All Forum Posts by: Devin Beverage

Welcome to Biggerpockets and real estate investment, Kimberly! I'm a newbie as well, and am also doing wholesaling. I'm in the process of setting up my wholesaling business from the ground up. Consider telling the story of how you came across your first deal and the process you went through getting it under contract! 

Congratulations on getting that first deal under contract. As you mentioned your next step will be to get that contract re-assigned to an investor and get paid. It's good that your contract is for well below the value of the house. First, let's ask a few questions. 

Does the home need any repairs, or is it completely updated? 

You may or may not have heard of the 70% rule, which means that (as a general rule), the ARV (after repair value) of the home x 70% (.7) - costs of renovations/upgrading = the most your buyer (investor) should be paying for the property. You want to make sure that your price is right before you start marketing the property to investors so that they don't discount you as "just another wannabe wholesaler."

A $100,000 ARV home with $15,000 in estimated rehab costs should not be bought for anything more than $55,000. That means that you want it under contract for $50,000 or so, because you want room for a good assignment or finders fee. Make sure those numbers work, because that is what your buyers are looking for.

Where are you getting your buyers? 
Well, you've got to find them somewhere. THere's always the marketplace here on BiggerPockets, which (I could be wrong but believe) you can access as a "Plus" member. In addition, you can look at your local REIA meet-ups to network and build a buyers list, as well as market your current property. you will want to have comps prepared as references to prove the ARV of the home, and actual estimates from contractors for repair costs would be very helpful and professional, although while some buyers will consider this step requisite, others may not even care. Regardless of how far you go with accuracy, I would prepare a good presentation for your property, meaning a nice portfolio/folder with the property, pictures, some briefs on comps, and a delineation of what the ARV is, price to the buyer, estimated repair costs, and maybe some features of the property. I haven't seen a lot of people do this but I feel like it's more professional and impressive.

Does everything with your contract check out? 

To do a reassignment for a finder's fee, you'll need to have a clause in your contract that says you can do that! This is as simple as the section that says "buyer," being followed by "or assigned," meaning either the buyer (you) are purchasing the property or whoever you assign it to. 

Have you made your earnest money deposit? 

You have to make your earnest money deposit with your real estate attorney or the title company you are using. Hopefully you put down something small like $10, to simplify things. 

How much will your finder's fee be? 

Again, you'll want to make sure your numbers work out. The 70% rule isn't a hard-and-fast law, but it's what the majority of investors I've spoken with go by. Some have other methods, and each market differs for sure. However, you want to make sure you're taking care of your buyer, because if they don't feel it's a deal, you're going to be holding on to that property for a while, potentially going past your "inspection period." $5,000 is a pretty fair fee. If you go up to $10,000 or more, you may want to consider double-closing instead of reassigning, because some buyers will get frustrated with you for making so much on the deal. I don't agree with this, as long as the buyer is making their fair share, but some will scoff at deals and turn away because of an outrageous assignment fee. 

Speaking of which, how long is your inspection period? 

This should also be outlined in your contract, and indicates how long you have to find your buyer. If you are unable to find a buyer, you need to cancel the contract before the inspection period ends. Via formal letter you can notify the seller that you are unable to purchase the property, legally breaking the contract. Be careful. Anyway, basically, your inspection period indicates how long you have to find a buyer. 

If I think of anything else, I'll let you know! Let me know if you have any questions. 

Good luck, and again, congratulations!

Hi, Val! I'm a newbie myself, but I'll try to tackle your questions anyway.

So... You have a friend who wants to buy a REO house, but he doesn't think it'll pass inspection. He wants to put an offer on it, though.

As far as your first question, I can't say for sure because I don't know enough about foreclosures/bank owned properties, but I believe they put homes on the market to recoup the remaining balance on the loan, not to put that remaining balance on another buyer.. That would be crazy, right!

Regarding the 203K loan, I'm inclined to ask whether he would be purchasing the property in cash if it weren't for the repair costs (need for the 203K). Because he'll need to apply for a mortgage anyway, why not go for a 203K through FHA? A regular ol' mortgage will require a credit check/screening.

You then go on to ask about possibly wholesaling the property, which I'm guessing means you are looking to get it under contract with the bank, close, and resell (because you'd need to do double-close with REO, because the bank isn't going to play around with re-assigning) it to your friend, who will pay in cash, for a fee. Is this accurate?

Unless there are rules against this, it sounds fine to me. Just make sure your friend (well, the guy you met at the gym) is okay with paying a little more if he does it through you. I think I may be missing something, though, because if he has cash anyway, why wouldn't he buy it straight through the bank? Does he not actually have cash and you are going to seller finance? I'm not sure I'm seeing his benefit, otherwise. 

Let me know if I'm misunderstanding. 

Hey, Lummie! Welcome to Biggerpockets, and welcome to the real estate game. I wish you a long and prosperous career. 

I'm a newbie in REI as well, in the Tampa market. I envy you up there in NYC (favorite city in the world)! I'm in the wholesale game as well, or at least, I'm getting into it.

I took the leap and attended my first REIA meeting just a few weeks into getting onto the BP forum. I was incredibly nervous that first time and it showed, but the group I attended was incredibly newbie-friendly, and there were not only other newbies there, but people who just showed up out of general interest and had no idea what they wanted to do in real estate yet.

I strongly recommend jumping in and finding several local meet-ups so you can make some contacts, talk real estate (as much as you can so far), hear all the lingo and territory-info you can get, and be immersed in the reality of REI. It's inspiring going to these things and talking to all the people who started just like we did and are now very successful.

Some groups may be more newbie focused than others, so take a good look around. Also some may be free, some paid; I would start with the free ones, because the paid ones can often be paid because they were mainly meant to be a marketplace for exchanging deals for profit. 

