All Forum Posts by: Scott Lewis

Hey BP,

Spartan Home Buyers is going to be setting up operations in Denver starting July 1st and we're looking to put our team together. We're looking for the following team members to partner with

- Wholesalers (quality ones that can analyze a deal and are top notch professionals)

- Real Estate Agent

- Contractor (someone that can do raw land development and condo projects up to 4 units)

- Real Estate Attorney (someone plugged into the probate division and who handles estates)

Very much appreciate the recommendations.

Hi Dee Dee, my company is often in your position of having to help sellers negotiate massive debt to make deals work. This is our niche and it's one of the primary ways we win deals.

That being said, we're in a similar situation, albeit, we found the lien before we even made an offer, and it looks like we're going to have to walk away, because outside of a short sale, there's no way to get the numbers to work. If the lien holder seems reasonable, maybe you can work something out, but your numbers are really far apart.

Be careful to not chase the unicorn. As someone else said, some deals just wont work.

We've executed deals a bunch of ways. We've paid cash and had the bank cash us out at the same percentages (65% of acq) you give your customers, we've negotiated with sellers that wanted a longer timeline so a quick closing wasn't important and used bank loans for the deal, we've keep our money in for acquisition and used the bank for the construction part. 

My point here is not against hard money, but plenty of good deals with lots of meat are done all the time without hard money and there are lots of options to financing a deal. 

While we're not there yet, our goal, which we should hit pretty soon, is a revolving line of credit from our bank we can pull from whenever we want, thus executing cash transactions.

 It's interesting you assume I'm not getting the best deals and not using cash. 

Dont agree with you here. While it took us a lot of effort on the front end to get a bank to play ball, now they've funded over $500k of deals and will underwrite more and more as we grow.  The key is finding a local bank.

As far as your stance that banks aren't much cheaper than hard money lenders, please point me to the hard money lender that offers 1pt and 5.5% interest and I will put $1M of business to him today.

If you cant inspect, build in costs to fix whatever you catch after closing. Unless you're planning on a total rehab anyways, not inspecting the utilities is a great way to get your budget (and by extension) bank account busted really quick if you don't have the margins to absorb the added expenses.

 Absolutely. Every time we approach a bank we put together a deal packet containing all the information they need to make a decision before we get the property under contract. As a matter of process, we only make offers on deals we have lined up 100% of the funding for. Some will probably say we're leaving deals on the table and they're right, but we never run into the issue of knowing whether we'll be able to complete the deal.

Hi Eric, my recommendation is a good deal for you is one with lots of profit built in because your first project will be a learning experience. You'll need that profit margin so that when mistakes are made, you can take your lumps without breaking the bank. A first deal with low margins is a recipe for disaster.

Also, if you can find a really solid contractor, I would start with a full gut rehab, so long as the foundation is ok. Many folks will challenge me on this one, but I do full guts all the time and my first deal was a full gut (as was my personal home.) The reason I say this is because as long as the foundation is good, most of the time there are no surprises because you're ripping everything out so you've already budgeted for everything to be replaced.

Again, finding a good, solid contractor, that adheres to his/her budget is key to this. (This is the hardest part of flipping, especially in today's market.)

Hi David, I would do this ASAP, as in DC, a new owner has 45 days from date of purchase to request a reassessment based on several factors or they have to wait until April.

Most jurisdictions will probably have some form you need to fill out and submit to your assessors office which they will ignore and then lose it, so you'll have to resubmit four times before you get an answer (it took us 90 days and three resubmittals to the SAME person.)

Implied task, make sure you keep a copy.

Hi Alan,

Getting commercial lending (which you'll need to do if you want the Ltd (this should be an LLC) to own the loan) is really tough when you're starting out.

For our first deal, I called 27 banks to try and get construction financing, we owned the property outright, until I found one local bank to underwrite a loan to our LLC but guaranteed personally by the managing members, and we had over $250k of profit in the deal and the loan was only for $160k.

My advice, find a local bank and only come to them with a smashing deal. Something with $10k of profit isn't going to get you anywhere because you'll never pass any bank's risk tolerances.

For your first deal, you're going to need a ton of profit margin in the deal to get any bank to play ball because they want to be assured if you mess up, there's plenty of meat to feed someone who can close the deal.