All Forum Posts by: Steve Theobald

Out-of-Town Landlord Here is a website that I don't run (but I am included on for Utah).

If you are an investor looking for experienced agents who work with out-of-state investors, then here is a great place to start.

If you are an agent who works with investors it may be worth it to try to get listed.  

See my latest BP blog post about why you should become a Realtor as part of your investment strategy if you do 3 or more deals a year.

https://www.biggerpockets.com/blogs/8070/53499-squ...

Try Cody Hoffhine at GMI.  I will send you the contact info.  There are others out there, but GMI's rates are reasonable for rehabs.  He insured at least 15 of my flips.

This is a short yet balanced review of FIG.  

1.  My brother-in-law owns two FIG four-plexes and is very happy.  (He has them manage the units, but it is not required.)

2. Based on this, I felt comfortable doing a screen share with with an investor client and one of the agents on the FIG team. I was very impressed. My client is still on the fence and has not yet moved forward with a new-unit reservation--but he wants unrealistic 30% CCR returns (at least for Utah).

3.  Another one of my clients had done extensive review of the FIG opportunity several months ago, and walked away before I met him.  I asked him why, and he said after many days of review, he determined that after all the fees related to the new construction loan were factored in, the true return was less than the advertised pro-forma.  I didn't try to argue with him or further explore the validity of his claims.

Few people look at as many on-market investment properties each week in Utah as me, and so I feel very confident in saying that FIG's pro-forma returns look totally awesome for Utah's investment climate.  

As I understand it, the great CCR and IRR numbers can be achieved (in part) because FIG presells the units and can negotiate harder with builders who can be hired to build multiple buildings instead of just one.  This is the magic, and I think it is genius.

@Jeremy Stringham  The higher price range has less competition for sure, and several guys I work with prefer the $300k - $600k range for this reason.  They also seem to be able to make an extra premium for a super rehab in this price range ($50k+ profit) over that of doing two smaller homes at $20k profit each ($40k total).

However, MOST flippers prefer to stay under the $250k range because their exit options are expanded.  If things don't work out, then they can rent it.  Rentals over $250k are much less profitable (unless you get very lucky).   

I recommend doing at least two sub $150k deals in Weber county before you try a $300k+ deal in Davis county.   While a sample size of 3 is quite small, you can then sit back an analyze all the deals and see what you liked and didn't like about the different price points.

The 2 keys to be successful at any price point will be for you (1) to find a cohesive team you assemble or hire and keep them on schedule.  I had disasters on 5 of the 30 homes I flipped because my team sucked on those 5.  Ironically, because I was patient in my purchasing, one of those 5 sucky deals turned into my most profitable ever despite the rehab cost overruns.  So key (2) is to buy right and not do a deal simply because you have over $500k burning a hole in your pocket.  

The fact that you are here on BP says you are doing your homework, so I am confident you will make great RE decisions.

@John Weidner  I agree with the low-ball alienation idea.   Your concerns are founded.  But I think I have learned how to compensate for it and keep the "small world's" ears open to me.   I closed over 40 investor deals in the last two years using the very approaches I have been discussing. 

Key #1 is to work mainly with investors who can actually close.  They have their funds lined up, and they have already talked with their spouse (LOL), and they are committed.   The listing agents know that once one of my buyers gets under contract, there is a high probability of a successful closing.   I even had an agent call me two weeks ago because she was looking for a quick close on a house that was about to go to auction.  (I had closed a deal with her previously.)

Key #2 is to work with investors who don't play games with price reductions after being under contract.   So many people want to get into investing, and some agents are willing to send in high offers so that they get under contract.  And then the "fun" begins; the investor was PLANNING on getting a price reduction two days before the end of the Due Diligence period!   At this point in time, the seller has "already spent the money," and they just want to be done with the transaction.  They don't want to start from scratch with another buyer.  The unscrupulous buyer knows this and takes advantage of the situation.  I recognize that there may be legitimate unseen issues that need a price reduction.   I am not talking about these times.   But I have MANY agents who say they had 1 or even 2 sequential offers on the house that were great -- until the addendum came.  After one or two transactions an agent will knows their client fairly well.  I have walked away from at least one buyer who seemed to be playing games.

Thanks @Ian Walsh. I know of a local investor who took on WAY too much risk for the profit potential. In other words, their PROFIT BUFFER was too small. Their ARV was in the $400's, but they were only planning on a $20k profit originally, which is too small for the risk. Unfortunately, the home is still on the market. They should have been shooting for $40k (10% of ARV), which would have forced them to either get the home at the right price or forced them to walk away.  But no, they "needed a deal," and their agent (my guess) didn't consider helping them succeed by discussing "the downside." 