Good luck, Lummie!

Hi, Cam! 

Congratulations and welcome to the Biggerpockets forum! I am a newbie as well, and am also getting into wholesaling. I'm glad that Daniel gave it to you straight about not going through a guru. There are just so many sharks out there who are going to charge you valuable investment capital for basic knowledge that you can find just by reading through the pages of all these forum posts. 

I'm in the Tampa market and am currently in the process of building my wholesaling business from the ground up. You want to sound official when you're prospecting sellers; this doesn't mean you need to get an LLC or anything right away, because you don't and you shouldn't. You just want professionalism and consistency for your sellers. You want them to trust and believe in your business. 

I recommend doing a good amount of learning, and once you have a good idea of the process, including the steps involved and the way to accomplish those steps, make a forum post explaining that you are a newbie and want to make sure you have a firm grasp on wholesaling, and describe the whole process as if you were explaining it to someone else. Then  ask the question, "Does all of this make sense, and did I leave anything out that is important?"

Good luck, Cam! 

I know this is quite an old thread, but I heard from a few different licensed wholesalers that Keller Williams is a good brokerage to hang your license with in the Tampa Bay area. Just out of curiosity, have you accomplished your goal @Aaron T.? I'm looking to get my license as well. 

Do you have any tips on the process?

@Ryan Robirds

I understand your confusion. I definitely still consider myself in the early stage of my REI career (learning as much as I can!), and so the main reason I investigated the property and built an analysis was to get feedback and see what I was missing, how well/badly I analyzed it, and whether it would actually be a good deal. While I would be ready to jump on a deal if I found one good enough, my timeframe for my first property is somewhere in the next six months, so I'm not necessarily looking to hop into the very first potential deal I see. For simplicity, when I evaluate properties like this one (half just for practice), I try to base my numbers on normal non-house-hacking situation where I don't occupy the property.

I understand that it's contradictory the way I posted my analysis based on an FHA down payment yet ran rental income like I was going to have both units filled with tenants. My ideal goal is to purchase a multi family property (3-4 units optimally) and live in one of the units for my first deal. That being said, I should have done this one with a 20% down payment, since there are only two units and forgoing the rental income for my own living arrangements would diminish profits -- my mistake. Thank you for pointing that out!

@Adrian Smude Thank you for your suggestion on PM numbers. I've been trying to overestimate in general for my analyses to not make my first deal too risky, but it's good to know a realistic price. One unit ("newly renovated") recently started a year lease. The second tenant is month-to-month and is paying less ($695 vs. $725 I believe). I understand what you're saying about taking over tenants... Though I suppose a month-to-month tenant possibly isn't looking to stay for very long anyway, right? 

Speaking of month-to-month, I just looked at the Zillow listing which is now updated, and the seller has removed the mention of the tenants (though it's still on loopnet), has added more photos, and now says that both units have been remodeled. It sounds like this seller is pretty motivated. 

@Doug Merriott, flood insurance isn't something I had even considered! You can bet it's something I'll be looking into more for every other property I consider in the future. 

Thank you all so much for your input, it's invaluable to me. I will be following all of your advice and investigating the property further, and even if this isn't the (first) one, I know a lot more than I did and I can apply it toward my future prospects.

Thank you, @Devon Garbus. I'm afraid you're mistaken regarding the proper spelling of "DevIn," however, you made some great points that I hadn't considered. I concur that it's best to find a property you benefit from in worst case scenario (here, with all the expenses taken into account, even the ones I wouldn't use or didn't think I'd need). Thank you for your input! I love your suggestion about making a spreadsheet.

I would like to opt out of property management for the experience and because the property is only two units. For capex and maintenance I would take 50% of my monthly cash flow, which would be based on the no-utilities and no-management number I came up with. I should have put that in there to start with, thank you for pointing it out. Utilities are my fuzziest area right now. Do you have recommendations besides simply asking landlords and people in an area in order to figure out what you suggest? I haven't found any good online sources for estimates of utilities or info on whether tenant pays or not. I've looked through a lot of rental listings and very rarely see mention of utilities being included. I really appreciate your input, Dan.

I'm new to the game and building my foundation. Please look over my analysis and give me some feedback. I want to make sure I'm within bounds for my estimates. If you'd be so helpful as to run your own analyses and show me a thing or two, I would be indebted to you. 

http://www.loopnet.com/xNet/MainSite/Listing/Profi...

http://www.zillow.com/homedetails/6804-S-Juanita-S...

Zillow hasn't been updated with the price reduction from today. Reported NOI: $15,121, meaning claimed monthly expenses are $159/mo, which I'm assuming is property management at 11% of the rent?

Annual Rent Income (currently rented): $17,040

Property Taxes: $1852

Mortgage: $8220 (This would be assuming an FHA loan, with 3.5% down which is my goal)

Mortgage Insurance: $1200 

Property Management: $2556 (15% of rent)

Utilities (?) : $5400 calculated as $225 per unit per month, for the whole year.

Vacancy: $1704 (10%)

Total expenses = $20,932 BUT, I do not expect to have property management, and I believe utilities are tenant-paid because in one of the photos I noticed there are two different meters. This would bring me into the green by $4,064 for the year, and $338 per month. While I am still early in my learning process and have been looking for a duplex I can live in as well (whereas this one is fully rented), but this seems like such a legitimately good deal to me that I'd consider looking at buying options.

After the price reduction to $140,000 in the last few hours, the property satisfies the 1% rule. I started evaluating before the change, so it's as if they knew what I was thinking!

Please give me some pointers, destroy my analysis, or whatever you may.