done you can move it back to your LLC.

2. Commercial Type 1: You can get loans from a portfolio lender or commercial loan for a residential property. The typical terms that you will get are as follows.

20 - 25 Year amortization

4.75 - 5.5% rate

5-7 Year balloon

3. Commercial Type 2: This type of a lender is a bit harder to find but they do exist. They will give you a 30 year fixed loan for a rate around 7.125 with your LLC owning the property. If the property has less than 6 months seasoning they will give you 60 - 70% of appraised value. If it is more than 6 months seasoning you will get up to 80% of appraised value.

Hope that helps

Andrew.