All Forum Posts by: Account Closed

I think the most common term here is whether the investor/investors involved are sophisticated/accredited.

Good to hear from you. I would like to know of the company's business model which you mentioned. Such as if it was it an REIT structure etc.?

If it was an REIT, the issue with that model is often that you have to dispose about 90% of income in form of dividends to shareholders which effectively might be a costlier source of funds in that you aren't retaining what you make.

The route I am trying to explore would require you compensating the investor or investors, whatever rate of interest that you negotiate depending on just how things are structured. 

Regarding pressure, again that might have to do with just how they were set up. I think turning over 10 properties in a year is not a tremendously difficult task. And the intent is not to splash $1million in the first month of the fiscal year on acquisitions but rather to distribute the acquisition, rehab and resale of the 10 properties incrementally through out the year.

The number of deals per year might start increasing eventually but will require strong management to ensure it does get chaotic. But that I think is a management problem.

Wrong. 

Perhaps you should post the specifics of the case that you are referencing so that readers can know exactly what the person you mentioned did. 

You mentioned securities for instance, that is one many ways to go. Many companies issue securities to fund their operations and engage in any legitimate business practice. To say that any business thinking of issuing securities will go to jail because some Joe who you knew, committed securities fraud and went to jail is simply incorrect. Need specifics of what you, are referring to.

As a business entity you can raise funds for any legitimate business purpose. If going the bond route, the SEC might tell you what requires registration or not or if what you are doing is regarded as a security or not. Each state might also have subtle variances but for the most part not drastically different from federal securities regulation. Some securities and exempt both at the state and federal level depending on things like amount, who is involved (whether a qualified or unqualified investor) etc.

I also wouldn't call it reinventing the wheel, just lowering your average cost of funds drastically, having more control of the process and making more money.

There seems to be too much money left on the table that even for someone extremely allergic to risk, it seems to make some sense also rehabbing and selling the property to a retail buyer. 

I am looking at securing $1.2 Million for a fiscal year which should fund both the acquisition, rehab and resale of approximately 10 SFR units during a fiscal year within a specified market.

The numbers currently seem to add up to about 59% for acquisition, rehabbing, some administrative and resale/marketing cost. Profit is somewhere in the 41% range.

The difference being that instead of running around with each deal to secure wholesale funding, have nightmares about a rehabbers' financing source bailing out last minute, a seller that is increasingly curious about the legality of the whole transaction, coupled with a somewhat high or higher cost of funds, you can simply spend more time filtering through to find very good deals and have more control over the funding process.

I would like to hear from some other users on the site, whether corporate finance gurus, investors or financial professionals, who may have had to secure funding for similar entities in a similar industry. What sort of margins, financing options and strategies were in play?

The ARV did utilize recent sales comps in the area and is probably $30K less than what the appraisal might come in at. Rent in the area is in the $1200 per month range.

This is another way to look at it. Being a wholesaler, I'm thinking the rehabber is thinking 70% rule. Using the conservative ARV of $165K: (($165K * .7) - $52K repairs) = $62,500. So a rehabber should be happy to get the property at $62,500. This seller is a little on the stubborn side though.

If I can get an appraiser and real estate agent to both confirm that the ARV can come in at the $190K that zillow is indicating, then: (($190K * .7) - $52K repairs) = $81,000 is a price that a rehabber might be happy with.

The actual ARV might be higher but will see what price seller is willing to sell at. There have been similar SFR within the area that did sell above $200K in the last 6 months and some with a smaller square footage.

I think the property would work well either for a buy and hold investor, rental or resale to a retail buyer. The area is also good but we never tell the seller this. I of course like to have bargain buyers who are interested in bargain deals with very good margins.

Christopher, there aren't any unpaid taxes or liens on the property. There isn't also a realtor involved. The $165K to $175K ARV is very very conservative; actual ARV might be a little higher. Zillow's for instance is at $190K.

I am not sure how you got your max offer number though. Seller's motivation to sell from what I heard is mostly the headache of managing a rental as he is elderly and an out of town owner.

Lol.. someone here did actually say: "Houston we have a problem". 

What niche you want to focus on is mostly a matter of preference and your personal 'risk adverse meter'. From what you just described, a rental condo deal in some markets, is not just risky but dangerous.

ARV = $165 to $175K range. Repair estimates = $52K; seller apparently refused a previous investor bid of $38K. As a wholesaler, at what seller price do you walk way?

So you just found a 1000 sqft SFR with an ARV of $100K; it needs some rehab of say $10K and the seller is selling the property in its 'as is' condition for less than the ARV of $100K -- an amount which we are trying to determine.

As a wholesaler, you want to purchase the property (or get it under contract) and either assign the contract or sell the property to a 'rehabber' or retail buyer who finds the adventure of rehabbing their entry level home thrilling. 

What is a good or standard target profit margin from a wholesalers' point of view? How much $ in dollars or a % would be considered standard, normal or the going rate?

We could also state the question this way: what is the most you would or should pay the seller in the AB transaction? and what also is the best price to sell the property to a cash buyer in the BC transaction?