All Forum Posts by: Dave Passey

@David Mohrmann

There are a lot of investors that will go to the property and tell the home owner that they will pay a little higher price if they will get out of the contract with the wholesaler. It's super shady, and if you are an honest person (like we are) then you never see it coming and lose a good deal. 

We now only let our "qualified" buyers know the address so that they have to have specific information provided and verified by us. If anything shady ever happens with them and the buyer, then we blacklist them from our properties and notify all other wholesalers that we know and work with at times about that person. We will never send them a deal ever again. 

@Nicholas Morgan

Go to a different lender and get a new appraisal.

@Josh Cooper To refinance if you are buying at full price you will need the property to appreciate high enough so you can pull your money out, or refinance to a lower down payment type loan, which will be difficult to find for investment properties. Not really a feasible plan for trying to scale.

@Lesley Resnick Congrats on doing an awesome job! That sounds like a great deal and the project looks exceptional. Where did you find the deal? How did you get connected with the out of state investor? What are you doing to do to ensure that you will find more great deals?

Well, I guess I am curious like @Matt P. to see what your plan was for this property. It doesn't sound like it will be a very good rental if your mortgage is $2k and even if you are able to get $2k in rents, you are going to be negative on the property. You will still have taxes, insurance, possibly property management, and vacancies to account for. 

@Tony Mayo Obviously we don’t know the whole situation or all of the numbers with this deal, but my guess would be that the property would be worth more to the neighboring company than anyone else. I don’t know what your property is worth, but those sound like pretty good returns in 2 years.

@Melissa Man

Do you currently have the property rented out? If yes, is it a good investment as it is even with any sort of appreciation? 

If the housing market takes a dip and it is still able to be a good investment, you won't lose any money unless you decide to pull out of the property. Say you bought they house for $250k and are happy with the returns you are making and then the market dips and the house is now worth $200k, but the return you are getting from the rental is still stable. Did you really lose anything? The market will go back up in a few years and then the house will be worth $300k and you will laugh about being concerned that the market slowed down for a minute. 

There is no loss unless you pull your money out when the value is lower. It is only a perceived loss. Little Elm is a good area and will have plenty of growth to come. 

@Mike B. If your lender won’t close on the property without the new roof, maybe you could have the seller do a short term seller financing situation for you. He sells you the property. You are able to close. Do it with no money down and no payments until you have a balloon payment in like 6 months. If he has a mortgage on it then just have him keep paying it, or you could pay it but I would try not to. You can then do all of the work and then refinance it out with your lender and he can get completely cashed out at that point. But putting money into it before you own it is foolish even though it seems like the only way to get it done. Creative solutions will be your friend.

@Calus Glispie Hey man, I have been following this thread since the beginning and what I see here is a lot of people that feel like money is the only way to show you are serious. If I have learned anything in my years of sales and real estate, it is that money is almost never the real concern. When I hear someone say “your earnest money is too low” what they are really saying is “I don’t trust you to do what you say you are going to do”. It is not about the money. I buy houses every week with $100 as the earnest money. I can hear you saying, but wait.. all these people say you have to have more skin in the game or the seller won’t sell to you. But this is false. You need to have more trust. Everyone else is trying to use the earnest money to try to make the seller trust them. Of course it can work, but there is no need. If you build real trust with the seller beforehand, then it shouldn’t be an issue. To be good at wholesaling you will need to be excellent and getting to the issues behind what people are actually saying. Take for example the people that are saying it is disrespectful to offer so little earnest money. What about it is actually disrespectful? Of course nothing. So what is making them so heated about this issue? It would seem from the comments like they have seen people contract properties with no ability or intention of closing on a property and putting sellers in a bad situation. But that still doesn’t make it disrespectful to a seller. All in all, it is just another part of the deal that can be negotiated on. There is no right or wrong amount, and if you have built trust with them in the beginning, the amount of earnest money won’t make or break your deal. Good luck out there!

The 1% rule is a rule of thumb, like you said, which means that it will not apply in all situations. Typically, if it meets the 1% rule, then it warrants a deeper look. Is there a reason you are looking at a 20 year mortgage? If you were able to get a 30 year then you would have a lower monthly payment which could give you better cash flow. However, some of your other percentages seem to be a little lower than most people calculate. The standard calculations are usually 7% - vacancy, 10% - repairs, 10% CapEx, 10% - still for management. That might kill your deal.