All Forum Posts by: Stephen E Drew

 Side note, as a Journey, you have a massive advantage over others in this arena. Or should I say "we" have that massive advantage. 

We "get it". We have this amazing mental training that few have, a toughness few will ever achieve. We have become masters of patience, perseverance, focus, and vision. VISION is a huge one, massive.     One can never get to journey, as we know, without the ability to see 4, 7, 10 steps ahead. To envision the final result and reverse engineer the steps all the way back to starting point. Most can't do this. 

The only trick is application, learning to apply all that you are already a master of, into this. 

You know operational steps like a grand master, have to to run a site and "shizam" prints into a physical reality right. This, REI, is also a system, setting up the steps, sherpa all along the path. Never go to D until C is completed 100%. The sales side works in this manner, the operational, disposition, all of it.

Not to mention you can walk a property and envision it's potential, most can not. you have a super-power. 

And the key thing you already know. Reading and studying on, let's say trim work, how skilled does that make a person? All but nothing right. The books and study gives direction and 'tricks" but the skill is only gained from doing, the actual exercise of putting it all into play and just getting in there and doing. And yes, you will screw things up at start, expect that, it's how one get's good right. 

I used to take new trimmers, the apprentice's, and I'd hand them a coping saw and some base, then show them my already coped base and say "ok, now all you gotta do is this" and I'd just sit and watch. The horrific mangled mess's they'd make. They thought it was a skill exercise but it was mental, because the whole time there miter saw is sitting right there, nobody ever asked. Hours up, all are a mess. Then I inform all got it wrong, the correct answer was "hey boss, can you help/show me how to". Then, 20 seconds, i kick out a perfect 45 cope baseboard. I tell them to practice, 1 hour later everyone is kicking them out just as good.     They sucked at it only because they thought they sucked at it, and had no idea how to correctly do it, and ego/self belief limited actions to discover and try. Once they knew, mastery came fast. 

Approach it all like you did to in carpentry and I assure you, your going to be one hell of a success. You got this! 

@Stephen E Drew your over complicating things. 

Remember back when you first started in carpentry, those first days when walked into a build, looked at those plans and thought "WTF, look at all this, how is everyone else so easily running around like ant's just doing stuff, where do i start", and what's always taught in Carpentry; just focus on your 1 thing, keep it simple, build upon that. 

Your making the mistake of assuming what seller will or won't do, what seller does or does not value, think etc.. If you can read minds, stop wasting your time in real estate and let's get some lotto tickets, right. 

Here is what you do, on a simple page of paper, do the research and get your ARV comp. Write down the 3-4 supporting address's for this ARV comp, and any modifications you did to come to that price. That's top line number, let's call it $200k.

Then, you write out your estimated reno, AND you must add any contingency $. You should know how to do this and remember your not a slave so don't factor on your free labor, NO, your not free are you? If yes, PM your address, I will send you tickets and fly you to me tomorrow, I will happily put you to work for free labor to the end of time, all the ramen you can eat, lol. Now, lets say that reno # is $40k, alright, now contingency is at minimum $5k right, if not $8k or $10k. 

Now, write down cost of selling. All the fun filled fee's associated with such. Let's say that is $20k all in. 

And then we have our holding costs of everything, from utilities, property taxes' everything. Let's say $10k. 

And last but not least, a fair profit for having done everything, taken it from the wreck it is today too the final done deal, you said $15k. 

This summary should be on 1 page. You should have your supporting docs on other pages, how you got to it all, but keep it simple. $200k minus, minus, minus, minus etc.. 

Then, it gives a final number. THAT's your maximum allowable purchase price. 

Now, you sit down with seller, and you do this together. You pull out a paper, and you write out this summary. Each step, you get agreement. You write out the ARV, tell him how you came to it, and ask "makes sense right" and either he agrees, which most time they do, or he disagrees and you stop there, address the disagreement, ask them to lay out the disagreement and hammer it out until you have that agreed upon before moving forward.

If you follow this simple SIMPLE structure, once you get to the end of the MAO, it will be a number you both got to, together. it's a # they can't ignore, or fight. It's simple math, they saw it, they did it with you. All the factors they agreed on.

I can not tell you how many times I have done this and a seller has launched into fighting with themself and I just sat and watched. They say "well, wow, I was certain that..., I had in mind $150k for the house as a fair price but, right here, it's not even close, it's $78k, I mean, I saw all these sold and thought $150k was a good deal but, yeah, it's right there, holy-cow, I mean.... yeah. The reno is right, and $15k, that's not that much, even if you did it for free, and who knows what will happen.... huh" and you just let them argue away with themself, this is them coming to acceptance. 

Either they will say "well, I don't care, I need ___ for it" and you can just say "well, this is the max we can work with, because i can't afford to just burn $___, that's fair right". OR they ask the golden question, which is something to the tune of "Ok, so, how does this work/ how will closing work/ what do we sign" POW, that's sold, that's done, and at that point just don't shoot yourself in the foot. 

It's really that simple. 

Just be honest, be open, let the #'s do the negotiating. Be fair, to both yourself and the sellers. #1 mistake people make is trying to screw someone in the deal, either seller or themself. Just-be-fair. When being fair, there is nothing to hide, right, so don't hide anything. 

I have had deals where I was certain the # was too low, and seller just said "yeah, that makes sense, ok, what next" and without a drop of resistance it was done. I had one like this that seller got $1,500, I kid you not at closing it was $1,500. And seller was HAPPY, gleeful actually. 

Assume nothing. 

Hey man, I know you meant well.. but allow me to correct you an a crucial point.

Honestly A bit shocked to hear a coach say that. How can you conclude a deal to be not good ONLY having knowledge of the ARV and it "needing quite a bit of work"?

$200K in CT is the PERFECT range for a flip and thus a whoelsale deal. Do you know how much money we are making with SERIOUSLY bad shape hosues in the ARV ranke of $200K?

The ARV has nothing (or not much) to do with it being a deal or not.

What has to do with it is if the numbers work. Remember I have bought a hosue for 10 dollars once. And bought a $183K house for $11K. And a $250K hosue for $40K, and... 

You sound misleading with the advise you give him. Why are you worried if he acepts $90K? It is compeltely irrelevant. Don't get emotional here. Stick to the numbers.

If $90K is the number that works, $90K it is. Period. 

See what you did? You told him it is not likely a good deal because you were afraid, the seller may not accept $90K... see how this is compeltely wrong? It being a good deal or not is irrelevant what the seller will accept for it or not... it only matters what you get it under contract for , period. Do you know how often the seller wanted $300K for a $12K ARV house? NO deal would be a good deal if seller opinon was the criteria for a deal to be a good deal.

So if he bought this house foe $20K, it IS a great deal right? So why tell him it is not likely a good deal when he is still in the making an offer stage.

My advise to the OP is this:

Don't be desperate, don't be emotional, and don't make an offer if you don't have a way to get through with it, either buying it or wholesaling it.

Then, you make an offer wiothout emotions based on the numbers, not on what the seller would accept or not.

An ARV of $200K and it needs quite a bit or work. There's probably not a deal here. You have to take into account all costs which means acquisition costs, carrying costs, rehab costs, and disposition costs. Because your rehab costs will be so high it doesnt leave much for profit.

Assume 15% for costs other than rehab. That's $30K. 

Assume $50K for rehab costs.

Right there you would need to get the property for $120K just to cover your costs. 

And I'm assuming you want to make money on the deal. Most flippers want a minimum of 15% so that's another $30K. 

So now your offer is only $90K. Would the owner take $90K.