All Forum Posts by: Robert Steele

Originally posted by Mike M:

As for this deal, sounds more like you should offer in the range of thirty five cents on the dollar, there will be some unforeseen damage.

Just the land is worth 25 cents on the dollar so I don't think they'll take 35 given the house is structurally sound. I am making sure I leave a _wide_ margin for unforeseen damage. As others have said, if the number work ...

Originally posted by Vikram C.:

Robert, when you buy a property with an HML, do you present your offer as a cash offer? Is that how you get it at a lower price than a financed offer? Does the seller ever complain when you later get it financed or do they not really care as long as they get paid on time and there is no appraisal contingency?

Vikram, This is a cash only offer. I have never had to present a cash offer before. My hard money lender has now decided that they are going to be a player in this deal. They will give me a pre-qual letter and my Realtor seems to think that will be enough.

I have the cash if needed but I'd rather not put in my own money. From some of the comments it seems that either I get the listing agents approval to use hard money, or switch from a cash offer to financing with no weasel clause, or pay cash and refi with hard money later + costs. I like the second choice. I am figuring that from their point of view they only care that you can close the deal and as quickly as cash? That and its been over 4 months on the market.

Originally posted by J Scott:

Originally posted by Robert Steele:

I spoke to the plumbing company I use on my jobs and they said anywhere between $4K and $10K with $6K being most likely so I will be budgeting for $10K.

That's a VERY large range, even for having to dig up foundation and replace drain pipes...

Why weren't they able to give you a more accurate estimate? Perhaps try a couple more plumbing companies...

They haven't been out there to inspect it in person. I just got a ball park figure. I have used them before and I trust them.

I spoke to the plumbing company I use on my jobs and they said anywhere between $4K and $10K with $6K being most likely so I will be budgeting for $10K.

I have done foundations, roofs, slab leaks and other structural problems but never anything like this. I take that back, a slab leak is similar.

Has anyone seen this kind of vandalism done before? I have only read about it and now you have too.

I actually am not a flipper. I am a buy and hold landlord but I often buy them very distressed. I find that getting a hard money loan and then refinancing allows me to get into a property with a lot less money down.

Yes everything else structurally is fine. Mainly cosmetic, some water damage/mold, electrical and the plumbing problems I described. Bank is asking 64 cents on the dollar. I am planning to offer 46.

I am definitely over estimating on my rehab budget. From previous experience we joke that one should double the expenses and half the profit. If it still looks like a good deal - take it.

I found a deal that I wanted to run by everyone here. A deal so scary my hard money lender needs to think twice about financing me. This wouldn't be the first time. Last time I scared the hell out of him with a mold property. So much so he almost backed out at the last minute until I educated him with legal precedents, health codes and state law.

So here's the deal; a 4bdrm SFH built in 2004 in nice neighborhood. Its a foreclosure and the previous owner vandalized the place. Besides the typical stuff, everything has been stripped including the kitchen sink. The electrical main has been severed. But the real kicker is they took off all the toilets and poured cement down the sewer lines and the shower & bath drain lines. This is what scares him.

I initially passed it over when I first saw it but I could not get it out my head and kept mulling it over for a few days until I got the courage up about doing some due diligence and putting together an offer. I typically run towards rehabs that most investors run away from (like my last mold remediation job). Am I crazy or do I see dollars where everyone else sees headaches. Would you do this deal for 100%+ ROI?

Perhaps looking at the Internal Rate of Return would be a better metric than ROI.

ROI is pretty meaningless anyway. I bought a property with $4K down last year. For the year it has made $2,400. That is a pretty *****'n ROI but I don't consider it as valued as another property that I have $40K into but made $7,200.

To further compound the point, back in the 0% down days it was very easy to make infinite ROI even though your cash flow might have been barely above break even. :)

Originally posted by Tom K:

Rent is late on the 5th and notice is posted on the 6th to start the eviction proceeding. No excuses - I don't care about your disability, pregnancy, or any other issue.

These kind of "tough guy" landlord comments about having a hair trigger on filing eviction is not always in your best interest. For instance:

* You are going to have pissed off tenants who will more than likely trash the place on the way out (good luck collecting on a judgement).

* It will take at minimum the better part of a month to get them out (another months vacancy).

* You will then probably have another months vacancy doing make ready and getting it leased out.

Granted that sometimes the hair trigger eviction is warranted. Particular if you have had problems with the tenants in question before. A lot of time I have a sense whether they are sincere or just another of the lost in the mail crowd.

The upside is if they are legitimate and have hit a rare rough spot then you can instead work with them and avoid all that vacancy. (Vacancy kills cash flow deader than anything).

For instance I have had a number of occasions where good tenants could not pay. The upside was that they were communicative (nothing pisses me off more than tenants who won't return calls or mail). They didn't write me a rubber check. They paid partial rent and _committed_ on a date 1-2 weeks later when the balance (including late fees) would be paid. If they had missed that date I would have filed eviction.

I have given this this concession to one tenant twice. They have been leasing now for 4 years. I have also given this concession to a second tenant. They have been leasing now for 2 years. If I had blindly adopted the tough guy eviction mentality I would have missed out on all those years of hassle free tenants and zero vacancy.

Originally posted by Jesse R:

Texas is definitely up there. The interest rate is 25% irregardless if it's redeemed the next day. Plus the interest is paid on the purchase price of the tax deed, not on the original tax lien amount.

Yep. Texas is the best in the country for tax sales. If the property was not the primary residence of the owner then the redemption period is 6 months and you get a flat 25% if it is redeemed at _anytime_ within that period. Primary residence is 2 years and if redeemed anytime after 6 months you get a flat 50%.

Not only is that on the purchase amount as mentioned but it includes any maintenance you do like keeping the yard mowed or fixing a leaky roof.

Originally posted by Peter Faul:

Robert-
When the buyer requestst the VA to contribute towards closing.... I'm assuming they jsut roll this up into the financing?
Also... When you mention how far below list price you offer .. wouldn't the NET to VA matter more since thats what they're looking at?

Sure. Just like with any offer you can play around with the numbers all you want but what matters to the seller in the end is the net money received.

So when I said 3-6% below asking price I ment net.