All Forum Posts by: Chad Benedict

@Brendan M. Awesome job thinking creatively and look at all of your expenses and cashflow as a whole, instead of just looking at the property by itself.

Congrats on a great deal!

Chad

Thanks, everyone!

@Scott Bottomley The wholesaler I partnered with is well-known in Dallas. He's actually developed a niche where he has the buyers list, and other wholesalers bring him deals. He then advertises it, host a showing, picks the buyer, and gets a cut of the assignment fee based on the arrangement. It works very well.

He has a system down to structure it. Essentially I assigned the deal to him, and then he assigned it again to the end buyer. If you do this, you just have to make sure the title company is comfortable with a double assignment. He and I just had an agreement about how we would split the deal, and we adjusted the assignment accordingly after we found the buyer. Just make sure if you're partnering with someone you don't know that it's all in writing and you're good with everything.

I think some of them are just trying to keep their crews busy, too, while inventory is so low. Better a really tight flip than no flip.

@Michael Quarles I agree here in Dallas it's still just a matter of low inventory rather than a bubble -- so far. I think the institutional investors (hedge funds) are having an outsized effect on the market, and that's a bubble of some sort that will stop eventually.

Thanks again, everyone!

@Tyler W. I just use an excel sheet to track my buyers, with their names, email, phone, and areas of Dallas they're interested in and what they're looking for. I've sent a blast email before but prefer more personalized emails to a few targeted investors if I think they're interested or might know someone who is interested in a given property. My emails are simple -- just a description of the property, repairs, etc. I include a link to lots of pictures on Dropbox. I also post to craigslist and myhousedeals, which worked well last time.

Don't be intimidated by people with large lists. The guy I know has a list of 45,000 people, but I'm sure only 300-400 of them are buyers at any given time. He'll send out an email, host one showing, and have maybe 3-10 people show up at the showing. Then he'll put it under contract right there with one of them. It works well but is not how most wholesalers do it, from my experience.

Again, you don't need 45,000 buyers. Just 4-5 people who you know are truly interested and buying frequently with cash. Good luck!

Others have mentioned the rehab and expenses, which you need to address. If the seller is willing to carry back a loan, that's where you can really make this deal work. Terms are everything. If you can negotiate a somewhat lower price, put 20% down, and convince them to carry back a note at a low rate for at least 15-20 years or longer, you can get close to good cashflow. All depends on the terms and how badly the owner needs to sell. But you'll never know until you ask! I know several investors who have gotten 0% carryback first or second loans on multi-family.

Best of luck!

Chad

Congrats! @Patrick H. 

I actually quit a good job last summer and jumped into real estate with absolutely no experience or other income. So you're already well ahead of me. You'll find it's actually much easier to make it work now than when you had to balance another job. No risk, no reward!

Best of luck!

Chad

I know people often post deals they have closed or are currently reviewing. I thought I’d post a deal I didn’t get just to show how competitive the market is here in Dallas. Those in the Dallas / Fort Worth area and other hot markets will probably have witnessed this many times. For those of you having trouble finding deals, this is why!

This lead came through a probate mailing. The executor told me over the phone she had already received a cash offer of $200,000 for the house, which had an ARV of $230,000. I told her she should run with that as there was no way I could go higher, even though I hadn't seen it yet.

I did, however, mail her a follow up letter thanking her for her time and asking her to contact me if anything changed. That letter was returned as I accidentally sent it to the wrong address. But, I sent it again to the correct address, and a few weeks later she called me.

She said the other offer fell through at closing. Apparently the investor-buyer went on his honeymoon, stayed too long, and then came back and his “funding had fallen through.” Sounds like there’s an interesting story there.

I looked at the property with her Friday morning. There was another investor coming to look that afternoon. The house was a typical 3/2/2 with only one owner ever, located in the Brookhaven Country Club subdivision in North Dallas, which is popular.

Here’s why the “traditional” formulas most investors have learned don’t work in a hot market, especially in a place like Dallas. I know this will be familiar to many, but I thought I’d share for those who are wondering what the heck is going on.

This is a flip property, not a rental. Rent rates are around $1600-$1700 per month for the area depending on the house and square footage. Even if you paid all cash, with closing costs and rehab, that’s only maybe a 4% annual return, so I would classify it as a pure flip. No way it would cash flow if you had to use financing.

Here are the numbers according to the traditional formulas for flippers and wholesalers:

ARV: $230,000
70% of ARV: $161,000
Minus renovations: $30,000 ($25-$35K depending on the flipper)
Minus desired wholesale fee: $5,000
Maximum I should offer on this property according to the regular formula: $126,000

I offered $170,000, and I was actually pretty confident I could wholesale it for around $174,000. I was outbid by the other investor offering $180,000. He actually made that offer sight unseen, and confirmed it when he toured the house Friday. I can only assume he planned to wholesale it or flip it himself.

At $180,000, that means this house was purchased for about 91%ARV minus repairs (not including closing costs), well above the formulaic 70%ARV minus repairs. I could never make this work for me, but obviously others can. And of course the first guy whose contract fell through offered 100%ARV minus repairs.

I don't know if there's really a moral to the story. I just thought it illustrated our current environment in Dallas pretty well. I've had similar situations in other deals I've lost, but this one just seemed like the perfect example. I'd be interested in hearing others' experiences with ARV numbers. I know buy-and-hold investors are paying that much, but it seems crazy for a flip.

Best of luck to everyone trying to find deals!

Chad

Congratulations on sticking with it!

Wow, not a good situation. @Sterling White I commend you for trying to make it work, but it sounds like this is becoming more trouble than it's worth. I've recently had to let go of a couple of deals I wanted (including a probate deal) because I realized a few weeks in that some of the specific complications and uncertainty were no longer worth my time.

Best of luck whatever you decide!

Chad