All Forum Posts by: Michael King

You may be able to find a real estate wholesaler at a local REI meeting that may be able to find deals that come with their own financing - like seller financing or "subject to". That may eliminate some of the up front deposit-type costs, and the wholesaler may have an easier qualification process.

For the new wholesalers out there, i just started a wholesaling business this past January and planned for a very slow start and included a very fair amount of time and money to account for the learning curve. One tip I recommend is to find a good contractor who knows what they're doing, and when you think you've found a good deal, perform your own SOW on the property first, then pay the contractor $100 to give you an estimate of the rehab costs with a breakdown of everything. It is important to let the contractor know up front that you are paying him for an estimate to learn from so that you are not giving him the impression he is getting a job out of it. Then simply compare the two evaluations and learn from it. Evaluate where your costs were wrong, and areas that need work. I'd do this 5 to 10 times before trying to wholesale anything. You'd be surprised at which parts of your own SOW were incorrect. This is an excellent way to learn! Mike

Yes, that is how I figure out repair/rehab costs for 1-3 family properties, but I tend to work backwards from what you said. Again, lots of guesswork, but I typically perform a CMA on a property first and foremost to get a feel for the ARV. It's unlikely that there are many similar properties that have the exact same repair work needed. So a lot of times the comparable properties are in rentable/livable condition already. Once I have determined the value of the subject property in rentable/livable condition, I figure out the repair/rehab costs of the subject property and subtract it from the ARV. This leaves you with a rough idea of the subject properties as-is value. And then I work my offer amount based of that figure. I hope this helps! Mike

Hi Everyone,

    I am a new wholesaler (started about 6 months ago) in Central Massachusetts. I had someone call on one of my online advertisements (for the sake of this forum: Joe Smith). The gentleman has a property in a very small town in Western MA (about 1 hour 20 minutes away from me). According to him, he was fixing this house up to move into himself, but very recently got an extremely well paying job out west making roughly 250k a year. He had bought the house from a big-name wholesaler based out of Texas (for the sake of this forum: ABC Properties) for about 35K in 2012. ABC Properties had purchased the home about 45 days earlier for 20K or so and flipped it to Joe Smith.

    Joe, who I get the impression does not have a strong grasp on financing, signed up for investor financing through ABC Properties (hard money, short-term type financing from the sounds of it. Supposedly he has been paying about 20+ percent interest for the entire 3 or so years that he has owned it. He says he only has about $2,500 left on the loan). The weird part is that ABC Properties is actually the one listed on the deed when I looked it up at the registry. Supposedly Joe Smith has an agreement with the lender that once the loan is paid off in full, ABC Properties will sign the deed over to him (Joe gave written permission to the lender to release information to me so that I can confirm this setup and find out the process for purchasing the property; I have left a message with the lender and am waiting to hear back).

    Joe Smith told me that he has about 2 weeks before he has to leave for his new job, and wants to dump the property for 50K. I took a quick look at the MLS and determined that the majority of similar houses in the same town had sold for about 100K, so I took a trip to the house last Wednesday to take a look at it for myself.

     Bottom line, the house is about 850 square feet and needs some work. It had a steep dirt driveway that I could not even get up with my truck (I was not in 4-wheel drive and had no traction. Also the drive likely would not have seemed so steep had it been paved). I took lots of pictures of the property, and from what the gentleman told me, he's done some work to the house. The work included roof replacement, fully insulating the house, fixing the drywall, digging drainage ditches to relieve the hydraulic pressure on the foundation, and jacking up the house to rebuild the foundation. The roof looked to be in very good shape and the insulation in the attic seemed to look great. However, when he jacked up the foundation, a great deal of the drywall had cracked. The foundation work involved building an entirely new block foundation along the inside of the original foundation. The new block foundation was secured with re-bar and cement through the center of the blocks and a new 2X6 frame was built on top of it to support the house. I am no expert but it looked very solid to me (though no idea if it meets code). So I asked him, "did you pull permits for all this work?" He told me yes.

    I told him I had to crunch some numbers and would get back to him in a couple of days. When I left the property I made a stop over at the very small, very friendly town hall, and asked a bunch of questions. Long story short here is what I found out while I was there:

1. There is roughly a $6,500 tax lien on the property.

2. The septic failed Title V in 2012 prior to Joe's purchase.

3. There are quite a few (very small = 2 foot tall) pine trees all planted on the leech field in the front yard.

4. Joe had pulled permits for the roof, and insulation/drywall but has not had an inspection done.

5. There was never a permit pulled for the foundation work that was done.

Upon further analyzation of the property and the comparables, I determined that the ARV was closer to $81,000, the rehab costs came to about $62,000 (very rough estimate), and similar properties have been appreciating at about 3% a year since 2012. I've decided to place an offer for around $11,000 and subject to Joe pulling the proper permits and having the proper inspections completed by the town building inspector (and of course another couple escape clauses). I figure the property sold twice in 2012 for more than $11,000 and was in worse shape at the time. Plus it should be able to sell for more as raw land if all else fails. I figure if he really wants to get rid of the property then there is a possibility he may accept the offer. I have not placed the offer yet, but where values in this small town are not very high, I don't think it would be worth my while to close on the property myself but rather assign the deal to a rehabber. My goal is to make about 8K were this deal to go through.

