All Forum Posts by: Chris Feltus

That's exactly what an option period is for. An option gives you the unrestricted right to back out of the contract for however long the option period is. I get options on every property I put under contract and it has never been an issue with the seller.

@Maria Laty I am fixing to close on a property with a tenant inside, first time to do so and it was a great learning experience. Anyways, you stated the current contract has no current lease? Is there perhaps a copy of an old lease even if its expired? The title company can use that if so, and you can use that as well when the property switches hands.

@Gunnar Teltow

I use Ultima Real Estate. Its roughly $120 per month sponsorship a flat rate for each property sold and about $75 for E&O insurance. Plus additional fees for MLS access and lock boxes.

Use your states promulgated purchase and sales contract. This adds legitimacy to your business and puts both you and the seller on equal footing.

I never, ever use weasel clauses. E.g. contract subject to inspections, contract subject to funding partners approval. Don’t do this its shady and these are real people with real problems counting on you to perform. If you need an option period, buy an option period. If I go on an appointment and find out one of the investors before me is trying to use a weasel clause, I will bring out the TREC contract, walk the seller through it educating them and make them look completely silly and illegitimate.

At least here in Texas earnest money is not required for a valid contract. When you walk them through the contract you are in control. If someone does inquire about earnest money put down 1% of the sales price.

It's not that simple. When selecting comparables, think about the word carefully, comparable. Its in the word itself yet so many seem to forget this at times. You are trying to identify comparable properties, comparing apples to apples, or like to like. This is just one component, in addition to that you will need to be able to estimate a conservative ERC (estimated repair cost) as well. Both of these factors must be correct for you to successfully market the property. You want to pull comps like an appraiser would.

1. Try and stay in the subject properties subdivision. If there is not enough activity in the subject properties subdivision you can go out in a radius or other subdivisions across local roads. Try and pick similar subdivisions with the same housing inventory/ amenities etc. How far your radius will go out will depend on where you live. Here in Texas, in the suburbs you can typically go out .5 - 1 mile and be pretty safe with your comps. However, using that same radius in the inner city of Philadelphia will not work, prices can very wildly from one block or street to another.

2. Don't go across major roads if possible.

3. Make sure to compare properties with similar square footage (the max I typically go is + or - 20%)

4. Make sure to DRIVE your comps. Don't try and be a desktop appraiser. Besides making sure your comps are accurate it will help you become an expert on housing inventory in your area.

5. Beds baths and garages. For instance if your subject property is a 3/2.5/2 (3 bedroom, 2 and a half bath, 2 car garage) then don't select a 2/1 as a comp. These are not comparable. With larger homes its typically acceptable to have some variance with the bedrooms. A 3/2/2 and a 4/2/2 can often be similar; however, the difference between a 3/2/2 and a 2/1 is night and day.

6. Sometimes the comps in the area are so weak you won't be able to find much of anything. In such cases I typically make a very conservative offer, typically 55-60% of what the properties tax assessed value is. Tax assessed value, at least here in Texas, tends to be conservative and lower than market value.

7. Pick a similar house style as your subject property. If your subject property tutor style dont pick ranch style homes as your comps. Similarly if the exterior is brick on your subject property, don't select wooden frame houses either.

8. Go back 6 months for most recent comps. Time is a factor when selecting comps. Sometimes when the comps are less than ideal you can go back 8-9 months. But make sure to think, how has the market changed since then? Has it improved, or worsened? And try to apply that to your evaluations.

9. Year built, try and stay within +/- 10 years of the subject property or better when pulling comps.

If you go around getting junk under contract that is not a deal but a dud you will tarnish your reputation make sure to do your research. If you need some help on where to get started with ERC, let me know and I can give you a quick write up on that as well. This was mainly focused on ARV, recall both ARV and ERC must be accurate to get a deal.

Estimating the ARV is more like 8th grade science. You remember the scientific method? We are trying to make an EDUCATED HYPOTHESIS as to what the property is worth its not an exact science. Hope this helped, this sort of turned into a blog post.

Here are some additional great resources:

Danny Johnson Guide to Estimating ARV

BP Book on Estimating Repair Costs by J Scott

J Scott's Estimating ARV Primer

@Steven Pierre I did a blog post for bigger pockets on this precise topic. If you would like to read more read the post here. Let me know if you have any questions I would be happy to help

http://www.biggerpockets.com/renewsblog/2013/05/10/driving-for-dollars-tracking-owners/

@James D. I suggest using your states promulgated purchase and sales contract, rather than use some 1 page form you found off the internet. Once you learn how to use your states promulgated contract, you simply need an assignment of contract. It can be a brief one page document. In the bigger pockets files place you may find some examples of these.

@Dar Rose If I am understanding you correctly, yes you can assuming there is an executor appointed as well. On the TREC 1-4 contract paragraph 1, parties in the transaction, for the seller put estate of (insert deceased persons name here).

EDDM distributes door hangers as well?

I am about to close on a property that is currently occupied with a tenant. First time I have worked on an occupied home, so it was definitely a learning experience for me.

Make sure you only bring serious buyers, if you are advertising or potentially showing the property to someone you have never done business with, ask about their experience. How many flips, rentals have they done ? Verify their proof of funds, get a higher earnest money deposit if you need to etc. You want to make as few showings as possible. Make sure you take great pictures, get an accurate ARV/rehab numbers, and a movie walk through if possible. This will help package the deal together.

If you are assigning the contract make sure to give the tenant information to the new landlord and likewise give the tenant the landlords information. Let them know at or before closing, preferably before, that the property will be changing hands. Also ask how the current tenant has been paying rent? Has it been by mailing a check or cash etc.

Make sure to provide the title company with a copy of the lease and your funding partner. In my case the lease had expired months ago; however, at least here in TX the title company can use the old notification terms even if the lease has since expired. It is also helpful to ask the seller for any documentation/ before & after pictures of the condition of the property prior to the tenants moving in. Usually lease terms state when the lease ends the property should be in similar condition than prior to the tenants moving in.