All Forum Posts by: Rashad Nelson

Hey Andrew.  Just saw your post and figure to take a crack at some of your questions.  Great work on getting started with your marketing.  

*Disclaimer - I'm not a wholesaler, strictly a rehabber, but I'll give this a shot.  

So my question is: Now that I have sent my mail and I know what I need to ask sellers when they call (property details, mortgage info, motivation, etc), how do I get this thing under contract when it comes my way??? 

Ah yes, before we dig into the potential sellers, do you already have a handy list of buyers you can reach out to once you have a solid deal?  If not, gather up a good list of email contacts from fellow real estate investors at your local REIA, join a local investor Facebook group, and have a good idea on how to create an ad on Craigslist.  An email blast, FB posting, and Craigslist listing will be the three main marketing mediums you'll use as a wholesaler.  

Now onto the potential leads.  It's important here to have a standard series of questions to ask any interested parties.  The most important is why they're selling.  If they're truly motivated, they'll spill the beans on why.  If not and say something along the lines of "No reason, I'm just seeing and weighing my options, what can you provide me?", then you'll know that individual is not truly motivated, and you can just move on.  

Some investors are open to answering every call that comes their way, having a written list of questions at the ready, and communicate with every person that actually responds to their mailer.  Other investors (including me) view this as a waste of their time, so they set up an answering service that tackles incoming calls with an approved set of questions (a script) and / or a ready made website, that has exactly the same series of questions, that handles incoming leads.  Both the answering service and website can forward the answers/results of those leads to your email inbox to view at your pace / leisure and return calls only to those leads that are genuinely interested in selling.  You also get to avoid those nasty callers who have nothing better to do than return your call with an angry message. However, a website and an answering service both cost money.  I spend roughly $150 / month for both.  I use AnswerConnect (answering service - $100) and LeadPropeller (websites geared for real estate investors - $50).  Both are great.  

Once you do get a motivated seller, find out what their property is selling for when fixed up. Best way is to get comps from a local, friendly real estate agent.  For my leads, I use a combination of Realtor.com and RealQuest.com to give me a rough idea of value, and confirm numbers with my agent.  Once you have that number, call your general contractor and line up an appointment to see the homeowner and his / her property.  Kindly introduce yourselves, view the property with your GC, and go over everything that needs to be updated. The more things you find, then the more leverage you have to negotiate a lower price with the seller.  Get a hard verbal number from your GC (be sure to ask him for the worst case scenario number), and calculate your numbers.  Be sure to factor in at least 30% equity for your end buyer - very important for continued business.  If the numbers work, give the homeowner your offer.  

I have no contracts prepared, no money for an attorney, and really no connections to real estate attorneys in my area at all. I also dont have a title company that I have choosen to go with. What steps can I take to obtain a good real estate attorney, obtain money to pay for the contracts to be made, and to decide on a title company? Those two things are huge road blocks for me right now even though they should not be.

You're definitely going to need a reliable real estate attorney and title agency - no avoiding this.  A real estate attorney and title agency is an integral part of every investor's team.  If there's a local REIA in your area, then there's definitely some fellow investors there that can refer you to an investor friendly attorney and title agency.  In regards to contracts, you can pull them online, but you'll definitely want your local attorney to review (and most likely alter) the generic contracts you choose to ensure it gels with local state laws.  He/She may charge you nothing for this service if you use him/her exclusively for your deals.

Nutshell:

*Develop a buyer's list and avenues of marketing (email blasts, Facebook posts, and Craigslist listings)

*Solidify your team - Find an investor friendly real estate agent, title agency, attorney (usually works for the same title agency / law firm), and general contractor.  Get referrals from local investors, agents, and other professionals in the industry.  

*If you can swing it, think about incorporating an answering service and website into your lead generation strategy.  Costs money, but big time saver and adds an air of professionalism to your business.  

I hope this helps.  Good luck man.

Get the LLC. Establishing the LLC allows you to establish business checking accounts, along with establishing business history, which is important. Over time, if you have enough assets (rental properties) in your LLC, you can apply for a business line of credit which would eliminate the need for hard money or joint venture partners. Hard money has it's place, but deals are starting to become harder and harder to put together with the high fees involved. I can't tell you the number of deals that could've worked if only the terms were much easier. JV partners are great, but sometimes you don't want to be accountable to someone else for use of their capital. Sometimes you just want to pull trigger and get started on a project without the need to sell a deal to someone else. It's great to get some more deals solo, but with cheaper money.

You can also get a $5 million umbrella policy for extra protection. Who says have you have to do a LLC or umbrella coverage? Do both. You'll sleep more soundly.

Update - I've decided against this strategy.  If building a shell, then most likely any interested buyers would be investors.  Definitely want to open up the number of options in regards to buyers, not limit them.  

