Newbie Rehab Question - Posted by Matt

Posted by rehab4life on February 24, 2004 at 18:53:08:

GL= Good Luck

I am in one of the most competitive investor markets in the country. I do like doing my own research and would no matter what the size of my company.

I do need new leads and I appreciate working with others who might have information, but the problem still exists for me.

Paying 10% of the expected profits is not a smart business decision for me. I dont know of many people who can give away those kind of margins/numbers and expect to stay working.

Bird Dogs for some reason attended a seminar or read some book etc and think they are due a ton of money. To me they arent unless they are willing to take some of the risk involved…meaning a partial financial involvment or somthing more than tying up a contract and expecting a payday.

Some will pay that, in my opinion those people are over paying for a minimal service. The real value is in finding a good price and keeping a good budget. What loses a profit on a deal is over shooting expected costs and not forcasting the proper selling price.

I consider the views that bird dogs get concerning 3k, 2.5k etc for merely tying up a contract came from a guru trying to sell a book or a seminar. You cant expect to make a working profit when you let it out the window so easily.

2.5k to a bird dog is 2.5k out of my working capital and is not an acceptable business practice for me and I will never pay it unless the deal were to net me 50k or so. Keeping ratios in line is key to making this less recreational and more of a business…

Newbie Rehab Question - Posted by Matt

Posted by Matt on February 24, 2004 at 09:54:50:

Newbie is looking to do a Rehab Project. Myself and my partner are just getting into RE investing the Rehabbing way…
A bird dog found a place that is vacant and is in need of repair. Here are the numbers:
ARV: 75,000 (conservative from comps))
Estimated Repairs: 20,000 Holding/Closing Costs: $10,000 (over estimate)
Profit: $20,000
Max offer: $25,000
Price with finder’s fee: $22,500
Now, these seems like a good deal here - is there anything I am overlooking??
How do I get started? I want to take this off the bird dogs hands - how do I go about this?
I want to make sure of his comps, estimated repairs, etc. What is the order in which I should go about getting things done?
Please help - Time Sensitive…
Thank you!
This is quite Intimidating and exciting all at the same time…

Matt

Re: Newbie Rehab Question - Posted by nick

Posted by nick on February 24, 2004 at 12:53:06:

I agree with Charles about not relying on the bird dogs numbers. Also I’m just curious what is the asking price?

Your Own Due Diligence - Posted by Charles

Posted by Charles on February 24, 2004 at 11:33:48:

The deal looks good but…
It seems you’re going entirely on what the finder is telling you. I wouldn’t touch this unless I did my own investigation of market value and fix-up costs. After all, the finder is far from being a completely unbiased, disinterested party. Take the time to do your own checking.

Best Wishes,
Charles

P.S. You didn’t mention how you’re going to fund the deal. Do you have funding arrangements?

Re: Newbie Rehab Question - Posted by rehabber4life

Posted by rehabber4life on February 24, 2004 at 12:57:56:

Giving the bird dog 10% of your profits with ZERO risk sounds quite unwise to me.

I would give the bird dog 500 bucks or let them do it themselves.

Do your own research as everyone here has stated, over estimate the expenses, be sure to add in RE comissions if applicable, HOLDING costs and dont buckle on your ratios.

Too many good deals around to settle for less.

But first off, that Bird Dog needs to have his wings trimmed, 2500 bucks???

NO way!

Re: Newbie Rehab Question - Posted by jorge

Posted by jorge on February 24, 2004 at 13:52:49:

I am curious… you wouldn’t invest $2500 to make 20k?.. so you would prefer nothing…now…in hopes of something better? I don’t get it… I am new as well… I am trying to see your rationale… Can you explain?
thanks,

Jorge

Re: Newbie Rehab Question - Posted by Rich Hyams

Posted by Rich Hyams on February 24, 2004 at 13:04:38:

If I got that job under contract, I wouldn’t pass it on for less than 4k, if someone brought it to me, I would give them 2.5k easy.It depends on your area and how competitive it is.

Re: Newbie Rehab Question - Posted by rehabber4life

Posted by rehabber4life on February 24, 2004 at 14:02:45:

Your argument doesnt make sense to me.

If someone had ZERO resources or had unlimited money and didnt want to search, then yes you are correct. I am not a person with unlimited funds and I do research myself.

I would not pay a bird dog 2500 bucks for a potential 20k profit (which is unverified and didnt include holding costs etc) when the bird dog has no risk in the deal.

Would I pay that kind of money if I were the figure head and was so big that it didnt really matter? Still no…but some would.

I do my own searching, I find plenty of deals to not be forced to pay a bird dog.

Any bird dog that would have the b@lls to ask for that kind of return would not do business with me. I dealt with a bird dog a few months ago (wholesaler…bird dog, same thing) and I ferreted out that he wanted 2k on the deal, I said thanks and no thanks…then walked on to my next deal.

Why pay more than what you have to? I could use the same argument about being overcharged for carpet work, real estate comissions, marketing costs. The point is when did it become ok to overpay someone for a service when they have NO risk in the transaction?

Makes no sense to me. If a bird dog wants that kind of return, the get the financing, roll up their sleeves and do the work themselves and take some risk.

FWIW

Re: Newbie Rehab Question - Posted by rehabber4life

Posted by rehabber4life on February 24, 2004 at 13:33:08:

There is no way I would pay a bird dog 10% of my expected profit. What risk are they taking, what expense are they incurring?

I think there are way too many decent deals out there to spend that kind of dough on someone who only did some marketing, locked up a contract for a minimal ammt and carries NO risk in the deal.

Anything more than 500 bucks is a bad mistake. Sorry bird dogs, but I will not pay that kind of sum unless they take risk along with me.

Plenty of people will, but I will not be one of those people.

Re: Newbie Rehab Question - Posted by Jorge

Posted by Jorge on February 24, 2004 at 14:29:45:

Ok…I guess if you are always busy and have no shortage of deals… then I would agree…I am just getting started so I don’t have an overflow of deals… and I too am looking to wholesale a few deals before rolling up my sleeves…
so we can agree to disagree…agreably…:slight_smile: (I forget where I stole that saying…)

jorge

Re: Newbie Rehab Question - Posted by rehabber4life

Posted by rehabber4life on February 24, 2004 at 14:39:32:

I can agree to that.

lol

I would equate what you are trying to do with an example of the property I am currently selling (if you dont mind an example)

I am trying to sell a nice property in a so-so area for 159k…why dont I try and sell it for 200k and make a killing? Why? It doesnt make sense and I like to deal fairly with the people who are buying from me, and pricing it correctly will help move the property.

Any investor will know how much you the wholesaler are making, or if they dont know they should ask. It is all about the risk/reward ratio, and as a wholesaler you assume little risk.

The reward comes when you buy the property, make those interest payments, arrange for contractors, keep a timeline, pay property taxes and utilities while never knowing if you are going to make a killing or get out with a loss.

That is risk, and that deserves reward. Putting out “I Buy Houses” bandit signs and place ads in the paper, researching through expired real estate listings etc and making offers including “and/or assigns” with 500 down, that isnt risk.

GL

Re: Newbie Rehab Question - Posted by Rich Hyams

Posted by Rich Hyams on February 24, 2004 at 16:33:03:

I still say that it has to do with your area. $2,500 is low.

GL could be in a not so competitive area, likes to do his own research, has been cultivating lead generators for years and no longer needs new leads, I am not sure, but once I confirmed, actually, I don’t even ask for or ignore the numbers he gives, but if my research came up with those numbers, I would pay 2.5k easy and would ask for more if I was flipping it to someone else.