All Forum Posts by: Hattie Dizmond

Contact Tom Kyle, Keller Williams, in Amarillo.  He's a great guy and totally honest.  Tell him I said hello!

First, wholesaling is hard.  I'll say that again.  Wholesaling is hard.

Second, laws vary from state to state, and some states have ruled unfavorably regarding the legality of wholesaling, so make sure you know what NY has to say about it.

Finally, I'm going to ask you a question, actually 4, but they are related.

1.  How good are you at deal evaluation?  If you had to think about it for even 2 seconds, you need to practice evaluating deals, until you're an expert.  Build your own workbook, so you have to work through the math.  It's the only way you're really going to understand it.  

2.  How good are you at estimating rehab costs?  Again, if you have to think about it, you need to build your skills.

3. How good are you at doing competitive analysis work to determine ARV? Yep, I'm going to tell you, if you have to think about it, then you need to practice.

4.  How well do you understand the different exit strategies?

All of these questions point to skills that are required to succeed as a wholesaler. You have to be an expert marketer, and you have to think like an investor. You have to be able to nail your deal evaluations, which means the rehab & ARV in order to get to the point of knowing whether the deal is a "deal". If you find true "deals", you will have NO problem selling the deal. If you develop a reputation of providing good deals, investors will be beating your door down, but they have to be great deals. And, you have to understand your investor customers. Each one of them will have their own thresholds for profit, total renovation costs, etc.

I'm not trying to dissuade you, but you were given a good piece of advice in finding a mentor. A lot of the "gurus" will tell you that wholesaling is the perfect, low cost way to get into REI. It's hard, really hard, and you have to be really good at everything.

Monica, it's a principle, not a true rule.  What constitutes a deal is a transaction that performs up to your minimum criteria.  You're obviously looking at buy and hold opportunities.  Use the Bigger Pockets calculator for Rental property.  There are also tons of worksheets posted in the Resources section that will help you evaluate deals.

Basically, the 1% rule is supposed to represent a deal that will provide a minimum accepted cash flow.  However, it isn't applicable in all scenarios.  You may be making a play on property with a longer term return in mind.  Set your own minimums and then work the numbers to figure out whether a particular "deal" is a deal for you.

You have lots of options.  You can treat it like a loan, secured by the property or unsecured.  You have to work out the terms of the loan with your "lenders", then you just make payment on the loan like you would any other loan.  You might also work out terms where you give them an interest in the property, and they get paid from the profits.  Get creative.  It's private money, so any terms you guys work out are possible as long as the numbers work.

 I understand, but at 3,800 sft things like flooring and trim can add up very quickly.  Now, if you're going to do it yourself, you may be ok with the $, but I would be very careful.  The 2 biggest mistakes I see new or newish flippers making is underestimating the renovation costs and being overly optimistic about the time it's going to take to make the repairs.  Holding costs can get you as quickly as renovation costs.

Good luck!

As you noted, there are plenty of workbook options here on BP.  J Scott's workbooks, including his rehab workbooks, are a great place to start.  I personally built my own deal evaluation workbook.  I'm a bit of an Excel geek, and I have my own thought process, so I wanted a workbook that conforms to the way I think and work through a deal.  In the end, the math is basically the same, and my workbook produces the same projections that J Scott's and the BP deal tool does.  However, I built mine to mirror my personal thought process, so it moves through some of the input details in a different order.  It also allows me to change assumptions on the fly.  The BP tool is great, but it didn't exist, when I built mine.  I think I learned more about deal evaluation from the process of building and fine-tuning my workbook than I did from everything I read.

For the rehab workbook, I started with J Scott's book and basically deconstructed it.  If you take a look at his workbook, there are big lists of items, and it was another one of those things that didn't work for the way my brain processes information.  So, I categorized all the different items/work into rooms, so the workbook would mirror the way I walk through a property.  For instance, you I won't find a selection to replace a toilet, when I'm in the living room.  I didn't want to have to scroll through hundreds of items.  I also set mine up to consider the size of the house and the level of finishes I will be using, when calculating the estimates.  Therefore, if I'm looking at a house as a rental, in a B/C neighborhood, I'm going to get a different number than if I'm looking at the same property as a flip.  Along the same lines, I'm going to get a much different number for the same size house, as a flip, in an A neighborhood.

Again, the BP tool is great, but I seriously learned more from going through the process and really learning the math than from everything I read, and I read A LOT!!  I'd recommend the exercise to anyone.

I'm laughing a bit at the question that started this thread. I guess not every market is as big or diverse as DFW, because I wouldn't even know where to start answering this. I can go down to the Fair Park area and probably buy 4 - 6 SFH for $200k. On the east side of Hwy 75, up here in Richardson, $200k will get me a 3/2/2 with around 2,000 sft, probably with a little left over. Head west, still in Richardson, and you're not getting into much of anything at $200k. Every area here is basically a micro-market, and you can't generalize anything.

Commercial lending is completely different and the rules are a lot more flexible.  First, most lenders, on a commercial property, will be much more concerned with the "experience" of the property than with your experience.  So, if the current owner's records show the property has produced a 95% occupancy rate over the last 5-years and the market rent is sufficient to support the amount being financed, the lender may not care in the slightest about your personal lack of experience.  You need to talk with some lenders.

My advice...keep soaking! I would advise you to use this time to get your own deal evaluation workbook together. Just because you're not ready to pull the trigger on deals doesn't mean you can't look at deals. Analyze, analyze, analyze. Practice deal analysis, until you get to the point you can do the analysis in your head, in under 5-min. Look at listings on the MLS, in the area your interested in. Do your own competitive analysis. Assign a market value, then watch that property, until it sells. Did you get it right? This is the time to build skills that will keep you from wasting that money you're saving.

Also, you don't mention what your strategy is, but whether it's flipping or buy and hold, you're likely going to have to deal with renovations/repairs with any property you acquire.  So, network.  Get to know some recommended, local contractors.  Go to Home Depot and check out the prices of the most common materials you would be using.  You're going to have to be able to do high-level estimates on rehab costs.  It's going to help a lot, if you know what the cost of common materials are.

Basically, just keep preparing.  Read the forums.  Respond to posts and get involved in the conversations.  You'll be surprised at who you'll meet and what you'll learn.

If your estimates are correct and your strategy is to keep this as a long-term hold for rental income, I don't see how it makes sense.  You'll be losing money, basically until year 5.  You will be well on your way toward year 10, before you can sell, based upon the projections you provided.  And, you're tying up $75k in liquidity.

My personal recommendation would be to look at lower cost properties, if you're looking to get into long-term hold/rentals.  This deal would make even less sense as a flip.