All Forum Posts by: Shane H.

Quote from @Ethan Anderson:

Thanks for all the answers! For clarity, the offer is for a lump sum payment of tens of thousands of dollars for a perpetual easement. No monthly checks.

 You value it based on yearly income and cap rate. So you have to determine it’s lease value. Land lease value. Not run the business by advertising yourself value. That’s much more difficult. 

The last reply seems like a lot of work. I would simply contact a sign company and see what they would lease the land for. Apples to apples. You building and handling the rental, hanging signs, etc is an orange. This way you can decide if you’d prefer to lease the land or grant permanent easement. You can also counter this person with a lease instead of an easement. 

Quote from @Account Closed:

Quote from @Anna Laud:

Quote from @Eric N.:

Quote from @Anna Laud:

@Eric N. Good post and lots of great feedback here, I think one issue that is missing is SHOULD wholesaling be outlawed and, while I know this will draw fire from some, overall the answer is probably yes at least partially. If you've spend more than one week in any market (I'm primarily in Indy and in the midwest) then you've seen:

- Houses that are "pending" and the realtor thinks closing is coming but it is being fished out

- MASSIVE spam and abuses of people that get HUNDREDS of calls a day from "wholesalers"

- The same deal advertised with 10 different prices

- Sellers who are lied to and taken advantage of

- Wholesalers lying about values, rents, etc.

Yes there are ethical wholesalers for sure but our collective immune system should be stronger and there shouldn't be so many people like this. Yes I do think eventually the laws will pass in more states and wholesalers will have to provide much more value. We do a lot of free training by the way on how to build your business correctly with wholesaling. Hope that helps. Thanks everybody!

@Anna Laud, thank you for sharing your perspective on it! All opinions are valuable, especially those we disagree with. Otherwise, our discussions would sound like an echo chamber))

I will just comment on some of the points you have made:

- Houses that are "pending" and the realtor thinks closing is coming but it is being fished out

Are these houses on MLS, made available to the public? Are they on-market? Because they shouldn't be.

- MASSIVE spam and abuses of people that get HUNDREDS of calls a day from "wholesalers"

There are DO NOT CALL lists and laws in place that prohibit abusive calls. The government should step up and enforce those laws. And it's not just wholesalers, a lot of other businesses subscribe to abusive marketing practices. They all should be prosecuted (they are already outlawed).

- The same deal advertised with 10 different prices

Wholesale deals should NOT be advertised to the public. Wholesalers can NOT sell a property, he can only assign a contract and do a B2B transaction (sell to investors, NEVER market to the public). And why does any wholesaler, if he has a TRULY wholesale deal, have to make 10 different advertisements? If the deal is REAL (meaning, all comps are accurate, the ARV is accurate, the cost of repair is accurate, and there is 30% profit to be made by fix-and-flipper), then investors should be ones lined up to buy it, and wholesalers can then assign the contract to the highest bidder. If wholesalers go around peddling in 10 places a deals that no one wants to buy then they DON'T have a wholesale deal. Market is the best remedy for those, since no intelligent buyer/investor will touch what they offer.

- Sellers who are lied to and taken advantage of

How exactly are they lied to and taken advantage of?

-Wholesalers lying about values, rents, etc.

I firmly believe that those "wholesalers" are idiots. You can't "lie" about values in this industry, all data is there and accessible to all. Especially to an investor who is going to part with 200K-700K of his hard-earned money. It takes one call to a realtor to run comps on MLS and tell you what the true numbers are. Only complete fools can be misled by false values, and RE is not a fool's business, thus if one is a fool one should never invest in RE.

I'm not sure if I need @ you or just quote this, still learning lol.

To answer your questions in order:

- Yes a house is on the market for let's 100k and the wholesaler gets an offer accepted for 85k then while telling the agent/seller they are good to go on closing they may make excuses to delay the date not telling them that they are trying to find a buyer instead. The realtor puts the house as pending while the wholesaler markets it for 85k. Many realtors still don't know what wholesaling is so they have no idea that closing isn't being delayed but it won't happen unless the wholesaler finds a buyer.

