All Forum Posts by: Jason S.

"Comps: We have houses on single lots selling for $130,000. Our home is on a double lot with a deck. We are hoping to be in the $135,000 to $140,000 range."

I may be wrong, but after reading the above, I have a feeling like you not really certain of the value of some unique features that you already own in the deal - the double lot and the deck. I'd hammer down on the true value of the double lot. Is it a 2 parcel double lot or single parcel double sized lot? If two lots is the home across both? Depending on lot cost and availability in the area there could be some value to be found.

You may have totally researched all of this, but you did say your "first flip" so I thought I'd bring up a few factors.

I am trying to respond to your post respectfully, please take no offense to the clear "assumptions" made.

From your first post - 

"gut rehabs are a no-brainer" - I find a lot of investors that do not respect nor appreciate the skill it takes to do the "hands on" work properly. That can directly impact your relationship with your contractor(s) and their attitude toward you and your project.

"move on to the next deal" - let's not move to the next deal until you master your problem at hand. Best not to repeat.

If the contract was for the Contractor to raise the floors as per the designated plans, then why are you adapting in lieu of the Contractor fixing the floor?

Sad how many here thought this was funny. I have been working with some non-profit housing agencies on a few projects lately and it is no wonder so many are hostile to "Investors".

That's funny, I too read both Cook books. To be honest I still tell people to read the Options book if they are interested in Options and to read McMillan on Options. Not because what he says works, but because he explains things and theories simplistically and then you have a base of knowledge for the more technical material in McMillan. There's probably better "simple" books, but most are confusing for those that know absolutely nothing.

Did you ever read Robert's on commodities? Same type of stuff from the same era.

Big Henry,

An "as-is" price is the price the property is worth given the entire situation.

These numbers are very rough of course, but it may serve as clarification.

Say we have a down and out person (no job no car destitute) who has no money and is about to lose their home with equity, not underwater.

Home value to all Investors within a specific market that will pay cash and close with the same contingencies and timeline. $70,000.

Home repairs needed. This too is relative because some fix to top of market, some to lowest possible level, and others to mid market. But for you let's say it takes $10,000 to fix to mid-market.

Mid-market re-sale - $100,000.

You buy it for $50,000. Though you would pay $70,000 as would any other Investor in your market.

Is it ethical? You are buying far below "as-is" value. and Your $10,000 in repairs brings $30,000 in gross "value added"which we will assume for your market at this time is the standard return.

Please, no one come in and tell me about cost of sale, commissions, how my $10K may cost another Investor $20K and why should I be harmed for that etc. This is not my first Rodeo - I know the numbers and all of the variables - this is a very oversimplified example and Yes I made it an 80%ARV deal on purpose to reflect the current market. The numbers at issue are the $50K purchase price versus the $70K true "As-Is" value.

None of this is necessarily true. In fact the price paid should be the correct "as-is" value. Then the investor can do value added repairs and earn a gain. The Investor does not have to get the property below its "as-is" value. The "as-is" value could also be a discount for "distress" and for "cash" or even "quick close".

Of course we all want properties below "as-is".

The question is, should you buy a property from a person in distress (or an uneducated Owner) at the lowest possible price or a reasonable "as-is" price.

I'd give the guy $100. Cash is 100% liquid at the current value and the distress situation is not relevant unless there is a cost to me to give him the $100.

Instead of what seems "fishy", can you think of anything about this deal that seems legit?

Is your lawyer commenting on the reasonableness of the contracts and agreements because anyone can write you a contract that is perfect, assuming the underlying presumptions of the contract are real. e.g., real company, real funds, real intent, etc.

Just in fun, use Google images and search for "seems legit".

For all I know what your doing may be fine, but be careful, from everything you have said I would be very leery.

Most of these rental funds are created by a larger fund or company. For example Morgan Stanley is starting one.
Most of the funds are buying at current prices because they are chasing a yield. Morgan Stanley is one of the first ones I have seen that has a specific focus of buying properties where they will be completing value added repairs. Other do it, but they are the most recent example I can think of at this time.
Whether this is all good or not - time will tell.

This is the problem when Wall St sees an opportunity. The little guy gets crowded out because the Investment Funds can survive on a lower yield than the typical investor. This happened with storage units a long time ago - for awhile Wall St started buying all of the properly zoned land and drove down the yield to where their investors were happy but that fewer and fewer local small investors could compete.

In the end this is the price of the free market. As it is increasingly simple to deploy nationwide, with instant communications etc, efficiency enters the market and drive down returns in other words we are the local hardware store and Wal Mart just opened a store across the street.

I'd be very careful and investigate the means by which the properties are being taken. I have heard wonderful stories and big loss stories given the same circumstances.

I am not certain Rob K is correct given the Kelo Supreme Court decision.

If you do not want them contact me maybe we can work something out.