All Forum Posts by: Ryan Webber

Welcome to the forum, believer1. It's always good to see fellow Texans here.

There are several steps to take to get started investing. If you are interested in rental property, have you checked into financing yet? Your starting capital and credit will make a big difference too. A small rental property is normally a very safe and easy way to get acquainted with this whole investing thing without taking too much risk.

Tax liens will supercede all other non-governmental liens. Something like an IRS Tax Lien will stick unless proper notification is given to the IRS. City assessments will also stick. Now mortgages and other junior liens will fall away on a tax lien sale, but normally the mortgage company will step in before it gets to that point and pay the taxes themselves.

Most states also have redemption periods for these types of foreclosures. In Texas, there is a two year redemption period for homesteads that are foreclosed on for property taxes.

Minute amounts asbestos are actually even present in current building materials. The issue comes into play when you are dealing with older properties. On the issues I have come across, I usually just avoid disturbing it if at all possible. I leave it alone, cover it, or paint over it. Remediation is extremely expensive and is something that I don't want to do.

If its something that concerns you, you might want to get an asbestos survey for older properties that you are looking to do extensive rehabbing. They usually cost about $500-$1,000 depending on how big the house is.

Depending on who you are making the offer to, you should be fine just showing your stamped CD accounts. The only one that might give you problems is if you are buying a HUD REO. They are the most anal that I have come across, but I've never shown proof of funds dispersed between different accounts so I couldn't tell you for sure. It would seem like it wouldn't make a difference to them, but I wouldn't be surprised if they required it.

In reference to showing proof of funds to a seller or a represented seller (anything but an REO), I'm sure that would be fine. I've never had a non-represented seller ask me to show proof of funds, and realtors that ask are just making sure you're not kicking tires just to kick tires.

And you are correct in thinking that once you offer is accepted, it doesn't matter how you fund the deal as long as you still fulfill the terms of the contract. If you have a 10 day close with a cash offer, and then decide to get financing which falls through or is going to push you to 30 days to close, then you still would have a responsibility to close that contract in 10 days. Unless, of course, the seller agrees to push the closing back with an amendment.

Banks are normally slow moving on decisions about offers. So the difference in a day or two on an offer will not make much of a difference in an REO situation. I am not sure why he didn't atleast submit your offer. I understand that he figured that it would most likely be rejected, but he still has a responsibility to present it. If you feel like you want to vent to someone about it, you can contact the agent's broker and discuss your issue with him or her.

Hello Rxr. Welcome to the forum.

Now on to your questions.

I get the feeling that coming from a "technical engineering background" is holding you back.

Okay you are going to have hang on a little with this one.

If you are coming from a technical perspective then your idea of clearly communicating the truth to someone is going to be full of technical detail that I would guess will mostly confuse and complicate the mind of a normal seller. A normal mind is not necessarily in need of all the details that your mind thinks are important to understand, and when it is time for a normal mind to make a large decision (selling a house) it has to find peace through its choosen avenue and not necessarily through yours. When you try to help others find peace like you find peace (details), you actually complicate most people's minds with more clutter. This will produce an environment in their mind in which they won't feel comfortable making a decision and will want to think about it more. It will also promote them to not feel comfortable with you.

I would recommend analysing yourself and your approach. Are you helping answer their questions or are you answering yours? Real estate investing is a sales and marketing beast. People skills and salesmanship are paramount. Salesmanship is based on directing and focusing information to ANSWER the questions your seller has in order to develop a relationship of trust and confidence.

It follows the idea of the iceberg. You only see 10% of what is there. A seller will need to understand only the piece of the iceberg that they require in order to personally feel comfortable with you and with the situation. Most sellers don't want to know that you know everything about real estate and closings and selling houses and repairs, but they do need to feel comfortable with the fact that you know what you're doing. Again, they need to feel COMFORTABLE with you and your knowledge and abilities. This comfortability does not necessarily come from you communicating how much you know. It comes from listening to, interacting with, and answering THEIR concerns and questions. People are emotional creatures, and creating a soft fluffy environment where they feel safe and secure following you in this transaction is key.

Some people's brains will work like yours and some will work the opposite of yours. It is your responsiblity to know which gear to be in to work with their brain. That's salesmanship.

To get some more info on how people's decision making processes are different, I'd recommed reading Positive Personality Profiles by Robert Rohm.

Okay on to a couple technical details :D .

Why are you spelling out how you arrived at your numbers(also 70%-repairs includes profit)? Be confident in your offer. "This is the most I can give you." If they anwser with a gasp or a look of shock and awe, then I explain that I do real estate to put food on the table and that with all the risks involved that is the most I can give. I am not ashamed of my offers. I understand the absolute necessity for me to make offers this low to stay in business. When somebody is shocked by my offer it is because they don't understand investing, but I don't expect them to. Now Rxr, are you sure you know why you are offering 70% minus repairs? Here's a good post on why: http://forums.biggerpockets.com/viewtopic.php?p=18225

I am also curious if your problem might just be that you haven't made enough offers to QUALIFIED leads, yet. Making 10 offers on unqualified leads, you are going to get all no's. When you make 10 offers on qualified leads, then you are going to find a yes or two. Qualifying is merely a tool to sift through the hay stack to make your time more efficient. If on the phone you don't find out how much equity they have then you are wasting your time 9 times out of 10 going to meet with them. When you qualify 80-90% of your calls as duds and you are only taking time to look at and make offers on the 10-20% that have equity then you will be a lot more effective in your offers.

