All Forum Posts by: Jason Timmerman

No, bandit signs are not legal but they don't usually result in a fine or anything.  People from the town just take them down.  So there's no real harm done and if it can generate a lead it's worth it.

You need to step up the direct mailing game.  What markets in NJ are you mailing?  The primary reason you are getting less calls is that there is now more competition, so home owners are receiving a lot more mailings.  So your cheap postcards are just white noise that aren't being looked at seriously.  You need to stand out from the competition.  What counties/towns are you mailing  I can let you know if our group has had success in any of those areas and what we've used to succeed.

Hello,

I am interested in getting into the buy and hold scene in Monmouth/Ocean County New Jersey.  Does anyone out there do this successfully? I'm finding the margins very difficult because of the high tax rates.  If you have been able to successfully find properties, let me know you're out there so I can decide whether this endeavor is worth it.  Thanks.

First and foremost,

Where is this property located?  1100 sq ft is TINY for $300k.  I think you may be overestimating the value of the house. 

Second, if an 1100 sq ft house needs $100k worth of reno work, it's a tear down.  Plain and simple.  You can build a new spec home at about $100/sq ft., so a home of that size would cost $110,000 to build, brand new.  With the plumbing being one of the major issues, you've probably got a ridiculous amount of rot and foundation damage and it needs to be torn down and the land needs to be regarded.  So add $40k to your repair estimate.  

Third, my guess is that you are going to have to install central AC and all of the duct work as well.  As I said initially, this is a tear down.  If wholesaling you have to think of the value of the lot, not the value of the home on it right now.  A spec home builder may be interested in the lot if the surrounding areas are as valuable as you say.  So, basically, the town and neighborhood location is key.  Where is this property?

Chris, I wish you a lot of luck with it.  I don't think you will lose your shirt here so long as the rental market is strong.  If you're not terribly interested in a high cash flow, you should be ok.  If you're truly thinking long term then if you break even in the near future you can potentially make a nice profit on the deal.  But appreciation is such a hard thing to judge.  It's a speculation game.  It does sound like the market is near the bottom so there's only one way to go. 

I agree with Stephen in as far as you have not seemed to account for cap ex/repairs and vacancy.  This seems like a negative cash flow deal.  I'm not quite sure why enticed you to go for it.  Appreciation is always a possibility.  Where is the property located? 

@Pearce G.  The whole "messing with my turf" thing is just an expression.  It's not literal.  I think that most people read the first post a little too seriously and without the sarcastic frustration that was supposed to be expressed. 


In all seriousness, I initiated a bidding war for three reasons, none of which are pure spite. 

First, I need to gauge my competition and his or her knowledge of the market.  Are they a newbie who is desperate for their first deal and willing to overbid?  Are they completely ignorant to the market and willing to drive a price beyond what is profitable?  Do they have disciplined limits and do they do research on each property prior to making a bid or will they just continue on aimlessly?

Second, There is a small pocket in there where we would have considered wholetailing the property ourselves.  If we were forced to pay between $110-113k for the property, we would've taken it ourselves, hired a local cleanup crew since we're not located in the area, hired an agent and tried to list it for a profit.  Wholetailing is not our preferred method, especially in a market such as this one, where hipsters are buying turnkey properties at a high price and flippers don't want to buy high because it's too risky.  The hope with a wholetail in a market like this is that we can find a buyer who intends to occupy and who isn't afraid of doing work his or herself.  Hipsters and millenials aren't as inclined to that approach for some reason. 

Third, once it got bid beyond our wholetailing range I threw it to a flipper for a $500 finder's fee.  I bid on his behalf because the seller and his daughter knew me.  His limit was $125k. 

When I got outbid again (to $130k), I said $135k partially out of spite and frustration and partially to see whether the competitor would dare to make another bid ($135k is not really profitable on this property).  To my surprise, he did.  $139k.  That's where I drew the line. 
 