- About the DNC list, very few wholesalers respect this. They upload a list of absentee owners or whatever and spam them all with calls, emails, texts, etc. Over 90% of the replies are peopel saying STOP or cussing them out. This is NOT marketing or lead gen, and yes others do it but I don't know of any industry where so many new people are taught that this is an acceptable form of "marketing/lead gen".

- Go to any fb real estate group and search a "deal" and you'll likely find it listed on that same forum by different people with different prices. Wholesalers will try to jv or just copy and paste and market properties they don't have any interest in, this is happening all the time.

- Sellers are being lied to about value, repairs and when/how it will close. Realtors lie to sellers too to get listings but wholesalers in my experience are far worse.

- I get what you mean about knowing your market, but we are all nerds here at bp while the average person is just trying to get into real estate or make some moves to help their financial situation so when they see an "expert" say something it carries weight. Plus if you are getting priced out of every other deal, moving too slow for on market houses, your realtor telling you that this is a bad time to invest, etc. then you may pull the trigger on a bad deal. It is understandable and much more worth of forgiving then the wholesaler who lied to them about the values, rent, etc. for a quick payday.

I don't all wholesalers, I'm just saying there are good reasons to ban them and we shouldn't expect the public to differentiate them from us when we haven't eradicated these terrible practices. I welcome the thinning of the herd, more for us.

@Account Closed:

Quote from @Anna Laud:

@Account Closed

1. The problem is with "wholesalers" trying to find a good deal on MLS from REA. 85K on a listed property might be a good deal for the end buyer, but not something worth investing as a flipper. The "wholesaler" will struggle to get a buyer for that house. A good wholesaler in his right mind will look for deals HE would buy as an investor/flipper. Knocking 15K off retail price may not do it. It all depends on ARV, cost of repair, and profit margins for investors. Such a "wholesaler" should be weeded out of the marketplace by failing miserably in what he is doing.

2. I know a lot of industries where abusive calls are commonplace. In fact, I receive a ton of spam calls almost daily but can't recall one from a wholesaler. As noted earlier, calling someone on the DO NOT CALL list is illegal. Anyone who does that, not just a wholesaler, should be dealt with by gov which is obliged to enforce the laws on the books.

3. They are not wholesalers. They are scammers. 

4. When I talk to the seller all I care about is making an offer that makes sense for me to move the inventory. The seller either accepts it or goes on his merry way. I am not obliged to educate or explain anything. Here is your house, and here I am, I think I can get you paid X dollars for that dilapidated junk you are living in. Either take it or leave it, period. I don't have to beg, lie or make up stories. I am not the one trying to get rid of the property, the seller is!

5. Wholesaler can lie all he wants.  If I am an investor buying from him he won't be able to fool me. No one will. I will have my comps, cost of repairs, and market forecasts ready in my hand before I pull the trigger. If a lying wholesaler can fool me then maybe I shouldn't be investing in RE and find some other endeavor where I have a better clue of what I am doing. 

6. I disagree. I don't think we should ban all wholesalers just because some are scammers, criminals, and idiots. market will weed out idiots, and criminals who break the law should be prosecuted by gov. The rest should continue doing business as usual, realtors, wholesalers, flippers, lenders and etc. 

4. “I think I can get you.” This is acting as a realtor. Wholesaling is “I’m going to give you 85k, because I think I can get 100k. 

5. Under each state that I’ve dug into the laws, the final investor should not be able to do their own estimates because they can’t be shown the house… again acting as a realtor under a “net contract.” That’s not wholesaling. As a wholesaler you buy the house for 85. And market it for 100. If you want to legally “contract flip,” you literally need to market the contract. Selling a contract to buy 124 fake street in fake town for $10,000. 

I'm glad bigger pockets linked me over tho this thread because I think the tone is better. 

Quote from @Sarah DeMamiel:

Quote from @Nicholas L.:

@Sarah DeMamiel

it sounds like you have done quite a bit of homework and are putting together a team. that's great. but these are still very tough strategies for beginners in today's market. i just tried a BRRRR (my 4th) in a market i'm familiar with. the numbers didn't work when i went to refinance, so I sold it (as @Jaron Walling noted, it turned into a flip.)  

it was a great project, i'm proud of it, i took a house built in 1900 that wasn't livable and brought it back to life, and i made a little bit of money... but it wasn't worth the time i put into it.  

you asked for specifics so here's a comment and a question.

