Posted by Del-Ohio on January 23, 2004 at 22:41:15:
Using MLS to your advantage.
Look for properties that have evidence of distressed owners, or distressed property, listings that are expired or about to expire and WRITE OFFERS.
Del-Ohio
Wholesaling logic… - Posted by Eric
Posted by Eric on January 21, 2004 at 20:20:35:
Hi All-
Common advice is to start investing in RE by wholesaling. Experienced investors also say not to start with foreclosures. Many people also advise to start with individual sellers instead of Banks and the MLS because there is less “red tape”. So basically that leaves us with needing to find an individual seller that is motivated enough to sell us their property for 50 cents on the dollar, and they can not be in foreclosure. This seems to be pretty slim pickings. A desperate seller who has at least 50% equity they are willing to throw away! Is my logic right here? If yes, are bandit signs and flyers the best way to start marketing because they are low cost? I can see myself aggresivly marketing for a long time this way and not finding a seller that fits the above profile. Any advise and words of wisdom are welcome.
-Eric
PS: Twyford and restrepo ADVISE to start with foreclosures. What gives?
Re: Wholesaling logic… - Posted by jasonrei
Posted by jasonrei on January 23, 2004 at 09:21:24:
I think dealing with folks in foreclosure is an excellent place for new investors to start. That’s where I started. “Stay away from foreclosures” usually means foreclosure auctions. Preforeclosure is good, post-foreclosure is good though pickings are slim, especially if your intent is to wholesale.
As for targeting folks willing to throw away 50% equity, I don’t think that’s the goal. I’m not sure what my average deal is, but here’s something close:
$30k buy
Will retail for $65k
Repairs= $12k
Takes me 5 months to sell
Holding costs= $3750 ($2200 interest, $700 taxes, $350 insurance, $500 utilities and maintenance). If I use hard money I’d pay another $2000.
Sales costs= $5000 ($2200 agt comm/MLS list, $1300 buyers cc, $1000 my cc, $500 addtl repairs)
Total costs= $20750 to $22750
My profit= $12k roughly
Now, I bought at less than 50% of ARV, but the seller’s house certainly wasn’t worth $65000. In reality, they sold to me at right near 100% of fair market value. Maybe they coulda gotten more from another buyer, maybe they coulda sprung for repairs and could’ve shouldered the burden of a rehab and sale. My bet is I can get a rehab done for several thousand less than they could’ve, in which case I paid MORE than fair market value from their perspective.
Finally, you say you can see yourself aggressively marketing for a long period of time and not finding a seller that fits your profile. Honestly I don’t see that happening. I don’t know what aggressively marketing is to you, but I would consider a moderately aggressive one year marketing campaign to be putting out hundreds of bandit signs, several thousand door hangers, tens of thousands of mailouts, researching dozens of vacant homes every month, some billboards, periodical advertising, etc.
My partner and I SUK at marketing. Really. We suk and still do 3-6 deals a month. We do make a lot of calls and we network, but we have yet to spend more than a grand a month in advertising. That’s pathetic for full-time rehabbers that want to do a lot of deals.
Re: Wholesaling logic… - Posted by B.L.Renfrow
Posted by B.L.Renfrow on January 22, 2004 at 11:33:03:
Del pretty well covered all the bases, but as far as foreclosures, I think you are mixing apples and oranges. The advice for newbies is to stay away from foreclosure AUCTIONS, not necessarily everything to do with foreclosures. Of course, as with any aspect of RE investing you should at least have a basic working knowledge of what you’re doing before you are out there meeting with potential sellers. There’s nothing wrong with working the foreclosure and preforeclosure market, but you do need enough knowledge so that sellers don’t end up worse off because of your involvement than they were before.
Brian (NY)
Re: Wholesaling logic… - Posted by Del-Ohio
Posted by Del-Ohio on January 21, 2004 at 20:58:42:
You will find in real-estate that a lot of people play very different gamee. The important thing is that you learn how to play one and become good at it. If it doesnt work in your area after giving it some very serious effort try a different technique.
A few comments regarding specific things you addressed.
Purchasing 50 cents on the dollar, this is not necessary. In our area, if you can find a 100,000 house, for 80,000 (thats a 20% discount)that does not need any significant work, you could lock it up, make 2,000-5,000 and flip it to an investor tomorrow.
If you are buying 40,000 houses, yes you will probably need to find them for 50 cents on the dollar. Most investors will want to make 15,000-30,000 on a property no matter if they pay 30,000 or 90,000. But the discount needed is a lot less on the 100,000 house.
In our area, I have found the MLS to be a very good and consistent source of deals, most of ours are purchased through mls. As far red-tape with a Realtor, thousands of properties are sold every week through realtors, their system of paper work is pretty cut and dried, “red tape” is minimal.
The other way to view things, is not so much at what discount can you find properties, but, can you profit by fixing it up, increasing the value and profiting from it. Or in your case, getting a contract on it, assigning the contract for money and still have enough room for the rehabber to make money.
