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As many of you know, I’m teaching a seminar the last weekend in March. Right after that, I’m heading to a “undisclosed city” for a whole week for a little experiment. ( Don’t worry, I won’t miss the conference calls)
This is a city where I don’t know any buyers, don’t have a title company lined up, I don’t even know my way around….. I’ll basically be starting from ground ZERO -just like some of you are now.
My objective is to do a few wholesale flips and get a few cash flow deals while I’m there. I really think I can do it. But we’ll soon find out.
I’m going to document EXACTLY what I do each and every day – including my thought process, make a few videos, and record calls with sellers, buyers and agent so you can hear me “making the deal”
For you, this will be the closest thing to being there.
Hopefully this will be a ROADMAP for you to use in your own town to get started on the fast track.
What do you think? Any suggestions?
Great idea, I look forward to hearing more about it. As someone starting to do some wholesale deals, this will be very helpful.
That sounds great Jackie. I’d love to do a wholesale deal, but I’m afraid that it just won’t work here (I’m sure you’ve heard that before). Here in Northern CA, the market has gotten so soft and prices have gone down so much, that I don’t see any flippers left to wholesale to. I’m looking forward to seeing how you do it.
That’s very encouraging to hear that it really can be done here. I’m in Sacramento and I had about given up on the idea of wholesaling, but I’d like to give it a try. I’ll be very interested to hear how your experiment works out. I know that finding the deals is the hard part, but the part that worries me the most is finding the buyers, because I’ve gotten stuck with houses that I couldn’t sell before. Of course, there isn’t really a risk with an option contract.
Announcing your “experiment” in advance takes confidence, but it also takes guts, since if there are any problems it leaves you open for all kinds of stuff. I’m sure that a lot of “gurus” would just secretly try it, and if it didn’t work out, you’d never hear anything about it. That’s if they had the guts to try it at all.
When you’re wholesaling, you should really line up your buyers FIRST.
Study my 4 step wholesale strategy in the Learning Center and you’ll have a lot more confidence moving forward.
YOU CAN DO THIS!
p.s. I’m NO Guru!
I’ll try just about anything… you wouldn’t believe the CRAZY deals I’ve gotten myself in to!!!! some worked out, some did not. But if you don’t try it, you’ll never learn and GROW! It’s good to always push yourself to try new things.Anonymous
My friend Mike Cantu who lives in Southern California is still wholesaling every week. He’ll be on an upcoming conference call to talk about wholesaling in a high priced area and where to find buyers.
I also know another investor in Sacramento who is wholesaling 4 – 5 houses a month.
So YES – it will work there!!!!!
Wholesale buyers have changed here in Dallas too. In Dallas, there are no rehabbers to sell to. But landlords are ready and willing to buy. If the deal is really good, you can always find a buyer. ( no marginal deals)
I’m leaving for the experiment tomorrow.
To get a head start, yesterday I looked at several ads on some of the FSBO ( for sale by owner) web sites. I was looking for signs of motivation in either the words in the ad or pictures of a vacant property.
It didn’t take long to find several of both!
I have an appointment at 1 on Friday to see a fsbo house. I will either buy it subject to the mortgage or do a master lease depending on what I see when I get there. The seller just wants debt relief. The payments are current.
If I buy subject to, the strategy will be to sell with a wrap and get $5,000 ++ for a down payment and a $300+ a month cashflow
If I master lease I can still get a $300 a month cash flow
I’ve also identified a few other areas that I think will have great potential but I won’t know for sure until I see the area. I’ll let you know what I find out.
I’ll post my progress over the next few days to let you know what happens.
p.s. — now how hard was that? you can do call fsbo’s tooAnonymous
one of the other deals was an investor who wants to dump 8 rental properties. He bought them 3 years ago and bascially owes what they are worth. He has $50 a month cash flow WHEN they are rented. But he has had constant tenant problems because he has terrible property managers. 3 of the 8 properties are vacant now. He just wants out.
This is an area of texas that has had a huge california invasion. ( california investors bought). Mostly homes less than 5 years old.
I checked the area where the properties are and there are 88 houses for rent. EIGHTY-EIGHT. Most are California addresses for the owners.
Would you want to get a marginal rental property in an area like this with that much competition?
not me….. passed on these too.
working on 6 house deal. Inherited. more details tomorrow….Anonymous
I looked at the FSBO property on Friday. It was built 3 years ago. The neighborhood is full of 3 year old brick boxes. I decided to pass. There are too many other rentals and seller financing deals in that area. I would be lucky to get $150 a month cash flow and my guess it it would take 2 months to find the right tenant/buyer. Just too skinny. My decision was based on an ad on craigslist for seller financing in that area and only got one call ALL WEEKEND from a guy with $2800 down. If my phone rang off the hook, I might have done the deal because I could get more down. Just too much risk I’m passing on this one I don’t want to make the seller’s problem my problem.
I’m working on two other deals here….more details later….
I had the opportunity to buy SIX rental properties all in a good area. They were inherited properties. The new owner does not want to be a landlord.
They are worth about $790,000 – $800,000 and will rent for $7800 at market rents.