-if you do a BRRRR correctly, you likely won't get any cash flow.  rates are too high.  you'll break even on rent and get all or most of your cash back out when you refi.  so BRRRR right now is an equity strategy, not a cash flow strategy.  if you want immediate cash flow, that's great - BRRRR is just the wrong strategy for it.

-can your agent help you get off market deals? there are certainly exceptions, but in general, to flip or BRRRR you have to buy something distressed that is off market.

hope this helps

 I appreciate the comment and the questions. I understand it is a tough market, but the timing is the timing. So here we are.
Ultimately, having big cash flow isn’t terribly important in the short term. Would it be nice, sure but it’s not necessary. SOME cash flow is necessary for us to move forward with the deal, however.
1900s! wow, very cool. I do love old houses so much! I love to see them come back to life.  Someday I would like to live in one. I won’t be buying any for investment though, not initially. Too many unforeseen issues.
I do have a great agent who is an investor herself. The rents are quite high in and around my area. I'm patient. I'm only going to move forward with the deal if the numbers make good sense. As you said, distressed is a must. As much forced equity as I can get out of a property, is the goal. Quality is important, but I'm not going to put more into it then I'm going to get out of it. I want single-family initially, no HOA's, good school district. I'll keep diligently searching until something comes along that we believe makes sense.
My mom and I started a business in California after we were told “don’t bother it’s an over saturated market“ and “it’s too difficult“. Well, we ended up being the most successful in our area. We sold our business and moved to Georgia following my husband’s job promotion.
My mom had me as a teenager so she’s young (relatively speaking ) very active and very capable, as am I. That said, she’s not at the beginning or even necessarily the middle of her life so we’re taking that into consideration.
The few pats on the head (not from you, thanks for that) I’ve been getting in this comment section is actually not a bad thing. We got the same reaction to our initial business plans in California and I have to say, nothing lit a fire under my *** more. 

I built a business from the ground up. Near 0 investment, against the advice of nearly everyone around me. I’m also a real estate investor. I think the 2 are very different. In some senses the real estate is easier, but I have far less control over that.

You can screen tenants all you want. Mitigate your risk. In the end, You can’t control what they’ll do to your property.

You can’t stop the house from burning down after you incurred costs, but before you’ve closed. 

if you’re leveraging, you can’t change interest rate (much.) you can’t guarantee that you don’t have a year of rent loss because your state decided to put a moratorium on evictions. 

did you see the case in California where the guy sold his house but didn’t move out? The new owner was left with no recourse… 

you can’t control the market that can plummet next week because of XYZ.

in my business I can take the “fire” and produce more. When my employee cost me $50k I can fire him and correct the problem and move on. If I lose the same 50k on a real estate deal the only thing I can really do is wait out the time it takes to recover. 

none of that to say don’t invest in real estate. I’m here because I do it, and I’ll continue to do it. Simply here to say, apples and oranges. Some skills will translate. Some won’t. Based on what you said, not any assumption I’m making, all of the expertise in these deals is coming from outside influencers. An investor agent sounds great on the surface. It CAN BE a great asset. It also could not be. Potential pitfalls? I always wonder if the deal is as good as they’re telling me, why aren’t they buying it… They’re still a real estate agent who is making a commission off your sale… speaking of that, why are they selling real estate if they’re a great investor, some it’s because they love it. Many it’s because they don’t really make that much on their investments. Lol contractor, references are one thing. Having worked for you is another. Anyone who’s ever hired someone for just about anything knows that different people have different preferences. 

I can control nearly all of this in my business. If I take on a new account and don’t like that account I can drop them. Can’t drop that 300k property you bought that turns out to have knob and tube hidden in the walls. Maybe the inspector sees it. Maybe they don’t. I can’t even seem to write a deal with inspection contingencies at this point so… 

Personally, I would never take that amount from a relative to “invest for them.” That doesn’t mean you can’t. I would however help my mother make decisions to invest that money for herself. I see you mentioned you’d keep her informed. That’s too much for me. I’ll give her advice so she can make the informed decision. Does your state allow you to invest on your mothers behalf without a license? 

