All Forum Posts by: Scott Swanson

Garrett, yes the market is tight right now and prices are up. But a deal is a deal is a deal.  Right now, the issue facing everyone, is finding those deals.  If the numbers are to your liking, why not buy? Just be sure to run them carefully and make sure what you're getting is truly a good deal. We just ran across a 3 bed for $75k and that includes the rehab costs. The rent is $1100 a month, so it cash flows very nicely. It also beats the 1% rule. It's slightly above 1.4%. Best of luck to you. 

Kais, taking action is a good thing, but it depends upon "what" action you take first! Buying a property long distance without doing proper due diligence and not having a team or boots on the ground, is a recipe for disaster. Like others mentioned, figure out your business plan. Is cash flow most important to you or is it appreciation or both? You mentioned a price point and some other specifics, which is good. You'll need to run the numbers. The numbers are absolutely critical. Also many new investors allow their feelings to get into the way of their investing. That can be a huge mistake. It's business and should be kept as such. We work the Midwest market and yes, you can easily get a duplex for $200k. I would suggest that you only look at properties that will bring you at least an 8% cash on cash return or higher. Some people call it cap rate or "other" names. But basically it all comes out the same in the wash. 

A realtor is a good start but you also need a solid contractor and/or handyman crew and a very solid property management company. What if the property is a good deal but needs rehab work? Someone reliable has to do that work. I would strongly suggest you find a realtor that works mainly with investors. Relying on a realtor to find you a property listed on the MLS is not the way to invest in today's market. Prices are way up and deals are very scarce. Trying to find an investment property on the MLS, that's listed well below "list" (ARV) price, is almost impossible right now. But a realtor that works with investors, might have off market properties available through their investors network at a good price. Off market deals right now is the way to go. But building a solid team is what's critical to your success. I hope this helps you. Best of luck.

Nick,

How much can you rent it for? I would figure out the return as a rental and then as a flip. But as @Billy Daniel mentioned, it all depends upon your goals as an investor. 

Hi Wendy,

The first thing I would do, is check with the HOA, to find out if they'll allow you to rent it out. Some HOA's won't allow it. Be sure to add in any rehab costs you might have when you purchase it. We use 5% for maintenance and vacancy. However, the maintenance percent may be higher, if the condo needs work and you don't rehab it, when you purchase it. If you message me, I can send you over a calculator we use for our properties.

@John Warren and @Jonathan Klemm, 

I appreciate the feedback and will be contacting them shortly.

Jake,

Thanks for the referral. It's appreciated!

My investor is looking for a solid, dependable and quality PM, to manage a couple of units on the north side (Rogers Park). My PM doesn't go that far north. If anyone can assist, it would be greatly appreciated! 

Jerryll,

I stand by my statement 100%. No buyers...no business. You have a limited amount of time to sell a property, once you sign a contract. Here's what you said: "You don't need a buyers list when, you are honest with the seller and explain your plans to wholesale the house." So what if the seller objects to your terms? What if the seller says I need to sell within 30 days? I could go on and on. You either don't get the contract signed and go back to square one or you get it signed. Of course you should be honest with the seller. But that doesn't mean that they won't ask for a hefty deposit and give you a limited amount of time to sell it. If that's the case, the wholesaler has to come up with the money. The what if they don't find a buyer? They just lost their money!

Does a "killer" deal, make it easier to sell a property? Yes. Does a "killer" deal mean that if you don't have buyers, you'll still sell it? No. Typically, you get 30 to 45 days on a contract. If you don't have a buyer waiting in the wings, the clock starts ticking immediately. It's difficult enough to get a deal closed within 30 days, when you already have a buyer, let alone NOT having a buyer. So if you don't have one, you have to "go fish" for one. That takes time. An inspection has to be done, title has to be run, the buyer might want to go look at the property, the buyer might need to get his contractor into the house etc. You're asking for major trouble, trying to find a buyer after you sign a contract! I've seen more wholesalers lose deals, simply because they didn't have a buyer. I'm talking about good deals, not some garbage deal. You're putting the cart way before the horse and you're setting yourself up for disaster! Why would anyone with common sense, risk all of that? If they have a buyers list, the house gets sold right away, the buyer can put down the deposit and it can close quickly. It doesn't make any sense to take such risks, especially when there's absolutely no reason to.

BTW, I discuss with my students, in length, what constitutes a good deal. They know what a good deal is and what a bad deal is. They know how to run the numbers. Would you buy and sign a contract for a new car, before you had the money? Of course not! Why? Because it's a risk and it's simply bad business. What makes real estate any different? 

When you tell a wholesaler that if they have a killer deal they'll find a buyer, IMO, you're setting them up for disaster. What if they don't find a buyer? Then what happens? EVERYONE involved in the transaction just got screwed. That's what happens. The house isn't sold, the homeowners are ticked off, the wholesaler worked his butt off trying to find a buyer and didn't make a dime for his efforts. As a result, he gets screwed as well. There might also be earnest money involved that the wholesaler loses too. I know, I know, if he "sets" up the deal properly, that won't happen. Do you now understand what I'm trying get new wholesalers to understand? Why in the world would you risk losing thousands of dollars and working your butt off for absolutely nothing? It just doesn't make sense! Yes, you might find a great deal and be able to sell it on social media or wherever. If that happens, you lucked out. If you think you that will happen on every "great" deal every time, without having a buyers list, you're in for a very rude awakening. 

I will always stand by: no buyers...no business. When you go to into business, you're suppose to do your best to eliminate risk or manage it the best way possible. if you have no buyers, you're not managing or eliminating risk. You're actually increasing your risk and why in the world would you do that? It just doesn't make any sense. Obviously you're more than welcome to run your business the way you see fit. But to try and convince new wholesalers they don't need a buyers list first, is just plain wrong. 

Richard,

One of the first things I tell newbie wholesaler when I mentor them is this: "You don't have a business if you don't have buyers. Period. Way too many wholesalers go out and find properties, put them under contract and then "assume" they'll find a buyer. That's like buying a store with empty shelves and having a grand opening! The problem is, that probably 95% of wholesalers don't have a clue what they're doing. They listen to people on FB or these so called guru's and think they're going to be rich overnight. Ain't happening. Wholesaling is one of the most difficult business' you can start. The amount of information you need to know to wholesale "properly," is mind boggling. I'll leave it at that.

If you find a property worth wholesaling, you should already have a buyer lined up. It should meet all of their criteria. You can either put the contract in his name and you can write up a fee agreement, so that you get paid, or you can assign the contract to him. Once you do that, he is responsible for following the terms in the contract. If you assign the contract to him, you write up a fee agreement so that you get paid. You send the fee agreement to the title company, so that they have a copy and that guarantees you'll get paid. However, be careful how you write up the agreement. You don't want to violate state law and word it so that it sounds like you're brokering the deal. That can cause you a lot of heartache and trouble! Best of luck. 

@James Wise There are many states that allow wholesaling. If it's done properly, it is NOT illegal. Most states still allow contracts to be assigned and it's not considered brokering. Illinois probably has the "toughest" law. They allow 1 deal per year and after that, you can be heavily fined. There is almost no way around it.