All Forum Posts by: Chris Majors

At least from my experience, wholesalers are a mixed bag.

Most are in it for the immediate profit and don't care (or do not know any better) about their long term reputation with the "real" investors in their market. There are a ton of wanna-be investors that want to be "sold" a good deal. These poor folks are prey to the "wholesalers" and buy things based on the wholesaler's ARV and repair numbers. They will do one or two deals and then realize they are losing money. Seems to me most get burned out after losing their hard-earned money, but some actually learn from their mistakes and learn the real numbers themselves (I fall under this category).

Unfortunately this situation seems to be fairly prevalent because of the lack of real deals on the MLS. That being said, most licensed residential real estate agents that deal with lower-end "investment" properties also lack this knowledge as well. I offer on nearly every REO with some meat on the bone in my area of interest (two counties). 9 times out of 10 I am out-bid, and really don't see how these "investors" that are buying these properties are actually making money based on what they are paying (unless they are doing the work themselves and buying a "job"). In many cases, the starving realtors that need commissions sell crappy deals off the MLS to ignorant "investors" in a way that is almost as bad as the greedy wholesalers.

On the other hand, I have purchased three investment properties in the last couple months from wholesalers and only one from the MLS that were actual deals. The wholesalers were not super greedy and maybe even possibly took my lower offers because they knew I would close quick with no B.S. Don't get me wrong, during this time frame I've sifted through 100+ wholesaler "deals" and EVERYTHING on the MLS during this time frame which is a good bit of work.

It's of my opinion that there are too many toxic gurus pitching get-rich-quick real estate that takes advantage of sellers and buyers alike.  The good news is that it's easy to spot the real investor/wholesalers from the fakers.  The good ones only wholesale because their deal-flow exceeds their ability to buy/rehab at the time.  The wholesalers that do not rehab themselves are usually the ones with little resources and knowledge, thus their numbers cannot be trusted.

Honestly there are WAY easier and less risky ways to make $5k.  If you break down all of the hours you will spend on that flip (we are talking fix and flip not a quick wholesale deal), you would be better off getting a part-time job IMO.   Not to mention the financial risk.  The realtors will make more than $5k!  

I think you're spot on having a $20k minimum after accounting for all costs.  More if you are in higher price points or dealing with older or larger homes.

I like that area too @Brian Eilering.  I think you will do well there as a buy and hold.  Please keep us updated on the AirBnB cottage.  If you have good luck with it I'd like to replicate it, lol.

Hi @Brian Eilering,

Congrats on the deal!  I'm curious, what area is the property located?  Good call on Augusta, lotsa job growth for sure..

@Rita Grimes

I am an investor/realtor in your area.  I will say that our market is small enough where most investors that do regular business know each other.  You are already doing a good thing by posting on BP because you just got someone to add to your cash buyers list.. me, lol.  I'm sure some other Augusta investors will chime in as well. 

Another good way to meet other investors is to network at groups like the Real Estate Investor Association meetings (REIA) and another is the Art of Real Estate (AORE).

To answer your question about asking realtors for all their contacts I would treat it like any other business relationship.  Get to know them, do some business, then start asking for referrals.  There are too many time wasters in our industry, add some value to a relationship before asking for everything.

If you want to be a successful wholesaler I would advise to focus on learning to find good off-market deals and not a buyer list.  Trust me, if you find a real deal, I will buy it and know dozens of other investors that will as well.  In order to know if it's a deal or not you need to learn the market.  I would also recommend having either the cash, line of credit, or private money available to close if you are out there making offers.  

I previously used laminate flooring in rentals, but switched over to vinyl plank flooring a couple years ago when I discovered it.  It has all the positive attributes of wood laminate flooring, but is easier to install (no need for any saws since you use a razor blade to cut it), doesn't have to acclimate like wood, and most importantly it's water proof.  In my opinion it holds up to scratches better as well.  

The only downside is that for the thicker vinyl plank (I don't use the really thin 2mm stuff) the prices are increasing because of it's popularity.

I still generally use dark rental grade carpet in my bedrooms.

Thanks @Andrew Postell

Who would you recommend getting a HELOC with?

Hi @Andrew Postell I am buying the house with a private money first mortgage.  I'm familiar with delayed financing, but it doesn't seem to be the best fit for me in this case.  If I were to do a conventional loan I would rather wait 6 months and do a 80% cash-out refinance based on the appraised value.  I would be able to pull all the cash invested plus a little.

The question I have is: 30YF versus a HELOC as a first?

30YF pros: Fixed monthly payments at historically low interest rate.

cons:  You are fixed into making the same payment regardless of the principle owed.

HELOC pros: Only pay interest on principle owed. Interest only payments. Line of credit can increase as property appreciates.

cons: Adjustable rate.  Potential for lender to call the loan?

Hey @Account Closed thanks for your response.

The private money is expensive, 12% interest only payments with a 35 month balloon. As far as I know ALL HELOC's have adjustable rates tied to an index. In this case the rate would be similar to what I could get on a 30YF (maybe a little less) and interest only.

I'm honestly not worried about WF closing the account or failing. They're too big to fail, remember the bailout? I have banked with them since they bought out Wachovia and love their online accessibility and the fact there are branches EVERYWHERE. They were bad to deal with a few years back for home mortgages, but seem to be getting their act together. I did a refinance with them lasts year and it went smooth as silk. I still don't recommend them for my clients on a purchase, but that may change. To be clear, I am NOT stuck on doing one with them, I'm still researching the best HELOC deal out there.

I'm not really interested in a 15YF, if I go with a conventional cash-out refinance it would be 30YF with no additional principle payments. The benefit I'm seeing with having a HELOC in lieu of a conventional mortgage is the fact I only pay interest on the principle borrowed. If I have a conventional mortgage I'm locked in to pay the interest for the life of the mortgage. I also like the flexibility of having the line of credit for additional acquisitions, but only pay interest when I'm using the money (instead of doing a cash-out refi and having the cash sitting in my bank account). There will be times when I can have the HELOC completely paid off, but others when I need the funds short term.

I am under contract to purchase a new primary and using private money for 80% of the purchase price. I've been kicking around the idea of applying for a HELOC immediately after closing instead of waiting 6 months for a conventional cash-out refinance.

I spoke with Wells Fargo and they can do a HELOC up to 80% of the purchase price with no seasoning and I would have the ability to do 80% of the appraised value after 12 months. They said it generally takes 5-8 weeks from application to closing.

I would use the HELOC to pay off the first and pay down the HELOC as I sell some other property.

It seems to me it is smart to use the HELOC as a first as opposed to a 15 or 30 year fixed because there will be times when I can have it completely paid off and not have to pay interest on my primary versus be locked in and have times when I just have cash sitting in the bank account. If I need cash to purchase additional property I can just use the HELOC.

The only downside I can really figure is it will have an adjustable rate.

Am I missing something?  Anyone else do this successfully?

ARV $300k

Purchase price $185k

Repairs $30k

Thanks for your time!