All Forum Posts by: Stephen Weber

@Charlie John were you able to successfully negotiate anything with this seller?

To determine the profit, you'll first want to define an acceptable price to both parties. Then subtract all expenses from the sale price and split the profit.  There needs to be enough profit when estimating the numbers to motivate the seller to wait for their money.  

Hi Chris, I see that your question received no answer.  I understand it isn't easy, especially when new in the investing game.  I've done three flips in Denver, where I live.  I'm not sure if we can do business together, but we could certainly chat and see.

Sorry I wasn't clear. The return in the proposal states a 40% return in 2 years (thus, 20% annual return).  But before I was presented with that information in writing, I was told verbally that the return would be 40%.  It sounded misleading.  If I am quoted a percent I assume it is an annualized return.  That was a bad assumption on my part, in this case.

I appreciate all the answers, but I was simply trying to figure out who quotes returns in 2 year periods, and it looks like that was just a little marketing on my "partner's" part. The Preferred reference is new to me, so I asked the community.

I would take on a loan position in this project to build duplexes.  So not an equity position @J Scott 

Thanks for your input @Chris Winterhalter and @Brent Coombs 

 and @Bryan Hancock I am absolutely skeptical, that's why I brought up my concern.

@Manolo D. - I might "get a better deal flipping houses" but that's beyond the scope of my question. And I have no knowledge of government contractors and surety bonds. 

@JScott, I would take title to the property in second lien position.  Can't I make a loan and have an equity position?

I met with a developer yesterday and during our meeting he stated a 40% “preferred” return to partners. That got my attention, and although I do not want to talk numbers here, the point is that he is looking for a loan to fund his deal. This morning I read his detailed proposal and see that the 40% return is over a two year period. That sounds misleading and I’m wondering if anyone in the world of development would present proposals that way.

Thanks for your feedback, i appreciate the insights.

@Larry Turowski , yes I've heard of MAO and planned on 70%ARV-r but haven't found that in my chosen market. I don't want to rush things and I don't want to stay sidelined either. Yes, I better factor in the taxes, insurance, utilities and holding costs.

@Ned Carey , I realize 90 days may be optimistic and there is a cost to the time.

@Cale Ferguson , i appreciate your encouragement. 

In the Denver market pressure moves prices up due to low inventory and high demand, so I sure appreciate your comments.

I hope to create a network of investors so we can all get a little more of what we want; experience, deals, success. In that effort I want to lay out the details of a deal I am evaluating. The numbers:

Purchase price: $181,000

Rehab: 75,500 (includes a contingency factor of 10%)

All in: 256,500

ARV: 325,000

Timeline: 60 day rehab schedule

We have an experienced selling agent who has agreed to list the property on the retail market at 4.8%.

We calculate our profit like this: 325,000 (sell prices) – 15,600 (sales commission)  – 256,500 (purchase price + rehab) = $52,900

Of course we may not realize full asking price, and we might be asked to pay concessions, but these are the values we are using. We will give some profit to our contractor to incentivize the work quality and schedule. This isn’t a ‘home-run’ but feels like a solid single. Questions and/or comments are welcome.

Analysis:

256,500 invested

$26,450 profit anticipated (after split)

Return = profit/down payment, so:  26,450/256,500 = 10.3% in ~90days.

On my way!!

@K. Marie Poe One issue I see here is that your list has no-equity leads for possible sub2s deals, but it sounds like your mail piece is general. IMO, getting a motivated, upside down seller to call takes a different message than the general yellow letter piece.

I think the yellow letter is way over-rated if you want to be taken seriously in certain markets. Especially if more than few investors are sending them to the same owners.

I'm concerned about a "mentor" that would let you mail that many pieces without results and/or tweaking of the message. Has anyone on the list been hit more than once?

Thanks for offering your thoughts above. I mailed the initial list and got no calls. My mentor suggested targeting just the absentee owners a second time. I Just mailed out 300 to those as a second mailing.

We are targeting folks with any amount of equity, but not negative. I agree with you that “there has to be sub2 properties in every market.”

You go on to say in another post that skill set and mind set are key! What steps can I take to get my first rental property under my experience without going the traditional route? Continue mailing to absentee owners, call/email ads in Craigslist to For Rent and For Sale By Owners, newspaper ad?

Any mindset adjusting advice is welcome…

Thanks for your contributions to the community!