All Forum Posts by: Travis Moe

I'm negotiating with seller on a 3/1 SFR with a 1/1 apt over the detached garage. Seller is willing to come down to a price point that works for me and my numbers - but the place is occupied. The 1/1 apt is fairly close to market rent with a lease until July 2019, but the main house is at around half market rent with a lease in place until August 2019.

This will cause negative cash flow during the acquisition and postpone the rehab phase for up to 9 months. 

The numbers kind of hinge on me being able to get the place reconditioned quickly. Otherwise, it seems to be a deal. I've asked for a price reduction to account for the low rent. Seller isn't keen to do that. 

Anyone have any more creative ideas on what I can offer the seller to make this work while accounting for the current leases?

Thanks!

@Matt Berklacy

I reached out to you via DM a couple of days ago. Did you receive that message?

Thank you to everyone who replied. 

Based on the advice of my PM, my agent, and BP commenters, I cancelled the contract.

@Jack Bobeck The seller did provide a disclosure. Claimed no knowledge of anything wrong due to never living in nor occupying the property. But when we went to do this they told us about the power and the bad wiring. So how did they know that? They obviously knew and did not disclose. Is this just newbie jitters? Or am I right to be suspicious about this?

BP Community - 

I'm in contract on a SFR in Jacksonville, FL. I'm a little stuck and need advice on best course of action.

Situation: The water and power are shut off at the property (it's an REO held by a private lender). This was not disclosed to me at any point. I discovered this when my GC went out to look it over and give me a rehab bid. The seller claims no knowledge of property and sent a disclosure to this fact since seller has never occupied the home.

The listing agent, on the other hand, was completely aware. 

When I requested the listing agent get the utilities connected so that I could conduct full inspections, he declined. He said power could not be restored to the property because there is exposed wiring making power a safety hazard. He stated this. So he knew ahead of time, but did not disclose this. 

I then asked that my inspection period deadline (11/26) be extended so that I'd have additional time to have an electrician quote me a price to repair something like that. The listing agent flatly declined.

In Cali, where I live, a listing agent is also required to disclose any knowledge about a property they represent - not just the seller. Is this the case in FL? In Cali, a seller's agent is responsible, at their own expense if necessary, to supply utilities to a property under contract for due diligence. Is this not the case in FL? Are there exemptions? Or is this listing agent just being a hardcase?

What should I do? My rehab bid came in just enough under my max threshold to allow for a 10% overage/margin of error. Systems repair like power and water can run into the thousands and I wouldn't know about them because I can't have inspection. I don't want to pay to repair the systems just to turn them on just to find degradation that kills the deal. 

How can I make this work?

@Nathan Reo

Welcome!

Don't do your own calculations. Just don't. At least, not yet. Sure... use the 70% rule to quickly determine if a property is even close and worthy of more careful scrutiny... but don't try to be a human spreadsheet. Just use the BP calculators. Focus on getting your inputs as accurate as possible and then let the calculator do the math.

Let's run your details thru... This is just meant to be illustrative... certainly not actionable advice.

• You don't really state what your goal is for the property. You didn't mention what it could rent for so, I'll assume you intend to flip it. 
• You didn't mention the location, so it's hard to know things like taxes, etc. I'll use my local SoCal rate of 1.25% of purchase price - hopefully your area is much lower or uses lower assessed value.
• I'll assume the CMA of $227K is for the rehabbed property. This is the ARV.
• $40K worth of repairs
• You're brand new, so bank on needing the better part of 180 days to purchase, rehab, list, negotiate, and close the flip. 
• You don't specifically state a profit - but you say you want 30% equity. I'll use $68K as the desired profit. 
• With purchase closing costs at 3%, it looks like you intend to finance it, but you don't mention the details - so I will assume all cash purchase.

here is a cocktail-napkin analysis (link only good for 7 days from now).

If I plug all those numbers into the flipping calculator on BP and I get a maximum allowable offer of $93,810. That's the most you can offer the Little Old Lady given your specs. 

Don't worry so much about what she's into it for or what her late husband bought it for or that her favorite poodle, Snookums, used to sleep under that oak tree in the backyard. Fact is, it's in terrible shape. It could be worth $227,000 but it isn't right now. You can only be assured of what it is worth to you given your goals. Offer what you can to get it at a price that supports your game plan. The vast majority of offers will get rejected - some by sellers vehemently offended by your price. @Alexander Felice would tell you to "Suck it up, Buttercup." and just keep plugging away at it. It only takes one good deal to make it all worth it.

I hope this helps. Good luck!

@Lyndon McKay

Go to some meet ups!

Here are two in November.

The REIA meeting on the 29th looks promising. 

1. First of all... it's at a brewery. Score. 
2. It's free. Score.
3. There are already members signed up to attend. Some may be wholesalers. Most will likely know one or two of them. 

Head over there, grab a beer (or 4) and introduce yourself. You could also try messaging @megan greathouse. She looks like the organizer. See if she can point you in the right direction.

I stole the following from @David Greene almost in its entirety. If it resonates with you, pick up his book, even if you're not investing out of state. He's got a very apt chapter on how to identify markets. 

1. Go to Zillow (yes.... Zillow). Use the Agent Finder up at the top and select your city. Here. I did it for you.
2. Sort the agents that come up by Most Recent Sales. This will show you which agents are producing the most sales. This means they probably have a team behind them.
3. That team likely includes a property manager. If not, those top agents will definitely know PMs in the area. 
4. Call up 3-4 agents. Explain what you're doing. Ask them about the best areas to invest given your criteria. Take good notes. 
5. Then call 3-4 property managers they refer. Tell them what you're trying to do. Ask them what neighborhoods they'd be looking in and why. Take good notes. 
6. Cross reference your notes. Look at areas that are on both sets of lists, especially those that show up on BOTH lists from multiple. This will tell you that agents like them because of prices, perception, etc and that PMs like them because of ease of rent, quality of tenant, etc. 
7. Those are going to be the areas that I would start my searches in. Refine, refine, refine as you go. 
8. Come back here to BP often and share your successes!

Happy Hunting!

@Diane Manders “Hot love” LOL.

@Melvin List My understanding is that one is limited to the lower of either the HUD 1 amount or 75% of value unless I wait 6 months. I would rather not wait 6 months. If I’m buying right, my HUD would be lower... so I want to load it up with rehab, insurance, prorations, etc.