I decided a multiple offer strategy would be best. See my offers below and see if you can guess which one he picked:
______ Offer #1
Price: $820,000 Lease with Option to Buy
Option payment: $12,000
Monthly Lease Payment: $5100
Terms: Balance of $808,000 to be paid in 5 years. Option will be secured by a Deed of Trust. .
Discussion: This offer would provide a monthly income that doesn?t reduce the principal balance you will be paid. Capital gains taxes are also deferred. If you needed more cash up front, I would be willing to prepay the monthly payments as discussed in Offer #2 Since I won?t have title to the properties, a simple eviction is all that is required if I don?t pay on time ( which I assure you will not happen)
______ Offer #2
Price: $ 720,000
Down payment: $35,000
Terms: Balance of $685,000 to be divided into two separate notes and deeds of trust fully secured by the properties. The 1st trust deed and note would be $342,500 payable at $3425.00 per month for the first 100 months. The 2nd trust deed and note would be for $342,500 with monthly payments beginning after the 1st trust deed and note is paid in full. Beginning in month 101, this note would also be payable at $3425 for 100 months.
Of course, I pay taxes and insurance
Discussion: This offer would give you a nice monthly income of $3425.00 for about 16 years. If you needed more cash at any time I could prepay the monthly payments over a period of time for a slight discount. Example— I prepay 6 months of payments ( $20,550) ) for a 10% discount. After 6 months elapsed, this could be done again. The 1st trust deed and note could also be sold any time you needed a large chunk of cash.
______ Offer #3
Price: $ 525,000
Terms: All cash
Discussion: When an all cash offer is given and there are virtually no contingencies, a discount is required.( ie. I take all the risk of the cost of repairs, lead based paint, asbestos, mold problems, termite and dry rot damage, cracked sewer lines, roof problems, settling or cracking foundations etc. etc. )
Other conditions ( all offers ) :
1. The offers are subject to approval of a general inspection of the property as well as an inspection paid for by the buyer. I can come to Austin with a 24 hour notice usually.
2. Property to be purchased in ? as is ? condition with no work or repairs required by the seller.
3. Seller to warrant the heating, cooling, electrical and plumbing to be in good working order and will disclose any known defects or problems with the property.
4. All window and floor coverings as well as any ceiling fans, light fixtures and appliances to remain with the property.
5. Buyer to pay for all sellers closing, escrow and title costs.
6. Closing can take place as soon as the title work is completed by Land American Title.
I suspect the all cash offer was too good to pass up.
Half a million unearned dollars (not accounting for taxes) would probably be pretty appealing, especially when these are properties are perceived as an unwelcome headache.
Hi there , Good Work , I would think offer #1 If it’s a single heir good mooney with a big payday
I’ld take it , ciao , Pat
My guess is that he took the second offer. No ownership, good money upfront, and some money every month for a long time. Some people may feel they would not know how to handle large sums and may prefer to get the money over time.
I wonder why you did not ask for a rent credit on the first offer, considering the fact that the price is above market and the lease is relatively short. Does he pay for all maintenance? I imagine your cashflow would be better than on the 2nd offer. Is that right?
By the way, are capital gain taxes a problem at all in this case? Wouldn’t he get a stepped up basis?
How did you find this deal?
I would think that he’ll pass on Offer #1 because he doesn’t want to be a landlord which he will basically still be with this agreement and he may have to take the properties back if for some reason you default.
There’s a huge discount on offer #3 of aprox. 265K so he may pass on that one also.
I say he chooses option #2. He still would have to foreclose in case of default but it seems a more secure type of deal than offer #1.
Those are great! Each has a big benefit to the seller. Personally I’d stay away from #2, however a retired person might look at it differently and could use that as comfortable monthly income for 20 yrs – despite no interest being earned on the $$$.
Choosing today for me, I’d opt for #1 and the landlord risks involved (if I get the properties back – I’d just resell them again & I really like selling with “lease options” anyway)
My guess is that they took #3 for the quick and easy money & no more worries….. isn’t that the American way these days????
Ok Jackie , Its been a month. Which did they choose. Best to you Pat.Anonymous
Well, I was waiting to get more responses but I guess it is not going to happen.
The owner accepted offer #2. Remember, he did not need cash and did not want cash because it would create a tax for him.
Since he did not want to be a landlord, the lease with option was not atrractive even though I offered $100k more.
BUt… here’s the kicker.
Even though the houses were not listed, the seller was working with an agent ( a family friend I gathered)
The agent said the seller would take seller financing. But when he saw my offers he said he did not think he would accept THOSE offers.
I asked him to present them anyway.
It took more than a week to hear back from him.
Originally, he told me the seller would accept Offer #2 – the seller financing with split notes. I wrote up the offers on an “official” texas real estate commission contract and faxed them over.
I waited and waited.
The agent would not return my calls.
Finally I talked to the seller and I found out that the real estate agent thought that was such a great deal that he got the seller to sell to HIM with the same terms INSTEAD.
So 5 days, 15 potential houses and I walked away empty handed.
Even though I didn’t get any deals, I sure did learn how to get my phone to ring instantly for deals.
Next time I try this I’ll know what NOT to do.
Guts but no glory this time.
Real estate agent(REA) friends such as that seller have give REAs such a good reputation – NOT!!! What a snake-in-the-grass!!! Hope you got the REA name so you know never to send business that direction.
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