All - I have a continual dilemma.  There's seems to be a rampant shortage of affordable, licensed general contractors in the Atlanta Metro market.  Key word being licensed.  I know the state of GA implemented a law that went into effect on July 1, 2008, that required general contractors / builders to be licensed when offering their services to the general public.  Because of this, I suspect the guys who are licensed are being bombarded with work and get pick and choose their projects - as they should.  

However, my main beef is that this law went into effect mid 2008, but it's now 2017 and there still doesn't seem to be an abundance of licensed GCs in this market, at least in investor circles.  Atlanta is a big market, so I really don't understand.  Every GC in this ATL market that's recommended to me by a fellow investor, agent, or mortgage broker are either unlicensed or a custom home builder charging $120 per square foot (how the hell can you make money off a deal if you're GC is charging $120 per square foot?) 

Another gripe is that contractor prices charged down here are on par with what's being charged in north eastern cities like Baltimore and Philadelphia.  However, in those cities, property and rent values can support those prices charged.  I have an expensive GC in Baltimore, but I can easily find deals to fit his renovation costs into my budget.  I can't do that in the ATL.  

Does anyone else have this dilemma here in Atlanta?  Obviously this a major pain point and if I were so inclined, I would put in my dues, get the necessary credentials including a license, and start my own contractor firm.  However, that's not where my passion or talent lies.  I enjoy being an investor - finding and putting together deals, getting the necessary talent together to make it happen, and spending my time and energy on finding the next one.  

Thoughts?

Eliminate hard money.

I see there hasn't been any response to your inquiry @Jen Applebaum, but I like the strategy.  I was just discussing it with a wholesaler in Baltimore.  I have capital to purchase properties, pay closing costs, and even hire an architect to create detailed plans to ensure there's no ambiguity when it comes to the renovation details (this takes more load off the GC).  However, I can't also pay for renovation costs without involving a hard money lender.  HM fees are extensive and doubly so because I then use a "soft" money lender for my re-finance exit strategy (buy and holds).  Instead of getting a partner to split the profit, I would want to make the GC the partner.  

The JV deal would be worked out as follows:

*I pay using cash for the property, closing costs, and soft costs (mainly plans / designs and spec books). 

*Based off the hard plans, the GC invests in materials and labor, therefore floating the renovation.  

*Once the project is completed, confirmed by a licensed inspector and certificate of occupancy, I immediately re-finance the property with a well-known "soft" money lender that can close within days and the GC immediately gets his / her investment back plus the usual profit they would charge if I simply hired them outright. The re-finance is critical because it allows the GC to immediately get back their original investment and profit vs. flipping which will take significantly longer.  However, purchase and renovation costs should be under 75% (preferably lower) to ensure end equity.  

In the commercial development arena, developers / builders don't get paid until the project is done in it's entirely (at least that's what I've read).  

Yeah, I'm sometimes baffled as to why full addresses aren't given in Craigslist listings. Could be concerns with privacy.  All you can do is inquire by responding to the ad and most will provide the full address upon request.  

Like other investors here, I have my rentals in a LLC and have an umbrella policy that covers all for extra coverage. In MD, the annual filing fee for each LLC is $300, so it can it get very expensive creating / maintaining one LLC for just one rental. Often times investors with MD holdings just cluster a few rentals together under one LLC, depending on their risk tolerance. Some three, others five, etc.

Craigslist and Facebook is a good source. A lot of wholesalers and owners who don't wish to sell through agents post on Craigslist and Facebook. Speaking of Facebook, reach out and join local FB real estate groups. Opportunities pop up from time to time on my FB feed, in my chosen markets. And of course (and it's like beating a dead horse), join your local REIA and network with other local investors - you may likely find a wholesaler with a deal or a joint venture opportunity.

You could also do direct marketing, but I find this to be effective only when sourcing for land or if your target area happens to be not so desirable.  

Hi all, 

My fellow BP members, I wish to gauge feedback and interest involving a certain strategy that I'm looking to implement in regards to new construction here in Atlanta. In a nutshell, instead of building a fully finished product to market to owner-occupants, I would build simply an empty, enclosed shell - complete with a laid water / sewer line, slab foundation, framing, roof, exterior doors, windows, and concrete landscaping - and market that product to other investors who to wish to complete the house using their desired finishes. Very similar to a full renovation, only an investor/buyer would hire an engineer to verify inspections with the municipality to ensure they've been completed as part of their due diligence, in addition to verifying the ARV. I would sell the property to an investor for about $125K, they put another $90K worth of renovations to complete the property, and make the sale for a good $275K sale price. Their true profit of course would depend on closing costs, whether or not they use a GC, whether or not they use financing, and how aggressive the financing terms (private money vs. bank financing vs. hard money).

Thoughts?