@Chris Purcell Not trying to get other wholesalers not to market.  There will always be competition from our competitors.  We're focused on trying to get flippers not to market.  Our business model is to become the marketing arm of the flippers we work with.  Why would a flipper want to spend their time and resources looking for properties?  When a flipper has a good wholesaler(s) they work with they will have a constant stream of properties coming in, that way they can focus on what they do best, which is improve homes and get them sold. 


@Mike Cumbie Not at all.  The market is open for as many wholesalers as it can support and we will try to outmarket and outbid our competition.  When flippers attempt to enter the direct buy market things tend to get a little crazy.  Frankly, flippers are not great at marketing and are not great at making deals.  For the most part.  Obviously there are exceptions.  But every business needs a marketing arm.  Instead of competing with one another to drive costs UP, our firm tries to position ourselves as the marketing arm OF the bigger flippers in the area.  In two markets we've signed joint ventures that guarantee a certain amount of properties below certain price points.  We are that confident in our marketing model. 

In my opinion, a flipper trying to market is like a Heisman Trophy winner trying to play baseball.  Some of the skillsets might seem similar and the procedures might seem easy.  But most flippers think that they can throw out a few yellow letters and find properties.  It doesn't work that way, at least not in the long run.  Dumb luck cannot be sustained.  Marketing is an ever changing beast that takes expertise and mastery.  Why would a flipper bother to learn the ins and outs of the whole process when they've got other aspects of their jobs that require their attention? 

@Chris Purcell Hence my disappointment.  When we are operating correctly there shouldn't be a buyer that isn't aware of our existence.  If you were one of my buyers you would be spending less on the deal overall because you wouldn't be able to get it without a bidding war.  My frustration stemmed exactly from that scenario.  IF the buyer contacted us first instead of attempting direct marketing themselves, it would've went down like this.


We contract with seller for $90-95, we sell to buyer for $105-110.  Buyer puts in $25k, sells it for around $230 and I make $15-20k, seller makes $90-95k, buyer makes ~$80k.  Because the buyer contacted the seller and drove the price up, buyer got the house for $139k.  I got $0, seller got $139k, buyer will profit ~$50k. 


This one transaction can flip it from a buyer's market to a seller's market.  I've seen it happen.  In fact, it always happens.  Buyers are onto the market now so the sellers are going to get sophisticated.  Selling prices are going to rise, flippers' profits are going to decrease and wholesalers are going to be pushed out.  I was just frustrated because this was such a good market.  We worked with all of the reputable flippers in the area.  We were able to turn 14 deals in this market between April 2016 and May 2017.  It was firing on all cylinders.  Now we have to regroup and find another market BEFORE it becomes a known market.  That takes a lot of research, money and time.  And test marketing.  And establishing a new buyers list.  And convincing flippers in the area not to direct market.  Etc. etc.  Obviously it's what we do.  That's how we operate.  So the beat rolls on.

But I would ask, how much would you spend in marketing to get that deal?  The reason we blanket our chosen market so heavily is so that no one else has to.  Step one is finding a market.  Step two is identifying all of the legitimate flippers in the area and taking them out to lunch to explain our business model.  Step three is creating our marketing funnel so that the flippers we partner with never have to spend a dime on marketing.  Step four is hitting the market hard and making sure we have a constant flow of properties to offer to our flippers.  Step five is closing deals.  The goal is to provide a property at a price that a flipper couldn't usually obtain for themselves and one which they are readily willing and able to pay. 

@Chris Purcell I'm not now, nor was I ever made at the seller.  His daughter wanted him out of the house and his property became the subject of a bidding war.  I'm happy he got more money than he wanted for his house.  I got frustrated at the destruction of what was, for a year, the best market we have been involved with.  We work very closer with 5-6 reputable flippers in the area.  Now there are a million new upstarts that have flooded the area and pushed us out.  It's ok, it happens.  I was just angry and frustrated so I came on here to vent.  I didn't expect that post to generate such a response and frankly I'm still shocked that it did.