One more thing. Why are you tying up the property? Why aren't you buying it? I'm going to guess that you feel it is necessary to fully explain to the seller that you have no intentions of buying the property and that if you have not found a buyer within the 30-45 days to closing then you will back out of the contract? If this is the case, and your conscience won't let you do it otherwise, then I would recommend that you step up and go get some financing lined up (hard money or conventional prequalifying) so you can honestly and with confidence tell the seller that you are going to buy their property. If you feel its necessary, tell the seller that you intend on selling it before closing but either way they will get their money so they don't have to worry.

I would just call the owner and ask if they would like to sell their house. If they say yes, I'd try to get a ball park of what they expect and then go from there. I would research the tax rolls and find the square footage and go research comps for your neighborhood. If you are looking for it as a rental then your numbers will be more of whatever you determine your desired return to be.

Under normal circumstances when I do a cold call to buy a house, I atleast know generally where I need to be at on price before I talk to the seller. Now I take about 5 minutes before I call them to figure that number from comps. I shy away from telling people to go research and crunch general numbers on the house before you call because you might take the next two months to research comps and then by then they've sold the house to someone else.

I have made so much money just because I jump faster than the next guy. I have lost so much money learning that lesson the hard way.

I'm sorry, Wes, I didn't clarify, but I was referring to the original post.

Now Wes in reference to your post, I have heard a similar story before. I originally chalked it up to RE investor urban legends, but you are saying you actually personally know a guy that did that?

Well first things first. Your comps range was about 10%, but you have to be on the top end of those comps to make your money. So if you were to deteremine an ARV for the property what would it be, 230K or 250K? If it sells for 230K and you buy it for 180K minus repairs, then you will be cutting it too close.

On a rehab, 70% of ARV minus repairs is the maximum you want to be at if you are in a normal market. That 30% spread covers your butt generally for the following expenses: realtor/advertising fees (4%-8%), conservative PITI holding costs (4%-8% for 4-8 months to fix and sell), closing/fianance costs to buy (1%-6%), closing costs to sell (2%-3%), and unexpected expenses/repairs (1%-3%). Now what's left over is your profit. Going off the numbers above the profits would be best case 18% and worst case 2%.

So if everything goes perfect, you sell it for $250,000 FSBO in less than 3 months after only taking 1 month to do all the repairs, financing it with a low fee, line of credit or bank loan, and no unforseen repairs then you will make about $45,000 profit if you buy if for $175,000 minus repairs.

Now if it turns into the rehab from hell, you still have to sell it for $250,000 but after taking 2 months to fix things you didn't budget for and trying to sell it FSBO for 3 months, you decide to hire a realtor who then sells it 3 months later so you can pay off your hard money loan then you will only make $5,000 profit, but you would still have to buy it for $175,000 minus repairs.

There is only one thing worse than only making $5,000 on a rehab from hell that you've dumped your life savings into and that has destroyed your tranquil sleep for the last 8 months. The only thing worse is LOSING money on that rehab from hell that you've dumped your life savings into and that has destroyed your tranquil sleep for the last 8 months.

My point is this, PROTECT YOURSELF BY BEING CONSERVATIVE. When it hits the fan on a rehab, your only protection is the equity. Make sure the equity is there, or it really hurts. 70% equity is a good number to hold on to when you are crunching your numbers, and don't smudge it unless your market dictates it. When you smudge it, you are not only comprimising your profit but you are comprimising your protection from loss.

Anyways, when you are ready to move forward on a deal, yes, you and the sellers need to sign a contract. Put in there whatever contingencies you want, and if your state dictates it, put monetary consideration (earnest money). I would contact an attorney and ask them if earnest money is required in your state. If it is not, then I wouldn't put a dime down for earnest money. If you do put earnest money up, you should not write the check directly to the seller. I would write it to the title company or attorney who is taking care of the closing. Show the check to the seller when they sign the contract and tell them that it will deposited with the title company/attorney when you drop off the contract.

Using an agent or attorney for the contract is completely dependent on your comfortableness with the process. It is a rather straight forward process, but it is new to you so third party assistance may be beneficial to you. Starting out you might want to use your state's standard real estate contract. Usually you can get one either from your state's real estate commission website or you may have to get one from a local realtor or a local title company. They are usually extensive and thorough but are fill in the blank contracts.

Good luck and if you have any other questions feel free to ask.

I don't know Green, but those don't sound like very good rental numbers to me. Now don't get me wrong, you beat MGD's offer hands down. Atleast yours might cash flow, but I'm use to buying a house for $30,000-$35,000 that will rent out for $600-$700 per month.