All Forum Posts by: Greg Smith

@Josh Banks

per investopia

Real estate wholesaling occurs when a party (the "wholeseller") contracts with a home seller, markets the home to potential buyers, and then assigns the contract to one of them. The wholesaler makes a profit, which is the difference between the contracted price with the seller and the amount paid by the buyer. The goal in real estate wholesaling is to sell the home before the contract with the original homeowner closes.

A typical wholesaling scenario looks like this: The wholesaler has a house under contract for $90,000 that he estimates needs $20,000 in repairs but will sell for $150,000 once the repairs are made. Using his network of investors, he finds an eager buyer at $100,000. He assigns the contract to this investor, who then has a profitable fixer-upper project. The wholesaler makes a $10,000 profit without ever owning the home.

The wholesaler is usually very experienced at finding great deals and recognizes that it is quicker and easier money than fixing, flipping or renting anything. They don't often own the house... they own an option to buy at a certain price which can be assigned to another. If you don't have experience or some kind of in to get distressed seller to come your way, you're barking up the wrong tree.  Flipping, renting or house hacking, depending on your wallet and skill set, are better places to start.

TY @Fredie Robinson  I do not do a credit check for low income tenants.  I assume that everyone has bad credit and rely on criminal and eviction history to determine if a tenant is acceptable.  That would make cozy $20... worth a try.  I don't think I've had a "good credit" applicant in that part of town.

@Pavel Reyes Valdes

That is super helpful.  As I search for a name I see "01 FORCIBLES" listed as a type of civil summary.  This looks to coincide with a filed eviction.  Do you know if 01 FORCIBLES is always an eviction or might it be a catch all of several types of civil action?

@Derek E.  

I hear you about decent people everywhere.  I have a section 8 tenant who pays a couple hundred dollars / month out of pocket.  Each month, I get an envelope, on time with a stack of money orders.  As she has the money, she will buy one towards rent.  One might be $70, one might be $40.  It's somewhat annoying filling out the deposit slip but I respect this woman being responsible with what she has when she has it.

Something else to consider... people are saying that low income areas have longer term tenants.  I'm too new to know from experience.  According to http://economistsoutlook.blogs.realtor.org/2015/12/16/how-many-houses-are-vacant-at-your-zip-code/, vacancy rate for C/D class zip code 40211 is 20%+, A/B class 40205 is 5%.  That's a big disparity if accurate.

@Johnny Hastings 

That's fantastic. I'd love to find that for Kentucky. I rent Section 8 in Louisville and I do a screen through e-renter.com but I always feel like I'm wasting my money.I'm not all that good at screening tenants it turns out.  The first lady I found has been terrific so I thought this is a breeze.  The next one has been a real headache.  She calls with problems that seem nit-picky, at inconvenient times seemingly every week.  She has been hard to satisfy.  I don't know what I'm doing :-o  I believe it is problems with me training my tenant, but I get flustered and don't know what to do.

I see truth in all this.  I'm about 50 - 50 A/B and C/D (depending who you ask).  Nearly 100% of maintenance issues, tenant issues and general headaches are from the C/D houses. Every time I'm telling crazy tenant stories with friends... C houses.  Every ambiguous problem or inconveniently timed call... you get the idea.  My experience may not be universal but literally ALL my trouble is from that 50%.  So why do I do it?  

1) It cash flows very well
2) I feel like I'm learning a lot
3) I believe (in spite of the post at BP to avoid pigs) that I'm getting better at it and developing systems that will make it easier and better in the future

My C houses are all about cash flow.  They will not appreciate.  I can buy cheap from a distressed seller but that $25K house I bought for $15K will still only be worth $25K when I'm dead and gone.  Equity growth in the A class properties compensates for the lack of robust cash flow for me.

@joe splitrock

A warranty is like gambling in the same way insurance is.  I had an unexpected HVAC problem at my second house the first month I owned it.  It took almost all $5000 I had in reserves.  I have increased my reserves now.  I didn’t think to get a home warranty but to call it gambling seems to imply that it’s always a bad idea.  The warranty gives predictably and outsources the risk (and the need for higher reserves) to a professional. I could see that being useful to a newbie.

if its a flip colorful landscaping goes a long way.  For a rental, landscaping seems to always be ignored 

thought I would finish this off... the hvac guy found some problem of overheating and repLaced something.  So she was right.  Then she called right back and said it was still messed up.  He went back and says it’s fine.  I will have the tough talk when she calls again.  I figure I’m eating the final service fee for the guy going back and finding no problem.