Now they are having trouble getting the house sold.  These things happen.  But because of the high price of the home and the hard money loan, they now can't shift to a "rental" exit strategy, but are forced to sell.  They will have to lower the price until they find a buyer! So they are about to burn up any profit they had.  

If everything had gone perfectly (hint - it never does!!!) then yes, they would make a nice $20k.  And $20k is nothing to laugh at.  But that $20k just turned to $0k (or even negative!).  But if they had been shooting for $40k, they now might "only" be down to $20k profit.  The difference in these two scenarios is astounding.  

I feel for these rehabbers.  And I am going to try to do my own marketing to help them find a buyer.  A different agent sold them the house and now has the listing.  They have their eyes on their next project (which I found for them).  So their bad calculator has impacted me as well.  They can't move forward yet because of this albatross.  I have now educated them on this topic, but I hope the damage to them on this deal is not too great.

Hi @Maria Marrero.  In my blog post on this topic I mentioned my low-ball approach.  The market is flush with investors, and you are competing with ALL of them.   I believe there is only one sane way to get deals: 

Use the MAO calculator and then offer the highest possible price that actually works for you.  Ignore the Days on Market.  You can take $2k off the price if the listing is a bit stale, but otherwise, don't be greedy.  They need to sell.  You need to buy.  Try to make it work for both parties.  But you must stick to your MAO (or below).

Maximum Allowable Offer (MAO) =

ARV

- Rehab costs 

- holding costs  

- financing costs 

- resale costs 

- closing costs on purchase 

- closing costs on resale

- desired profit.

It's a long calculation, but it is critical that you follow the formula.

Holding costs include insurance, utilities, taxes

Resale costs.  On the Resale costs, you have to assume that you will be asked to pay the buyer's closing costs, but you might get lucky and the Buyer will be willing to add these to the purchase price.  Also, you may be able to get the home sold yourself the first week, but if not, then don't wait; hire a Realtor right away.  If you have a good relationship with an agent, especially the one that may have helped you find the deal, you may be able to get a discount on the listing.

If you are using hard money, then your financing costs are vital, and also know that you will have to buy a title policy as part of the closing costs to cover the hard money lender.

Profit.  How much profit should you be shooting for? What has worked well for me and my investors is to make at least 8% ROI (with a 15k minimum), with a real target of 10% of ARV. The 8% ROI is to make sure that you are taking the proper risk into account. Add the purchase price plus the rehab. The minimum profit should be 8% of this number. So if you buy something for 160k and put 30k into it, then 8% of 190k is $15,200. If you buy it for 200k and put 50k into it, then you need to make at least $20k. But if you sell it for $320k, then you should really be trying to buy it at a price that lets you make $32k, not just the $20k.

I hope this helps.  Bigger Pockets has lots of calculators you can use.

@Michael Hayworth , Thanks for the input.  I love Texas!  I lived in Grand Prairie for just 4 months, but I met some of the nicest people in my life.  Unfortunately, I got laid off and moved back to Utah.   And that is when I started in on my low-ball offer spree and became an agent for investors. 

Your point #1 is right on.  As an agent, I work with dozens of investors.  I do have a couple who call me frequently to say "Let's offer $100k on 123 I'm Dreaming Ln.," but I would go crazy if I had more than two who did this.  

Instead, I am the one who decides the ARV, estimates the rehab, and decides which investor the deal makes the most sense for. I get signatures and then submit. If we then get some traction (acceptance or a close counter) and investor #1 backs out, I have several more the deal might work for.

(For those who are not Realtors, I recommend working with a couple agents along side your own finding efforts, but work within their system.)

Regarding point #2.  Tell that low-baller to just stop and go get a full time job until a more balanced market returns someday.   It will.   Until then, he must not be pissed off.  Everyone is doing what is best for themselves, and this is the way it should be.  Yelling at the market is just asinine.   Yes, I have felt like that guy, but I am trying to branch out, and not relay on just one strategy.   

I agree that for a newbie investor, it might be best to focus on other strategies like calling FSBOs, door knocking, I Buy Homes ads and more.

@Andrew Michael   You are my hero!  Every time I try cold calling I last about 30 minutes before I'd rather have sand in my eyes.   Keep up the great work!!!  

@Kristopher Hanks   Thanks for proving my point so perfectly.  I may quote you soon!  Congratulations for getting your persistence to pay off so well.