All Forum Posts by: Dan Miller

Two thoughts:

1) you could throw in an offer of 10-15k and just add a contingency that it's subject to a hard money lender's approval. That will ensure that you have an out. Second, it will also test the seller to see how motivated the bank is. They will liklely coutner, rather than outright ignoring you. At that point, you can take a contractor over to the home, get a more firm estimate and either reject the counter if the rehab numbers are higher than you thought or get the deal.

2) to get around the potential assignment issues with a bank, what you can do is offer to buy it with an LLC, specifically formed for this property (i.e. property is 123 Main Street, so buyer will be "123 Mainstreet LLC, a to be formed LLC"). Check with a lawyer on this for your state. You set up the LLC after ratifciation of the contract and assign the LLC to the end buyer, rather than the contract. You can always sell your stake in an LLC to someone else.

Thanks, Mike. That's a good idea. I know of some areas that have A LOT of foreclosure issues, but I've heard from other local investors that these properties are less desirable to fix up and resell since there are SO MANY on the market just sitting there. They may be more desirable to buy and hold though.

I have found a middle class neigborhood that fits your description and is still selling fast, so rehabbers would be more likely to want it. However, if major repairs aren't needed, I wonder if my pricing formula breaks down. Currently, I take the ARV*.70 - repair costs - wholesale fee to determine my max allowable offer. The homes in my market have ARV of 350-500k where I'm looking (that's the DC market and there even higher if look closer to the city). Thus a 30% discount is a big chunk of change (we're talking a maximum offer of 350k on a 500k property even before capturing my fees and repair costs. The basis for the 30% discount is that's what Hard Money Lenders lend (70% of ARV).

Thoughts?

One approach you may consider taking is to find an experienced partner. Check out your local REIA. With an experienced investor, you could a) cover your knowledge gaps and deficiencies; b) potentially have that investor bring the money; c) split 50/50 profits.

As my mentor often says, 50% of something is a lot better than 100% of nothing.

I am new investor, focused on getting that first deal done, and I'm following a system in which you focus on one specific neighborhood, using a realtor and MLS, "in your own backyard" that consists of "ugly" homes in need of repairs.

Unfortunately, where I live (Northwest DC) and work (Northern VA), there aren't too many ugly homes, and most of the investors I have met at the local REIA (which is in MD) focus on Baltimore and Maryland, including my mentor. Both of these areas are VERY difficult for me to explore given that I have a full-time job right now and they are in the opposite direction (plus DC traffic is no fun). There are some neighborhoods in Northern VA that were built post WW2 era (50s) that I think could be promising, but I'm not sure.

Would you suggest going to MD where I know other investors/rehabbers are (but is tough for me to get to) or farming in those 50s neighborhoods in NoVA, where prices are higher and I know fewer rehabbers working?

Really in need of some advice here so that I can going.

Should a hard money lender be checking my credit to prequalify me? I was under the impression that hard money lenders lend on the hard asset regardless of credit, so no credit check is needed. I've talked to a few lenders that want to do a credit check first and others that don't.

Can someone provide some clarity on this?

Thanks,
Dan

Don't know where specifically you are located, but I'm from DC. I have attended DC REIA, which has two chapters--one in Bowie, MD, which is going to be too far for you if you're near Fredericksburg, and one in Chantilly, VA, which is still a hike, but not awful. As I live in the district, each is about a 45 minute drive for me on a Saturday morning, and I think it would be about 45-60 minutes for you. I REALLY like the Chantilly club. It is known both as DCREIA Chantilly (www.dcreia.com) and DC/VA REIG, led by Sandy Schafer. Good sized group, but not too big at all (last weekend, I'd say there were 75 people there) and some very successful investors and great discussions. 3rd Saturday of every month at 9am.

Highly recommend it. I'll be there next month, schedule permiitting. Please feel free to PM me with additional questions if you want.

Dan

Thanks all for the replies. I'm trying to find the right neighborhood to farm in the DC area. The obvious "ugly" ones that are transitional are nowhere near me, so they are ultra inconvenient (it would be at least an hour out and back). The advice of looking for ugly houses in nicer neighborhoods is a good idea.

next I have to figure out how to estimate rehab costs.

Hey all,

I have a few questions that are somewhat unrelated to each directly, but all tie to the process of wholesaling. As I'm a newbie, I'm trying to first identify leads by using a Realtor, focusing on a specific neighborhood with "ugly" homes--1950s and 60s homes--older neighborhoods, and testing for motivation by putting out lowball offers on the properties in that neighborhood.

Here are my questions:

1) Once I've chosen an "ugly" house neighborhood and a realtor, should I test the waters by putting offers out on every house for sale in that neighborhood (assuming it's not brand new), or is the idea to pick and choose based on the listing comments sounding like it's either bankowned or a rehab project?

2) Would you recommend taking a contractor to a property the first time to learn of costs BEFORE of AFTER testing for motivation with an initial offer? I have no idea how much things cost, and I doubt it's a good use of time to go see properties before making a low offer to see if the owners are even motivated. What should I do in this case?

3) I've talked to one hard money lender, but that lender wants to prequalify me by doing a credit check. My credit is excellent, but I thought HMLs don't check credit. Is this common? I was told they would have to prequalify any end buyer as well. Is that normal?

4) How should I go about finding buyers? I've gone to my local REIAs and have business cards, but I don't feel like I have a robust buyers lists. Should I just go get good deals under control and then post messages on local bullet boards of REIAs, assuming that if the deal is good, there will be ivnestors to take it?

5) What happens if I can't find a buyer? Would I lose my earnest money deposit?

I'm trying to get started and manage that fear that I'm feeling from not knowing what I don't know, but it's tough. Looking for some encouragement and guidance.

Thanks,
Dan

There's a guy in my local REIA (DCREIA in the DC metropolitan area) who started a skip tracing business a few years back. I don't know him personally yet, but I know he's a reputable person, since my mentor has taught him and spoken for him.

His name is Reggie Pasteur, and here's his website.

http://www.tracethenation.biz/

Hope that helps.

Dan Miller

Ryan,

From an end buyer's perspective, why would the relationship be harmed? They do expect you to make some money on the transaction, right? or would it have to do with you taking too much of their profits in certain cases? What is considered "too much" in general?

Thanks,
dan