All Forum Posts by: Jorge Zea

Open houses by Listing Agents are designed to get new leads as @Kevin Hill describes.

Agree. SFH is the way to go for most ... but the numbers will show the path and light your way. Some Condos or HOA properties have better returns and because investors avoid them, there is less competition (sometimes). Do your numbers and buy the property that fulfills your goals!

Many variables and moving parts. @Account Closed is correct. First: how much money do you have for downpayment? Then the bank will look at income to make sure you can pay monthly mortgage in case your tenants move out - so income is important (specially in a new deal). A traditional bank can do it without a problem if income and assets are within their parameters. Credit: you will get penalized with higher interest rate. Till August you still have time to improve it: Pay old debts, pay down credit lines, don't be late, etc. I use CreditKarma.com for suggestions and to check my report and score - it is free. 

Maybe if there is a Mortgage Broker in the forum, he/she will be the best advice.

Good luck: House hack is a great start!

@Chris Isaacson. On the contrary, your assumption is completely out of place without even knowing our business model. I am the Broker of the company and personally service as full broker representation many upscale customers in high end transaction (very selected group of customers). I specialize in investors and top executives relocation with an outstanding reputation. I am member of our board's grievance ethics committee and works toward a professionalization of our business. If you read my posts, they are insightful and helpful to the BP community. There is one where I describe what a Realtor should be and what a Realtor should do for an investor (customer-buyer) and that is exactly what I do for my customers; and I am expensive for doing this. I strive to help investors make the best decision and make the best profit possible, even in detriment of my own income - standard of Ethics require us to work for the best benefit of our customers .... this will give you immense power, infinite leads, repeat business, and good thankful friends (which, for me is much more valuable than money).

I see you have your license less than 2 year ago, so I understand you are still full of pragmatic dreams but you will soon get to understand how broad our profession can be and discover the different ways you can service the public and still offer excellent value; you will find a changing world where the customer is being increasingly empowered by technology and market disruptors. You have to keep moving, switching, shifting, reacting, thinking outside of the box, innovating, etc.

Through my more than 14 years in my business I found that some people did not need a listing agent and shouldn't pay for one so we created a flat fee service as well (not the bulk of our income by far) to service that small portion of the market. I have cried on the phone with some of my elderly flat fee customers (some of which became good friends and have already passed away); cried and suffered because they could barely sale the house, pay ONLY 2.5% commission and break even - you obviously wouldn't take that customer ... but I do and give them peace of mind in difficult times. Life is more than making money.

Furthermore being a member our Board's grievance ethics committee I would suggest you review the Code of Ethics and Standards of Practice because discriminating (or black listing) Entry Only, Limited Service, or Flat Fee listings and refusing to show these to your potential buyers (even if they are good fits for their needs) can get you an Ethics Violation and a sanction by your Board.  Furthermore if you refuse to show your buyer a property, they will just go to Zillow , Realtor.com, Trulia and skip you altogether. The availability of information in the Internet for consumers does not allow agents to "hide" properties from their buyers. When they like a property, they will find a way to getting to see it and buy it. I understand and respect if your business model is going after the low hanging fruit ... that is OK too.

Bottom line, our business model is as valid as yours or as any body's else's and you should not assume that I give a bad service and no value to my customers. Understanding why we do what we do for a low cost is much more profound and philosophical than your simplistic assumption.

This is a flip project - 4 months buy repair and ready to sell. Assuming 6 months for the estimates bellow.

Want to know if I am missing something ... advice welcomed.

BTW - need hard money for this one if you have advice on this - welcome it is.

Target purchase price: $230K

ARV: $360K (maybe a bit more)

Acquisition estimate:

Price: $230,000

Closing cots (1%): $2,300

My commission will be rolled into the deal (3%): -$6,900

Total Acquisition cost: $225,500

Repairs (it is a 3/2 with) 1488 sq ft

• Kitchen Cabinets: $15,000
• Floors ( a descent ceramic): $4,000
• Painting and baseboard. $5,000 - inside + outside
• Windows (10 windows): $10,000
• Light fixtures: $1,000
• 2 baths (small baths): 6,000
• doors: 1 main door, 2 exterior doors and 5 interior doors: $2,000
• Driveway reseal, roof cleaning and elastomeric coating (flat concrete tile): $3,000
• garden and sprinklers (they appear to be OK but need minor tuneup): $3,000 - 8500 sq lot. mainly re-sod and some shrubs.
• a/c: $2,500
• Appliances: $3,000
• permits and inspections: $1,000

we are looking for at 75 ARV hard money: $270K

Carrying cost for 6 months: 13,500 at 10% interest

Utilities for 6 months $1500.

TOTAL COST: $294,400

The sale:

Expected sale price: $360,000 (on the lower end)

Closing cost + commission: (5%) -  i am the listing agent: $18000

PROFIT: $46,100

Inputs welcomed.

