All Forum Posts by: Vena Jones-Cox

This is a hard and fast rule in most Ohio probate cases. Here's how it works:

1. the court orders an "appraisal" (it pays an agent $15 to do a driveby/AVM, which is nearly always high)

2. it orders the executor/adminstrator to sell the property, with a minimum price of 80% of the "appraisal"

Here's how you fix it: ask the executor to ask his attorney to go BACK to court with your offer to request that the executor be permitted to sell at this price. If there are no creditors, the heirs are in agreement, and the executor wants this, the court will allow it, no new appraisal needed.

I've done this dozens of times here in Cincinnati. It slows things down--and depending on the estate attorney, you many have to talk them thru the process--but it works.

I live in the neighborhood in questions and have been investing in and flipping RE here for 25 years. And the answer is just: No. Maybe at 1/2 the asking price.

Sadly, I haven't had the time to go thru every post in this thread. However, I thought I would add this: there is legal action being pursued to clarify both the wording in the revised code and the first amendment issues involved in "marketing ones' contract". More info will be discussed tonight at the CAA building at 1740 Langdon Farm in Cincinnati at 6 p.m. if anyone wants to attend. An attorney who believes that the ODRE is overstepping will be addressing the group.

You're talking about a spectrum of "quick turn" strategies that range from doing no work and selling at a very discounted price (usually 60-70% of the after repaired value LESS repairs) to completely fixing up the property and selling to a homeowner at close to full price. These are wholesaling and retailing--you'll find a lot of info about these strategies and the pros and cons here.

There's a sort of "in between" strategy, too, commonly called pre-habbing, where you do only the major work (mechanics etc) and sell for a higher percentage of value to an investor who can finish the work.

IN GENERAL, assuming that you bought the property "right" and can get the work done correctly and at a reasonable cost, pre-habbing and retailing will be more lucrative on a per-deal basis. They're also, of course, more risky than wholesaling.

Hope that helps a little.

Passive rental income!

Jumping in late, but let me say that this practice, which is widespread in the TKR industry, DRIVES ME INSANE.

I've written multiple articles about this, but let me summarize by saying:

I'm a second generation landord, and I've owned single family rentals for over 20 years. Years of experience and "real numbers" tell me that the evaluations that come out of TKR companies are ridiculous.

For one thing, the insurance numbers are usually based on the seller's rates, not the buyer's, which are generally around twice as much b/c the buyer owns too few properties to get the commercial discounts available to larger owners.

Secondly, the "real estate taxes" expense is almost always based on the seller's current, lower evaluation. When the property sells and is re-evaluated, the taxes will often increase by 50% or more.

Thirdly, a 20% of gross rents factor for maintenance and vacancy is only accurate if 1) the property is FULLY stablized (new roof, new furnace, new windows, and so on)--and most of the TKRs I've seen do NOT meet this standard by a long shot, 2) if the property is VERY aggressively managed--heavy screening, prompt eviction, quick re-rent--a practice not common amongst most property managers, and 3) aggressive maintenance is done to maintain the capital repair items (changing furnace filters bi-monthly, cleaning gutters in the fall to avoid failure, maintaining metal roofs, cutting back trees to avoid roof damage, etc--again, uncommon amongst property managers). If these things are NOT done, 30-40% maintenance and vacancy is COMMON.

Fourthly, as pointed out previously, many of these "turn-key" rentals appear to have higher-than-market rents upon sale, and from what I can tell it's because the sellers grab the first (unscreened, unqualified) person they can who will sign a lease at that amount. Simply checking with the local landlords (and seeing this done in my own market) quickly uncovers this.

And finally, the management costs of 10% of gross + rent up fees + overrides on repair costs are almost always obfuscated by the "one year free management" offer.

When I evaluate TKRs in my own market and others under the "correct" income and expense numbers, many are, in reality, negative cash flow deals. NONE meet the 14-22% return numbers being quoted by the sellers.

And when *I* market turnkey rentals with the correct expenses included and the *real* returns (which generally work out to 5.5%-6.5% cash on cash, 8%-10% with mortgage paydown), some potential buyers counter with, "why would I buy that deal? so-and-so is offering 27%!"

Thanks to the many, many bad guys in the TKR business, passive investors are getting their greed glands milked to a ridiculous degree. Since when was 6% NOT a great return on an investment you didn't find, didn't rehab, didn't fill, and aren't going to manage??

And don't even get me started on the companies that have set up their own personal pyramid schemes by offering free management for years or forever...

This is the current equivalent of the "buy pre-construction" and so-called wholesale deals scams of the middle of the last decade. Knowledgeable, slick salespeople convincing uneducated, unsophisticated "investors" that they can get rich for doing practically nothing, and with no risk...it's got a new face, but apparently it's never going to end.

I predict both regulation and litigation over this in the future, and it makes me both angry and sad, because we ALL get painted with the same brush as the black-hat scammers.

Lokesh--

I don't care what the gurus told you, making an offer of this nature to someone with whom you have no pre-existing relationship is absolutely, positively, illegal.

Vena

REOs, absolutely and without question.

Dave--

I think what's confusing you here is the term "buyer". Although your name is currently signed on the purchase contract that says "buyer", you're actually not going to be the buyer at the time of the closing. Remember, you're going to assign this contract.

I assume that you intend to be paid your wholesale fee OUTSIDE of (and before) the closing (you really, really don't want it on the closing statement when an REO is involved).

It's out of context, but it what this clause appears to say is that the buyer can't borrow money in excess of the actual purchase price and costs and get a check for the difference at closing.

Which is stupid, but, hey, it's a bank.

Vena

PS you did notice the non-assignment agreement that's probably in the same addendum, right?