Posted by Bud Branstetter on March 11, 1999 at 09:57:09:
A weasel clause allows you to negate a contract without penalty. In the HUD bids it is very difficult to get out without losing your earnest money(typical 1k).
Would you flip this Wholesale or Retail?? - Posted by Duane
Posted by Duane on March 10, 1999 at 22:50:13:
I was just informed that my HUD bid was accepted today. A 2 bd/1 ba foreclosure in a fairly stable area, although a bit on the low income side. Several other homes for sale on this city street. Comps come in around 39k - 42k. HUD just lowered the listing bid of this house from 20k to 18k last week (so I had to wait a week because of owner-occupant bid week). I also found out through their web site that 3 bids were rejected in mid February for 12k, 14k and 15k.
My investor bid of $16,200, with HUD paying up to 5% closing cost and the 6% commission was accepted today, which resulted in a net bid of $14,400. Anyway, this home atleast has a breaker box and was not listed with any particular repair codes. It needs new kitchen (really there’s just one set of floor cabinets in there), new bath, hardwood floors were painted gray, new windows on bottom floor and new front and back doors. Also, the siding is an old shingle like material, so I’m figuring on vinyl siding.
I am ROUGHLY estimating $10k would do a lot for this place, but I am wondering if I should not worry about it and flip it wholesale. I plan on this being a flip no matter what, unless I just can’t sell it. Thanks for any insight!
Re: Would you flip this Wholesale or Retail?? - Posted by Bud Branstetter
Posted by Bud Branstetter on March 11, 1999 at 13:41:42:
If you ask 20K cash from me I would look at it as follows: 10K fixup to have 30K invested to wait for a buyer at 42K. Not a lot of room but possible. If I sold with 4k down and sold the 80% first for 33K I would make (3+4)7K and the second note. In reality 2K down is more realistic but I would also get you to sell at 18K.
Unless the siding is really bad a coat of paint may work. Is central HVAC required? Do you have contractors lined up? Have you done it before?
Re: Would you flip this Wholesale or Retail?? - Posted by Terry (Dallas)
Posted by Terry (Dallas) on March 11, 1999 at 09:54:25:
If you cannot flip it for whatever reason you might put a sign up in the yard or in the paper that say Handyman special or fire sale take this off of my hands and see what happens.
weasle clauses are clauses that allow you to back out if needed like Subjeact to partners approval or buyer has 15 days to inspect and approve the property.
If you flip it be prepared to have a profit price in mind and stick with it. Jackie has written several articles on this as have others. Take a look around.
Great Luck
Terry
Re: Would you flip this Wholesale or Retail?? - Posted by Bob-Tx
Posted by Bob-Tx on March 11, 1999 at 08:52:02:
Congratulations on a good buy!!
Would this be your first rehab? If so, I would recomend a wholesale flip. It just sounds like a major rehab for your first.
Another consideration is the process of cashing out of a rehab…How are you paying for this deal? Do you have the $10k (and be warned, if it looks like $10k to you it will probably run over that when you take into account holding costs, utilities, insurance, etc.) for the rehab? Do you have an exit strategy if you rehab it? These are just a few of the considerations.
Another thing - this rehab would not have as much room in it as one might think. If your exit strategy would be to sell it owner financed it is very tight.
I don’t mean to be presumptuous, but if you have not done rehabs before, I suggest a solid flip…market it to your investor contacts, pick up a nice little check at closing and go get some more. Best of Fortunes,
Bob
Re: Would you flip this Wholesale or Retail?? - Posted by SCook85
Posted by SCook85 on March 11, 1999 at 08:14:34:
I’m sorry but I’ve never considered anything that I took title to and rehabbed a flip. Flipping is a very quick process. Rehabbing is not.
A retail flip is a process in which you flip a home to a home owner for top dollar without doing any work to it.
A wholesale flip is a process in which you flip a home to a rehabber for a wholesale price without doing any work to the home.
The home you are reffering to sounds like a candidate for a wholesale flip. It sounds like it needs to much work for you to flip to a homeowner.
I would seek an all cash buyer, but be prepared to acquire the home and rehab it. Did you have weasal clauses in your HUD contract?
SCook85
Re: Would you flip this Wholesale or Retail?? - Posted by Duane
Posted by Duane on March 11, 1999 at 17:15:41:
I half way responded to your post below but, there is no c/a, the siding really does need to be covered over. I figure the siding will be the most expensive and I would have someone else do this. Most of the stuff inside I could do.
Re: Would you flip this Wholesale or Retail?? - Posted by Barbara (AZ)
Posted by Barbara (AZ) on March 11, 1999 at 10:32:01:
Does HUD let you do a double closing?
Re: Would you flip this Wholesale or Retail?? - Posted by Duane
Posted by Duane on March 11, 1999 at 16:46:40:
There are no clauses in this contract. I was told that HUD would not negotiate these points, that they are selling ‘as is’ and that they wouldn’t do any repairs anyway. I am aware of the clauses that you are referring to, I just didn’t think they were acceptable in this situation.
So, I realize that I am definitely closing on this one, I have not done rehabs before, but I have done that sort of work before on my parents home. My original plan was this: Try to flip wholesale, (since HUD does not allow assignments this means a simultaneous close, still a flip). However, I actually thought I had left myself enough room to make a quick $5k, with my investor making $10k. I don’t see why they would not be able to sell outright after the rehab (no reason now to create a note and have to discount it). In the event that I could not flip, I would have to close and start the rehab, then try to sell as a handy-man special. If I still can’t sell, I could always rent it.
So I guess my real question is, would you flip this wholesale or rehab it? Thanks.
Re: Would you flip this Wholesale or Retail?? - Posted by Bob
Posted by Bob on March 11, 1999 at 09:31:36:
Steve, What are weasal clauses?
Re: Would you flip this Wholesale or Retail?? - Posted by Steve H.
Posted by Steve H. on March 11, 1999 at 18:15:06:
That’s a question you’ll have to decide for yourself. I just purchase a house that took $10,000 in rehab expense. But it was close to the end of the year and I needed some tax write-offs. What I got was a house 8 weeks later that I was able to rent with a $300 per month positive cash flow. There is a lot of hands on management needed here. So be prepared to spend some time getting to the point of a rental if you decide not to flip.
Regards,
Steve H.
Re: Would you flip this Wholesale or Retail?? - Posted by SCook85
Posted by SCook85 on March 11, 1999 at 21:26:00:
Weasal clauses are contingencies placed in the contract that are there for the purposes of you backing out of a deal. Ex: Subject to inspection by partner.
SCook85