Why not put the vast majority into something secure, and take say 50 and do your first deal together? She as the decision maker, you as her advisor. See how that goes. The 350k will earn 15-20k/yr recouping a good portion of the gambled amount. if that works out do it again. If 2 work out you’re probably onto something and can get bigger while barely risking principle… 








 

Looking at your numbers you show a valuation of 6-8% of future income. I’m not even positive if that includes the 70k that your suggesting be put into it because they’re all estimates. 

So if it nets 17k 5% would be 340k. And 5% is awfully low, no? 8 % brings it into the low 200s. Maybe I’m misunderstanding your pro forma. 

Jeez. I’m glad they’re open to negotiation. Lol

Who here believes that home prices do not include associated fees?

So as an investor when I run the numbers closing costs are included. The appraisal can come back with anything. We all know it’s easily manipulated. Let’s say the property is appraised and listed at 100k and I need to bring 110 to the table. If it doesn’t produce at 110 I may have to offer 90 to bring us back to 100 at the closing table. (Crude numbers just to give the idea.)

There seems to be an idea here that people aren’t doing that math before the offer. A good agent is showing this to their client while placing the offer. I just don’t see how buyers will just start paying more at closing. personal home buyers are often buying the very maximum they can afford.  Those buyers are willing to pay the same exact amount no matter who the silly piece of paper says paid the fees…

Quote from @Christopher Davis:

I don't have a broad opinion as an experienced professional, but as someone with one investment house who will likely sell in the next 2-5 years, I have one thing on my mind. Commissions. My goal is to reduce my commission payout as much as possible. From reading here it sounds like the buyers and their agent will have a rocky road ahead for a few years until new standards are set in place. But as a seller I am hoping my commission will go from 6% to 3%. Is that a likely result for sellers? It seems like that's the direction this goes. I know that also means sale prices may go down, but I am less worried about that in a good market.

As I see it you will receive 3% less from the property and then pay 3% instead of 6. Winning… lol

Quote from @Rigo V.:

I have a few deals UC. I am skeptical of some buyers and have seen it in the past that will try to talk to the owner directly. Anyone make their buyers sign something before they release any info to ensure you can hold them accountable? 

You’re under contract. You’d hold the seller responsible…

Quote from @Jay Hinrichs:

Quote from @Matthew Paul:

Quote from @Alan Asriants:

Quote from @Mark Cotter:

Quote from @Devin Scott:

Quote from @Shane H.:

I think the whole thing is irrelevant. Prices aren’t going to go down. Are you seriously going to list a house for 145,500 instead of 150k because of this? Lol I expect an increase in overall cost. The only way it’s going to drive prices down is if buyers agents (like all of them not just one here or there) encourage buyers to make offers accordingly. I don’t see it… the fact of the matter is that buyers have always paid both sides of the fees. That hasn’t changed. This situation is the equivalent of a store listing sales tax in the price one day and not the next. Except in real estate the price is already so murky it won’t be as noticeable. 

 Prices aren't just determined by list price.  Buyers won't be able to pay as much across the board because they need to cover their own agent fees.  Hmm, what could that do to prices...

 When there is a void something always moves in to fill it. I'm willing to bet you that companies like Redfin and Zillow will be all over this. Buyers won't be using Agents within 5 years.

 How will Buyers get their representation? Lawyers, just paper pushers? Lawyers aren't trained to know location, neighborhoods, property conditions. 

 I would think a lawyer would be able to write a contract .   Most buyers will research the location for themselves , check out the neighborhood by going there and some internet searching . As far as property condition , short of what is obvious , isnt that what the buyers hire a home inspector for ?   

I see lawyers heavily involved with deals in Chicago and it appears New York I have done a lot of Chi Rack but nothing in New york.  and in CHi town its very frustrating you have buyer and seller each has a lawyer then you have each client with a realtor so lots of coordinating etc.. and come to think of it thats how they do it in Charleston SC as well. the lawyers are just closing the transactions like escrow officers but in Chi town I saw them also reply on inspection addendums.. and you talk about killing deals..

 I tried to buy a property in New York and couldn’t understand why they wanted to know who my lawyer was. The closing costs were absurd. We had a verbal agreement on price but never went under contract because of it. We are talking about a 4 figure property so 2 lawyers 2 agents can really spoil a deal.