    The problem now, is that time is running out. There is probably just under a week before Joe starts his new job. So I don't think there is enough time to hear back about the buying process from the lender, get an accepted offer, and assign the deal in that amount of time. Chances are this deal won't go through, but I am determined to learn from it. So here's my questions:

A. Let's say Joe moves before I can do anything with the property. Is a long distance closing possible? How would a long distance closing work?

B. Am I missing anything vital here? I have been trying to check everything and verify everything as I go which is why I haven't made the offer yet (this would be my first deal so I'm still a little nervous).

    When everything has been verified, I plan to call up Joe and basically say, "Hi Joe. I have an offer plugged into my email and I am ready to send it over to you, but unfortunately it is a lot lower than what you were hoping to get for the property... I mean a lot lower... I was debating whether to even send it over to you or not because I don't want you to be insulted or laugh at me. Unfortunately when I looked at the numbers it was the only offer that would make the deal work for me." Then I'd go on to explain everything that affected my offer price (i.e. failed septic, none of the work inspected, estimated rehab cost, steep dirt driveway, distance from home, etc.) and I'll give him the choice of whether or not he wants me to send it over. I won't tell him how much my offer is over the phone, but will send it over if he wants. I don't think anyone in their right mind would not want to see what the offer is, even if it is low, but you never know. Any thoughts?

    Thanks everyone!!! Much appreciated!!!

              Mike

Hi everyone,

    Long story short, there is a gentleman who called me up on one of my ads to tell me that he got a good job out west and wanted to sell his house quickly. The house is located in Massachusetts (a judicial state). I asked him who was on the deed, and he informed me that he and his uncle were both on the deed. When I got off the phone with him, I looked up the property with the registry of deeds and found that it was some sort of holding company based out of Texas that was on the deed.

    I called him back and basically said, "hey, what's going on? I thought you were on the deed with your uncle? Who's this Texas holding company on the deed?"

    His reply was that the company is the mortgage lender, which brought me to my next question. If MA is a judicial state, why would the lender be on the deed and not the homeowner? Which brought me to my next question. I looked it up, and Texas appears to be largely non-judicial... If this lender is based out of Texas, is it possible that the homeowner could have a deed of trust and not a mortgage because the lender is based out of state?

    I wasn't sure whether the lending method was based off the state the property is in, or the state the lender is in?

    Thanks,

                   Mike

Hi everyone,

    I received a call from a lady yesterday who is filing bankruptcy and wants to sell her house quick so she can just start over. I am wondering what the best course of action is. I'm not sure if buying "subject to", trying to get a lease option, or offering a lower cash price is such a good idea in this case. Don't some sales have to be approved by the bankruptcy lawyer?

    I have not spoke with her yet, but did leave her a return message. I just want to make sure I know what I'm getting myself into before I talk to her.

    Thanks!

                 Mike

Hi everyone!

I am a licensed real estate agent in Massachusetts. I am pretty sure I know the answer to this question, but signs and advertisements require that we list our brokers information somewhere on the sign. An example of my standard disclosure is listed below:

Michael King is a licensed real estate agent (license # blah blah blah) with Blah Blah Realty. 500 blah blah street, Leominster, MA 01453. (978) 555-5555.

I am ordering car magnets for my investing business. They say:

Need to sell your house fast?

We buy houses!!!

Call:

(978) 555-5555 Ext. 555

24 Hour Recorded Message

www.blahblahblah.com

Blah Blah Investments

Do I need to put the broker disclosure at the bottom of the magnets? I am planning on putting it but would rather leave my own name off the magnets. Or does anyone have an example of a broker disclosure that has the broker's name but not the agent's?

    Thanks,

                 Mike

Hi again everyone,

    Looking for some ideas of ways to build a buyers list? When I make my cold calls I occasionally come across someone who is a flipper, rehabber, or investor, so I inform them I am a wholesaler and ask what they are looking for and where they are looking for it. Then I go and add them to my buyers list for future use. I've only talked to a couple of them however, and am just nervous that when I find a great property and lock it up that I won't be able to find any buyers.

If I found a property right now I would go to town on Craigslist, look for buyers at my local REI club meetings, check out the BP Marketplace, etc.. But building a buyers list would make a great side project for me to work on.

    Thanks,

                  Mike

Hi everyone,

    I live in Massachusetts.

    Hypothetical: Let's say I use a lease option to basically take over a property from an owner/seller. Then I sublet the property to a tenant or tenant/buyer. My broker voiced concerns that I would have little control over the tenant that is subletting from me. For example, if the tenant I am subletting to doesn't pay his rent, my broker thought I would have to go through the owner/seller of the property to have my tenant evicted, and that I couldn't pursue the process myself. Is that true?

    From what I thought, the lease option that I signed with the owner/seller would give me an interest in the property (not an ownership interest, but an interest from a control standpoint). I was also under the impression that the sublease would be subordinate to my lease with the owner/seller and thus I would have total control over the conditions of the sublease.

    Thanks,

                 Mike

Hi everyone,

    This may be a stupid question, but this is something that confuses me a little. I always see wholesalers and investors advertizing that they can close quickly. Why is it that wholesalers and investors can close faster than other buyers? Isn't it the same process? Closing at an attorneys office or title company? What makes the process faster?

    Thanks,

                  Mike