All Forum Posts by: Jorge Zea

Hello.

Getting into a new deal.

Evaluating if I should rehab and flip or rehab rent and refi (BRRR)

Questions.

1. What is a typical return that I should aim for when rehabbing and flipping? (after considering Purchase price, points, carrying cost, closing cost and total rehab).

2. If I go the BRRR route. I am getting a hard cash loan ... after I close how long will a traditional lender ask me to wait after closing the loan. Ideally I would like to refi after rehab (+/- 3 months) .. is this doable? I find different answer for this: some say I have to wait 1 year, some say 2 ... some say I can refi but can only use the purchase price and not the market value (through appraisal).

Number are great so both will be profitable ... just trying to figure out which strategy is best.

Thanks

J

@Kristie Eddy: regarding @Chris Eley comment. I am assuming that he is negotiating his own properties. owners (sellers) don't need a license to sell their own properties.

@Chris Kraemer: Agents are trained to get a lot of listings so they will come up with a list of marketing strategy that is mainly aimed at getting more listings, not selling the house. Most of the exposure will be automatic and included in all (or vastly most) MLS listings even as Entry Only: MLS exposure, Realtor.com, Zillow, Tulia, Redfin, Movoto, HousePads, HomeSnap, .... presence in other's Realtors and Brokerages websites (aka IDX syndication). These, in the majority of cases (unless it is a particular property that diverts from the standard of the market) will get the property sold within normal average sale time if priced correctly. Open houses you can host yourself and the Entry Only broker should list them for free in the MLS and syndication sites. Professional pics are also important and you can get a good set for $150 with virtual tour and /or slideshow. Yard sign you can get chep online with teh Entry Only Brokerage logo to comply with MLS rules (and you phone)

95% of the properties in the USA sell via the MLS. This is by far the most important element of your marketing mix. This is why FSBO without MLS rarely sell..

Whatever additional marketing elements Realtors offers  focus on getting the WOW factor and getting the listing. they can build a website specific for the property (this doesn't work if not matched with an aggressive and expensive google ads, bing ads and facebook and instagram campaign). Drone videos - these are only useful when property is difficult to show through stills and 360 V Tours (like large land parcels, mountain properties or waterfront properties to show view form the water - You can hire this yourself.

With all the resources an Entry Only (Flat Fee) listing broker has through the MLS, in most cases(not all), it is difficult to justify a high commission by listing agents.

Again ...before the fellow Realtors react to my comments. The Entry Only or Flat Fee model is not for everyone and there are a ton of very good and very professional Listing Agents out there that are worth the money .... but unfortunately they are not the majority. ....and Entry Only listings are just a tiny fraction of the market (much less than 1%) so no need to concern...keep doing what you are doing, ethically and professionally and you will always have good paying listings. The Flat Fee system is for a fraction of the population that feel they can do it themselves and want (or in many cases "need") to save the money.

Some do ... some don't. It is a one on one basis analysis and not a blanket to cover all.

... but the fact that Flat Fed Listing services (Entry Only Brokerages) exist and are growing exponentially, can be understood that the public considers listing agents too expensive ... this is our opinion for most situations.

On the other hand, Bure Agents deserve their money. Most do most of the legwork: pre-approve the buyer, (or verify fonds), show the properties, prepare offers and most disclosures, work with the bank, appraiser, title company, escrow agent, seller and buyer ...

Look for a local broker (not a referral service) that you can talk to on the phone. Verify licenses (reputable Flat Fee (entry only) broker's websites will have a their licenses listed on the home page of their site. Ask to talk to the broker directly (Some company pay some broker just to use his or her license and run it without licensed supervision.  Sometimes the licensed broker is not involved in the operation (this is dangerous).

Make sure there are no hidden fees, that listing broker doesn't try to collect from buyer or buyer agent, that you get on the local MLS, that you can cancel free, that changes are free,that open house postings are free, that they work on weekends.

@Mike Cumbie is on the right track ... furthermore: smart Buyer agents can convert that Flat Fee Seller into a buyer for them to represent - remember that 85% of seller buy a property within a 15 mile radius. See the money flow in for smart Realtors.

Jim, Full Service Brokers will agree (obviously) because they need to undermine a model that cut their commissions' structure.

After many properties listed and sold, I know, for a fact that regardless of the attitude of Buyer's agents towards Flat Fee (Entry Only or Limited Service Listings) the sale of a property is not affected by it - the buyer will buy the property they like regardless of Realtor's willingness to show it or not.

If a Realtor "refuses" to show a buyer a property (buyer already saw it online already anyway) because of the Flat Fee listings ... the buyer always either skips the his Realtor, find a new Realtor or contacts the seller or listing agent directly.

Furthermore we have seen ethics complains against agents that do this (violation of article 3) ... so Realtors steering buyers away not only loose the buyer but some get fined too.

People sell their homes without a Listing Agent for a variety of reasons. mainly to save money and control the transaction.

FSBO without MLS presence rarely work.

To be effective on selling it yourself, you have to get onto the local MLS ... there is where Flat Fee or Entry Only listings come in. Savings + exposure + sale. You do have to dod some leg work ... there is where the savings are.

@Eric Delcol: You as an investor should know that a 3% commission while calculated on the entire sale price comes straight, directly and ONLY from your equity. This 3% then affects disproportionally your ROI; specially your COC. The large your financial leverage on the project, the greater the impact on on your bottom line.

Most investors we work with fee comfortable dealing with Buyer's agents, showings (or having someone to show, or having a lockbox) properties, negotiating deals, reading  contract and using a Real Estate Attorney (that they would use anyway).  By just doing these things (that they would probably need to do anyway even with a Listing Agent), the investor, like you can improve your bottom line in each project by much more than 3% you are saving. If your projects have high leverage (which I recommend), you can boost your profit by 25%+ each time ... if you do 12 deals a year (which many of our customers do) ... that is hundreds of thousands of dollars in profit ... enough to hire an assistant for $40K a year to do all the leg work.

Regarding @Jim C.'s comment. This is just a cheap complain Realtors have because they are scared of Flat Fee brokerages and have to through dirt of the business model that undermines (so they think) their long-established commission structure. With today's information availability (and this I can tell from a lot of experience), buyers in many (if not all) instances look for properties online and ask their Realtors to show them the ones they like online ... Realtors refusing to show these listing because they are Flat Fee listings, just loose the client because the buyer grabs the phone and contact the listing agent directly and skip his Realtor altogether ... 

I would like to post the question back to @Eric Delcol - Why do investors still use full service listing brokerages?

Flat Fee MLS listing service - just google "Flat Fee MLS Mesa Arizona"-

You should find goo reputable ones.

1. use a direct broker, not a referral.
2. check licenses
3. call their number and ask to talk to the Broker or a licensed agent (just to make sure they are legitimate and not just paying someone to use their license).
4. make sure there are no hidden fees or another fees at closing
5. max pics in the MLS
6. read whatever agreement you will sign
7. check that you can cancel for free
8. offer market commission to buyer's agents
9. get a local RE attorney for all

You will be just fine and will save a bunch of money!

Listing Spark is good, licensed and nice site and service; very expensive though. 

In the USA Properties take an average of 62 days to go under contract* (aka: DOM) + plus you have to keep it in the MLS until closing so let's add 30 days (some locations it takes longer) - thats 92 days at $7/day = $644 (on average) ----> Expensive in my opinion.

There are similar services by licensed Brokerages in some states like FL, CA, CT, MA (don't know if TX or VA though) for $99 for 6 to 12 months.

*Source: National Association of Realtors (NAR: http://research.realtor.com/)