Cant advise you on bandit signs, we dont use them. We WRITE OFFERS through mls and buy a property, last year a little less than one every two weeks.
I wish you the best in your venture
Del-Ohio
Re: Wholesaling logic… - Posted by Eric
Posted by Eric on January 22, 2004 at 17:38:09:
Thank you Del. Very informative post. Can you give us a little more information on how you make your offers through the MLS? Do you just ask your realtor for the usual: handyman specials, foreclosures, expired listings, etc… and then follow a formula (depending on the situation) and simply make tons of offers? Most are rejected but you get the keepers (Steve Cook’s style)?
I also live in an area where I think the MLS may be a great tool since the area is not saturated with investors. I live in Omaha, NE.
Any more details you give us would be greatly appreciated. Thank you. -Eric
Re: Wholesaling logic… - Posted by Marcus
Posted by Marcus on January 22, 2004 at 08:28:36:
Del, thanks for the info. Got one follow-up: Given that you use the MLS to make offers, do you see an advantage of becoming a realtor first? Or does this tie your hands with legal constraints on disclosure and all that? I don’t know any realtors, and am a “newbie.” How do I gain access to the MLS system? Many thanks.
Marcus
Thanks Del - Posted by Christopher-FL
Posted by Christopher-FL on January 21, 2004 at 21:11:58:
Del-
Newbie here that just wanted to say thanks for your reply to this question (though it wasn’t mine). It was a very useful reply. Mind if I ask what kind of properties you focus on through the MLS? I’m getting ready to talk to a realtor friend about pulling some MLS info for me but I need a plan of action first.
Thanks,
Christopher
FL
Re: Wholesaling logic… - Posted by Del-Ohio
Posted by Del-Ohio on January 23, 2004 at 22:56:00:
In our area and at least four surrounding counties we have something called “HOMES” magazines, I pick one of these up go to the coffee shop buy a Mocha, sit down and circle all the properties that look distressed (over grown lawns ion photo, damage to property) or have evidence of distressed or motivated seller (ie: handyman special, fixer-upper, needs TLC, bank owned, move right in etc).
I then select the four that look the best to me call the realtor and ask him for the sheets on these properties, and comps for each of the properties, drive the neighborhood and hope they are in good neighborhoods. If I like what I see I call the realtor to show me those properties. We take a tour and then I write offers.
I dont do large volumes of blanket offers to me it seems like a waste of time, I like to do things where I have a pretty high certainty of success. If you select them right, your odds get pretty good after a while. In the beginning we probabloy got one house per 10 offers, now its more like one in three.
We have not worked the expired listings yet, it sounds like a good strategy and one we will try when we need another “source” of leads. Right now we have more deals then we have time. Last year we did this part time, and did a little less than two per month. Both my partner and I have sold our businesses to do this full time this year. Our goal is to do one per week.
One of the other things we do, on bank owned properties we write offers and then we keep submitting the same offer every three weeks until the house sells or until they take our offer. We purchased four bank owned properties last year.
Wish you all the best.
Hope this helps
Del-Ohio
Re: Wholesaling logic… - Posted by Del-Ohio
Posted by Del-Ohio on January 23, 2004 at 22:38:26:
The way to gain access to the mls. Find a property that looks interesting call the listing agent let him know you are interested in theat property and then ask him to for SOLD comps. I have always found Realtors more than happy to run comps on any property I was interested in. Now if you keep asking and askin for more and more comps and you dont buy anything, the realtor will become less and less motivated to providem to you. However you can always go to another realtor who has another property listed that you may be interested in.
I see some advantages to being a Realtor, the main one being, you get part of the comission for every home you “sell” to yourself, thus you make a little extra on each house. If you then are the listing agent for your property it also cut your cost of selling, assuming you are selling via mls, so far we have sold all of ours quite rapidly FSBO.
The other advantage is the access to mls. But, if you are looking to buy a property is is easy to get comps from the listing realtor, or what ever realtor you use as your buyers agent.
When I look at upcoming sheriff sale properties, I have a friend who is a realtor run comps for me, I pay her $2.00 for any comps I need. $1.00 for the “short version”.
Hope this helps
Del-Ohio
Re: Wholesaling logic… - Posted by Ryan
Posted by Ryan on January 22, 2004 at 10:20:13:
I would also like to know how to use the MLS to my advantage. Although i am not a realtor some of my investor friends who are also not realtors have the MLS. It seems like they are finding plenty of deals.
Any advice is appreciated.
Re: Thanks Del - Posted by Del-Ohio
Posted by Del-Ohio on January 23, 2004 at 23:02:12:
Our strategy is anything that can make us 20,000 per 100,000 purchase price. Minimum we want to make on any property is 15,000.
We have done a mobile home, a few single families, a church, a four plex, five plex etc. There is no typical property, we just look for good deals.
Or more accurately, we create good deals.
Plan of action in my opinion if you are using mls, find a target property, or a couple properties you are interested in have the realtor pull the sheet on subject property and then ask for SOLD comps. Check all the comparble properties out tour the subject property and then write an offer.
Del-Ohio