All Forum Posts by: Kenneth Sok

@Trey Watson

Thanks for that response. That's the general feel I get too from other wholesalers and investors. Everyone seems to be gobbling up deals at 75-80%.

I've also heard more focus on ROI versus the 70% rule of thumb. Granted, it's a good rule for a reason but it shouldn't limit your buying power, especially in this hot market. On the other hand, you definitely have to consider what other investors are thinking and what their mentality is about buying and how much the 70% rule is ingrained in us.

Rehabbers:

(70% of ARV) - Repairs = MAO.

For wholesaling:

(70% of ARV) - Repairs - Assignment fee = MAO

@Chuck Redman - Thanks for your opinion.

The way I understand it, if you came in at 80% (including repairs) on a 300K house, You'd have 60K margin but a good portion of that could go to any order of things including closing costs, agent commissions when you sell, holding costs, etc. 

Let's say you still walk away with 30K after everything's said and done, would that gross profit still be too slim? If you're all in at say 240K and you make 30K, that's a 12.5% ROI. Is that still shaving it too close?

I've been in discussions lately with various investors and found that some seem to be going in on numbers that are much thinner than what I would imagine.

Being in Houston, deals around 70% are harder to come by. I've talked to some rehabbers that are going as high as 75-80% of ARV minus repairs. This makes your profit margin super thin, in my opinion, and one bad error could sink you. The guys who do this though are operating on larger scale houses ( > 300K) so there's still room to make a decent profit. In addition, most of the deals I see flying around are all in that upper echelon of 75-80% as well.

As a wholesaler, I don't always get every deal, given that I'm very conservative on my own numbers and generally try to get 70-75% at the very most minus repairs minus fee. Many of my deals tend to fly quick off the shelf but I've seen many also linger on for a while and not close at all.

I'm wondering, am I being too conservative on my end and letting too many deals go? Rehabbers, would you take on a deal between 75-80% if you can still walk away with a decent amount or is that too risky?

@Martha Marty - Pick somewhere near where you live.

Another investor gave a good example - stay within your cone of familiarity.

If you're still working, invest in areas that are between and nearby your work and your drive home. This way, if something happens, it's always in between where you are going on a regular basis. Otherwise, if you have to drive across the city to reach your rental, you'll have more of a chance of neglecting it.

Houston is such a big city there are so many good areas to invest in. Choose one and study and keep expanding as you grow both your business and your expertise.

On top of higher HOAs, you've got to worry about higher insurance.

@Leigh Ann Smith already mentioned it but check the insurance policy. The dwelling policy will usually be higher with townhouses just because it's connected to other houses. The insurance company will have to factor in how much to cover the entire structure of all units attached to your townhouse.

Make sure your rents can cover it all.

@Trey Watson

Awesome resource! Really interesting to see the data on this.

@Trey Watson

We've got a few in the pipeline. They've got title issues that we are currently resolving.

Got some land in Swiney subdivision, a SFR nearby 288 and Reed, and another SFR nearby 45 and S Wayside.

Send me a PM if you'd like more details.

Hi @Michele Jefferson! Shoot me a PM and ask any question!

I'll be happy to help in any way I can.

@Han Oh

Not an accountant, so please consult one.

In the past when I've wholesaled with other investors/businesses, they usually just 1099 me. I handle the taxes on my own in regards to my own return. We wouldn't use a joint bank account. You can do so for more transparency but if you trust the other party or they trust you, it shouldn't be an issue.

They would just write me a check for my cut once everything was said and done and then issue the 1099.