All Forum Posts by: Logan Turner

Yes you are correct. The owner would only be responsible for taxes on the downpayment and payments received for the year. One thing to keep in mind though, is that the seller must have lived in the house for 2 out of the last 5 years. 

There are a few ways you could approach this situation. Knocking on the door and talking with the owner / decision maker would be your best bet. Explain your situation. Tell them you are looking to invest in a home, that your parents live across the street and ask if they have any interest in selling. Find out their needs, and then see if your desires can align with their needs. Maybe a discounted buy it now works best for them, or maybe its seller financing. Either way, we're just speculating until you talk with them. Have a game plan in place for both situations. Have a price you would be willing to buy it for (run your comps, estimate repairs etc..) and if they want to take installment payments, have your terms that would work for you. For a "good deal", you should either get your terms or your price (of course not paying over FMV).

Sure , i can agree to a lot of those points. Wholesaling does have its place, but just not your sole business in real estate. Here are some of the pros

-You can take action NOW. You don't have to wait to accumulate 20% down payment or find that mentor you can add value to

-It teaches you how to find discounted properties (valuable for any real estate investor)

-You learn as you go, sure you'll make mistakes, but at least you'll learn real life, not just book info (which is great but there comes a time to put that **** down and go take ACTION!)

-You will build relationships with sellers, buyers/investors, title companies etc... (be a good person, don't try and screw people, be ethical and try to add value to all parties)

Disclaimer:

I don't wholesale with the sole intention of assigning it for a fee. My goal is first to buy it, fix it up and then either sell it or rent it out. If there are properties that come in that are great deals, and i can't handle it that month, then I will look to wholesale it to someone who can. But only if its a win win situation for everyone involved. 

I agree that trying to replace your job with strictly wholesaling takes one hell of a salesmen. I prefer to invest in RE and not be just a salesmen. 

Originally posted by @Jake Hartnett:

Bob Bowling thanks for your input. I haven't thought much about FMV because for me it's very difficult to determine and is only relevant if I sell it. This is in a town of 4,000 people so there aren't a ton of comps. I have looked at similar properties in different towns, and this seems to be in the ball park, but it's not apples to apples. The value to me is the price at which it cash flows, that could be different than FMV, but that to me is irrelevant. How do you approach FMV?

The reason why FMV is not irrelevant, is because say you wish to sell the property in 4 years and you are only able to sell if for 10k less than what you paid for it. Well, your cash flow, which you thought was the deal itself, simply made up for your loss of equity because you bought too high.

Another example: you wish to take a heloc out on your properties and realize your property is only appraised at 5-10k less than what you bought it for... again, you are now spending years, waiting for that nice cash flow to make up the difference. 

So basically, in the big picture and long term thinking, FMV is important. If you wish to hold forever, yeah, not as important.

Just my two cents

Why 10% down? Why not do an FHA loan and put 5% down (no PMI after 20 percent owned)? This would give you more cash to use on another deal sooner. From your numbers it looks like you are taking a lot of risk for not much profit. I would say rent. However, if you were ok for a little bit cheaper of a house or one that needed more repairs, you could do a buy and hold and then Refinance. The benefit is it allows you to get into a home for cheap. Analyze the property as if you would any other buy and hold property, if the numbers make sense, then it allows you to get it under contract for 3-5perxent down vs 20-25 percent. If that is not your game then the fix and flip risk is not worth it. Rent from your dad, and save your capital for investment deals.

Great design and look on the house. Now go do 10 more :)

You're welcome! Keep studying but set a date to start taking some action

Awesome stuff @Martin Chavez. I'm in your market but just getting started. Going to be sending out a direct marketing campaign shortly with the goal of finding 1 or 2 buy and holds that need some cosmetic rehab. If you come across any deals you wish to wholesale, send them my way. I'm looking into the east odessa area (east of grandview) and north and west midland. 

Cheers

find out what local rent is. search craigslist, call places and talk with owners/ PM companies to make sure 600 is going rate.

Analyze best case scenario, analyze worst case, and it will prob end up somewhere in between in reality. If you can still float with worst case scenario, then go for it. 125k purchase price is nothing. Worst case scenario youre paying 800-1200 a month with no renters. Can you afford that? (Now of course repairs could be needed, but thats for another discussion) If you can eat the entire mortgage with no renters then i say do it. 
You won't do everything perfect, but learn and grow from it and you may even make some damn good money when its all said and done. 

So it is very, very rare to find 2% rule deals. Those are rarely, if ever, found on MLS, zillow etc. A deal usually only needs to be at 1% to meet the 50% rule.

ex. with some quick dirty numbers: 100k house, renting at 2k (2%), mortgage would be $530. Throw in 1k in expenses and you cash flow at 470 dollars with very conservative numbers. That would be an incredible deal and a few of those would have you set. 

Thats almost 30 percent Cash on cash return (not talking about ROI with debt pay down and appreciation) Double your money in every 3 years.

Now 1 percent rule on same house. 100k, rents at 1k. mortgage is 530, expenses 500. You negative cash flow 30 dollars with very conservative numbers.  

As you can see in this example you would only need slightly above 1% to make deals work with 20 percent down, and this is buying without any discount and without doing anything to add value to the property. 

Also, the worse neighborhood you enter (C and D classes) the better the property will look on paper. But, don't be fooled as the cheaper houses (say 50k) will still have the same cost for an HVAC or roof (Cap Ex.) and also will have higher repair costs (usually) and vacancy rates d/t the renter population. 

Just analyze the property with 40-50 percent of gross rent dedicated to expenses (maybe 50 for c and d and 40 for B or A) 

150/mo for repairs/maintenance is a good figure, get an insurance estimate to break it down monthly, calculate the taxes (county records) and do play with the vacancy rate depending on your area. Say 5-8% for a A/B area and 10-12% for a worse one, and then of course 8-10 percent for PM (even if you plan to do it yourself)

Again, 2 percent rule is very very rare. Find a distressed place that can be brought up to rental standards in the neighborhood. Then maybe you can create a 2 percent property, based on your buying price, but its unlikely you will find one already at 2%. Who would sell such a property thats cash flowing so much! You have to find the problem with the place and solve it to reap the rewards

Pg 153 and 154, and yes the subject property is 1940 sq ft. Its irrelevant though, just realize more sq ft = higher value when you're figuring out comps. Don't focus on the minutia, try to keep a big picture view of what concept he is trying to teach you. 

Best of luck!