Hard money lender welcomed.

I have been a Broker for over 14 years, live in the neighborhood, know the market. My partner has flipped 5 properties with success and has the team ready to go.

We are offering cash with 15-days closing, 10 day inspection.

THANKS.

@Russell Brazil is TOTALLY correct. These are the type or realtors that we need more of. - more than Realtors, guys like these are real Professionals!.

Flat Fee listing services with no broker representation are ONLY for experts (like most of BP Pros) - in my many years providing the service I have see horrible tragic stories. It is much better to get a smaller ROI that risk some pitfalls that loom around every corner. Listing agents will never disappear because of their knowledge and outstanding service most provide; nevertheless a very small portion of the population ... specially knowledgeable investors with a support team around them (including an attorney) should be OK with a Flat fee Listing service. In our practice we reject many people that want to use the Flat Fee service because we know they will run into trouble.

@Richard Recuset some states prohibit cash/back/credit to parties (even if disclosed) and some even prohibit Flat Fee or Limited Service listings - US DOJ has several lawsuits against several states for this. Check out: https://www.justice.gov/atr/competition-and-real-estate - you will see what states prohibit what.

Where do commissions come from? (they don't come from Paris like babies do)

BP members are mostly able to sell a property on their own, handle contract, consult an attorney, title company - we all have a support team already around us (or should be building one fast). What we need the most is get the property on the MLS without having to offer the entire 6% commission.

Use a Flat Fee listing service that charge $99 to get it on the MLS and syndicate it through the Internet - Zillow, Trulia, Realtor.com, Redfin, Movoto, HotPads, etc, etc, etc - (no other services provided); they post the max amount of pictures allowed; you have to offer a commission for buyer agent to get on the MLS and DIY from there on.

BTW, buyers' agents are who do most of the work all the time anyway (deal with mortgage bank, show the property, write the contracts, do the negotiation, deal with inspections, appraisals, surveyors, title company, etc - they deserve their commission) - You save at least half the commission. (traditionally 6%, but as Jay Hinrichs says: commissions are negotiable.

So now lets understand where commission come from and how they affect your bottom line. They have a HUGE impact on your ROI and particularly on your CASH ON CASH. Commissions come directly out of your equity but are calculated from the entire sale price .... huuuummm. Stp, breath deep (twice) and think about it - (I suggest you glance at the sky while you digest this and breath deep)

Example: an imaginary one, but will show the impact of commissions on bottom line. - a Flip.

The Acquisition:

Acquisition cost $100,000 (purchase price + closing costs)

Rehab: $25,000

ARV: $160,000 (assume this is the sale price)

Assumed you get investor to finance you 75% of project: ($125,000 x .75) = 93,750

Your equity (cash for "cash on cash" calculation): $31,250 (100000+25000-93750)

Now the sale:

Sale price = ARV $160,000

Sale commission 6% ($9,600) - traditional listing agent.

Other closing costs: ($2,500) (lets ignore the interest for this exercise)

Profit: $54,150  (160000-9600-2500-93750) 

Cash on Cash 73% (54150-31250)/31250 ---- VERY SWEET INDEED.

....BUT ASSUME YOU GO WITH A FLAT FEE LISTING SERVICE (FOR $99) AND OFFER 3.0% COMMISSION TO BUYER AGENT

Sale commission 3%+$99 ($4,899)

Profit: $58,851 - (160000-4899-2500-93750)

Cash on Cash 88% (58851-31250)/31250----- MUCH SWEETER

Your see how a small % change in the commission has an exponential effect on your Cash on Cash due to this simple fact: Commission come directly out of your equity while commissions are calculated on the entire sale price, which a large portions is leveraged by the loan. - a change in less than 3% in the commission impact your Cash on Cash by 15% - WOW! - Magic hat trick,

NOTE, the larger the leverage, the more exponential impact will the commission have on Cash on Cash.

Meditate about it ... run numbers and always use flat fee listing services ... it is worth for you to do the listing agents work and save a ton of money and make your CASH ON CASH ridiculously better. Bond with the buyer's agent and he will be a huge support - he wants his commission regardless of how much the other side os getting.

Need advice on how to use an effective Flat Fee service ... reach out please.

HI.

I am working on a potential deal. Need a good reputable contractor to come out and give us an analysis of the property. Will be a complete rehab (praying for the roof to be OK though). Depending on a rough estimate from contractor we will be able to make it work.

Hopefully Contractor has BP member reviews and recommendations ... and has VERY GOOD price. I need a guy with ideas, resourceful, with sense of aesthetics and that can suggest innovative ideas ... a hands-on guy that will be proud of final project.

Google for Andrew Garofalo. I haven't used it myself nut some customers have and they have been happy with him.