Jeff Bowman
Active 2 months, 1 week agoForum Replies Created
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CARLTON,
It depends how you write the initial option agreement with the seller. You have to get your purchase price set with the option price for the seller. You then hold the HBS and essentially sell your contract to the new purchaser. A double close prevents the buyer-seller from meeting each other but all you need is the agreement of the closing attorney.
I’ve done several HBS and never had an issue with either the buyer or seller.
In my opinion…this market is not done by a long shot. There are so many Wall Street funds out there still snapping up inventory left and right like it’s nobody’s business. The Fed has injected trillions into economy and there’s no place for these funds to go except into assets like stocks and real estate. There might be some zigs and zags along the way but SFR has caught the eye of these hedge funds and they’re piling all into the space. Even should there be a “black swan” event again, Wall Street is not going anywhere from the big markets and slowly but surely will be expanding into all of them.
Update: Thanks for the feedback, folks. Sorry for the delay in updating. We’re going back and forth on this one but I have some hope it might work out. The wife of the owner really did not like the deal but the owner (name on title) seems to be really sick of landlording. I’ve left it for them give me a counter-offer. Jackie, you were probably right that I went too aggressive with the initial offer of .60 on the dollar but I don’t see how other investors would have liked the numbers without some sort of a discount. We’ll see if they circle back around…
Thanks, Jackie, I couldn’t agree more. Fortunately, it doesn’t look like I’ll have to come out of pocket to proceed but the landlord does need my assistance to get the place empty again. Hopefully, I can have the landlord see the light when we meet tomorrow to discuss the best way moving forward. One way or another, this does show the importance of tenant screening.
Jackie:
my thoughts were headed that direction… I’ll have to talk landlord into it. But, yes, they clearly can’t afford the rent as is.
Mike:
what I’m going to try and work out is a performance lease on both properties. On the condo, 50-50 split on any amount above PITI and with the duplex 50-50 split on any amount above $2K (no payments for 90 days). Landlord’s mother owns the duplex but has told her landlord to try out the short-term rental market with the property. The family owns five more properties but don’t manage them well so I’m going to try to be accommodating with this first opportunity to see where the others lead.Thanks to you both!
Thanks, Dee. You’re correct, the city and county where I live have their minions out and about to catch people using bandit signs. Also, other wholesalers will often trash competitor’ s signs. The YouTube video I linked to above shows how to build a sign stapler as you described. Tacking the signs high on the telephone pole combined with the innate laziness of code enforcers allowed me to get away with having a lot of signs up over the weekend. The Monday following I had a long day driving around and collecting all the signs but that was better than getting a fine. All’s well that ends well and I consider this a live seminar in guerrilla marketing 101.
Jackie,
Your manual was what helped bring the whole thing together but the experience of actually doing one did hammer home important lessons. To answer your questions:
What was the strike price on the property?
The strike price was the balance of the mortgage plus $5K. The house was abandoned and I needed to do an eviction to get empty and ready for sale.
What did you advertise if for?
$100K OBO
What did you sell it for? Was that close to market value?
The closing was for $175K. The house probably needed $30 K in rehab and renovation and ARV in the area is anywhere between $225K and $325K depending on how extensive is the rehab.
How many bidders?
Like I said, we had somewhere between 150-200 visitors and ended up with 75 bidders.All told, I probably had about $3 K of my money tied up in the property so the money I made to release my option was a phenomenal ROI!
Rob,
Thanks for the advice! I like that idea of telling them to show me chapter and verse. To be honest, nobody was really hassling me so much as pointing out that I should not use the word auction. Pleading ignorance seemed to work and, as you said, most of the realtors were more interested to see if I had another wholesale opportunity in the pipeline. Your tips here on the forum along with Jackie’s manual or my Bible to get through the sale and ultimate success. Best of luck with your next sale I hope I have the opportunity to share another soon.
Don, thanks for the heads up. I think you can charge prepayment penalty in my state bill check.
Jackie,
I’m not sure how far along the foreclosure process these people are. So I might have to make a payment in order to get them current: $10K. Call that option price. Hopefully, I have more time.
As I said before, 3/2 SFR: Under contract for $70K. ARV $225K-$250K; Switch option price to remaining balance: $65K.
We sign option agreement, notarized and recorded between seller and my LLC.
WD conveyed to land trust. Beneficiary: my LLC and seller? I’m not making a purchase yet.
Conduct HBS for down payment. Selling price $175K +/- Down payment takes care of remaining liens. Any extra I keep.
Here’s what I don’t understand. All I have is the option. What happens to the deed at that point? regardless of the investor, they’re still going to need at least 90 and probably 180-200 days to get house renovated. The down payment won’t cover the remaining balance on the original mortgage. Are we signing a contract for deed at the HBS? Would a flipper/renovator have trouble getting financing with only a CFD?
Any insights appreciated.
Jeff
Thanks, Jackie. I’ve had similar thoughts. You’re definitely correct about that being risk-free. I’m fairly comfortable with the risk level despite no inspection since I think I can sell this no matter what with an HBS.
I guess my thoughts are that holding onto this for a few years and getting cash flows from rents and then selling to a retail or investor buyer would be preferable to getting cash right now.
Would you or anyone else be willing to share their philosophy on when you flip one versus keeping it in the portfolio? Granted, I haven’t seen the inside yet but I still think the worst case is $25-30 K on the rehab but the location of the property can’t be beat (good schools, great highway access, jobs, etc.) along with good potential appreciation. As a younger investor getting started, TTT doesn’t scare me that much but the seasoned investors here and elsewhere all seem to transition to owner financing sales and all the other tactics of avoiding being a landlord.
Thanks for the help,
JeffThanks, Don. I agree about the inspection but the issue is that it was abandoned by a family member who has an expired lien against the property in some sort of family squabble. I have go file for a writ of possession and get his stuff out first. Good news is I’ve got a ten-page appraisal report from an insurance company on the property from five years ago that gives me the details on what to expect.
