All Forum Posts by: David Moore

My LLC made an offer on a 2 bedroom 1 bath home in Albert Lea, MN.  The home needs a $1500.00 sump pump and about $1500.00 in roof repair.  Other than that, it needs nothing.  Similar homes in Albert Lea sell for $55,000 to $75,000.00.  

Listed price $47,000.00, on the market now for 48 days. My LLC offered $37,600.00, exactly 80% a week ago. On Tuesday, I learned from my realtor that HUD countered at $41,500.00. We chose not to increase our offer, and we pulled the offer. Today, my realtor calls back, saying HUD decided they will take my offer, if I am still interested.

It will rent for $650.00, tenant pays all utilities save water. Cash flow, calculated on this site, will be $248.00 per month. It is already a pretty good deal, but not quite a 2% winner. I would like your advice. Lock up the HUD at $37,600.00 or counter with a lower offer. What would my fellow BP investors do in my place? I have more potential renters looking for a home, so I'm tempted just to get this one in the boat.

Robert Leonard,

I couldn't agree with you more.  It sounds like you've run across a lot of bad apples out there.  Remember I posted about integrity in the business community.  Part of that means when you do a LO, you are still doing due dilligience to check the renter, to make sure they have the  ability to purchase.  In my market, homes appreciate slowly, but that may not be true in all markets.  My point is, don't take advantage of the renter...it is bad business.  Don't want them to fail...want them to succeed.  A happy, satisfied customer is worth the referrals for a lifetime.  Part of my strategy is to buy low and sell LO so that the house will appraise for the renter during the term.  Also, let's not overly complicate what an option is.  It is a rental agreement with an option to purchase at a pre-set price.  It is then in the renters interest to keep the property in great shape, to ready for his/her purchase date.

I advise anyone to learn, learn, learn.  Lease options are just one tool in the tool belt. 

Ryan,

Have you ever tried to acquire the property from the seller before getting to the courthouse, before the foreclosure date. I'm in a similar situation. There is a home with a, get this, over $100K ARV that basically needs nothing, being foreclosed for 51K. I am marketing to the homeowner to try to get an option contract in place before the court date. Have you done this as a method to avoid bidding wars at the courthouse. Have you ever had a bidding war at the courthouse/

I would suggest speaking with someone in your local REIA. Our REIA president has read through Dodd Frank and most of the bill applies to companies that have over $2 billion a year in mortgage business. I lose no sleep over Dodd Frank.

My posts are messed up. I keep trying to say I wouldn't adhere to the advice offered by JC Gauthier, because it is bad business. You want to be known in the community, by realtors, investors and the like as having integrity. But the idea of a lease option might work here. The tenant/buyer is someone with less than perfect credit, and cannot get a loan from a bank. You sell an option to purchase in the next three years. Set a price that the property will appraise to in three years. Let the tenant/buyer maintain and improve the property to the ARV target. Your concern over repairs is warranted, but it could be a great opportunity for a tenant/buyer with home improvement skills. For good info on lease options, I like Wendy Patton's book "Investing in Real Estate with Lease Options and Subject To Deals".

Congrats Dawn.  I assume it will be a rental.  Did you get this north of the 2% rule?

The key on your post, to me, is when you say "they are asking". Who are they? I check out property tax records and cross reference other homes they own. I look at tax assessed value. Then I go to Zillow and see what it last sold for. I know Zillow has old info, but it will have prior sold prices. Finally, if all looks good, require a 10 day inspection window, and get an inspector to look it over. I had a slam dunk recently, a light rehab. My contractor had been there, estimated a repair. I had my exit strategy and rent analysis done. The deal was a no-brainer. It was the worst house in a gorgeous neighborhood. Everything was yes, until my inspector found a water egress problem with a pending 15k fix. The seller would not negotiate, and we walked away.

I found a small community lender is much more reasonable, personal, and willing to take a chance on you. On my 2nd deal, Wells Fargo was willing to go 75% ARV, but points and closing costs were three times what the community bank offered. Ask other investors where they get financing.

Originally posted by @Wendy BK:

@David Moore I was in similar boat before and then decided to get my own license. Totally worth it. You can see any house whenever you like yourself and save the commission. And it is very easy to pass the realtor exams.

Thanks, Wendy. As a realtor, then, I can just buy for my LLC? Do they teach you that stuff in the classes?

Originally posted by @Joel Owens:

The brokers/ agents should be honest with you. Many take on clients and see what sticks to make money.

A broker/agent in demand only has so much time in a day.

For me on the commercial side I have to allocate time to only serious buyers and sellers.

I think the issue might be in the beginning outline in writing what you expect.

For instance I am a buyer looking for 3 bed 2 bath buy and holds with a 2 car garage for 900 in rent for 80,000 purchase price. I am looking to buy 1 a month and I am qualified with a loan person and here is my banks statement.

The broker/agent if they are any good on the residential side will see 12 deals a year at 80k is 960k at 3% commission equals a 28,800 book of business annually for that client. Next the broker/agent needs to define the time it will take to accomplish the goal to see ROI. Especially if an investor is buying a flip where they will make 30,000 they can't expect a broker/agent to have the same enthusiasm to make 2,000 to 3,000 commission for the same work and effort.

I will give you an example. Years and years ago I would work on the vacant apartment buildings. A 30 unit was a gut job and I spent 4 months negotiating that short sale, water lien, waiver of deficiency to make a paltry 6,000 because the sales price was 3k and change a door.

Every deal I work on now makes me 5 to 6 figures in commission. I don't waste time on low income and high work properties as it reduces my ROI.

Hope it helps.

It helps a lot. Don't you think the listing agent has more to gain from me making offers direct through them? A 6% commission must sound better than a 3% commission. It seems that in my case, sellers agents work harder to get your deal in. Sure, you don't build up relationships as good, but if my negotiations are fair, my checks and closings go smooth, won't my LLC still get a good reputation with realtors? Your idea of writing out expectations are good. We expect to close on a property once every 3-4 months.