Real Estate Investing Training - Creative Deal Structuring

[Robtheprince]

There are two plots of land adjacent to a each other that haven't been developed in over 20 years. There are class C houses on either side of them with the owner occupying one of those houses. After checking zoning, it is zoned for 7-8 unit apt. The property appraisers site values each plot at 19K. I want to hopefully acquire each plot at 10K maximum and wholesale at 25K or 30K for a 5K-10K profit. With the zoning I think it would be a steal for a potential investor. What do you think?

[localmentor]

@Robtheprince  - great question...issue is would someone want to build a NEW multi-unit in a 20+ year old C area? In my locale, probably not. A friend of mine lives in Pennsylvania and it's common to put modular 4-plexes (possibly an 8 plex if they make such a thing) on lots like that. I doubt it's going to be as easy as just getting a contract and assigning it, you need to research the viability of doing something like that, what the costs are, and project a return for ...

[localmentor]

@localmentor ...an investor who'd consider such a deal. Sell the Dream, Sell the Vision of what it could be with HARD data to back it up....or do the deal yourself and go through the process of doing that and raise capital via construction financing or private financing - if you go private - figure a high rate of return for an investor who'd put in the cash and keep the rest as your slice of the pie. You'll learn a lot going through the process. Let me know how it turns out!

[blube444]

Hey michael. I have recently purchaced my first investment property through a tax deed sale. It's in the city of Saint Louis. I paid $5k for it. It needs a total rehab. 954 sq ft.

One thing I really like about this area is that there are tons of workers who are laid off and looking for any work.

I would like to rehab the property, rent it out, and then refinance and pull out the equity. How does that sound?

[localmentor]

@blube444 - I'd refi your rehab money and purchase price out, but I would NOT refi equity out.

Congrats on your first deal!

[REstatebuyersClub1]

Seller will hold mortgage w/ 100,000 up front asking price is 245,000 but I got him down to 225,000

Comps are 190 to 400,000 its a beach area. This is a legal 2 family currently being rented for 1400.00 back unit is being rented as storage only for like 900.00

Taxes are around 2500.00 currently tenants do not want to move would like to buy the property but dont have the 100,000

I will also be selling the Note once the Seller takes the second mortgage position. This Home is in NJ.

[localmentor]

Seller WANTS 100k, what does he need?

Comps of 190k to 400k are NOT Comps. You absolutely NEED to have a system of getting accurate comps - to get within 5-10k of value in that pricepoint to understand how to put the deal together.

Only way to get a big chunk of cash to the seller up front without it coming from YOU is using subordination - get the seller to subordinate behind a new first (Hard Money or Private Money) - BUT you have to determine what the House will afford for a payment (ie.rent

[localmentor]

if, for example the house would rent for 1500, then you have 1500 - less min. acceptable cash flow to support debt/taxes/insurance. If you borrow 1st position money to give the seller, you have to calculate that payment into what's left over you can pay the seller on the carry back.

Get some accurate comps, though!

[REstatebuyersClub1]

Homes in that area of the beach are currently selling from 190, to 400,000. I live a few mins away and the home across the street from me is listed at 400,000.00

what type of comps are necessary to est value?

[REstatebuyersClub1]

oh Yes Seller needs 100,000 cash because he needs to pay off debt.

[rhagel1]

Hi, Michael,

3 BR, 2 Ba, Modular

72K owed, Value 105-120K ARV

5K Repairs incl paint, some carpet.

What would you suggest??

[localmentor]

In my market, I run from modulars. They depreciate and the days on market are insanely LONG. Takes time to move even on terms, so I'd PASS.

In some markets, modular's are "normal" and even thought of as a better built home - you'd better know which you are in. If this is the case, I'd go for taking over the payments and lease it out as a "sweat equity" rent to own. doubt you'd get 5k down to recoup a 5k investment of paint and carpet, but if you really only need paint and carpet based ....

[localmentor]

on likely size of it, your probably talking more like 2k-2.5k and then you might be able to raise that as an option consideration payment for RTO or possibly more if you wrap or carry on installment sale. Right now you have till June-ish to have a buyer collect an 8k tax refund for buying - and Installment sales qualify, so you could pitch it that way - you paint and carpet it and get 8k back.

[scubudoo]

2 bed 1 bath 850+ sqft

Price- $30,000

Repairs-fullrehab about 10-15k

ARV-$ 65-85k ish

[localmentor]

it'd squeak by as an all cash deal at 75%-repairs, so you can likely fund 100% with hard money or a private lender - funding rehab as well.

another option is get the seller to take a single pay balloon note due on resale. If houses sell for that amount in the area, I wouldn't want 15k stuck in the deal long term., so I'd still want to fix and flip this, not keep long term.

3rd option for a keeper would be raise the rehab by borrowing 20k in 1st and have seller subordinate with owner carry.

[richboywayne]

3 bed, 2 bath 1100+ sqft

Market value: $62k

Price- $42,000

Repairs-fullrehab about 10k to 20k

ARV-$82k

This is a funny townhouse deal I'm stumped on. It's a short sale (which I've never done before) where the owner doesn't want to go below $40k. The market wont support a house at 82k in that area (most sale for about $48k-$54k). And the house is in need of some major repair work.

[localmentor]

If it quacks like a duck, it's probably a duck. Short sale is the only option that would make sense. If it would only sell for 48-54k in good condition and needs 10-20k then 40k is no option. You'd have to short this to around 17k to make this make sense as a retail deal, and as a wholesale deal, you need to get it less than 17k so you make a profit. If the owner won't agree to you shorting it less than 40k, walk. Plenty of fish in the sea.

[dgbuyshouses]

5 bed, 1 bath 3000+ sqft

Price- $67,000

Repairs-full rehab about 35,000

ARV-$160,000-$200,000

dont have the resources to do it myself, just going to wholesale it if I can find a buyer... any WNY investors in here lol

[richboywayne]

This may sound dumb but how can you have a 5br - 1bth house? It should at least be a 5-2 because no one will want to buy a 5 bedroom house with only 1 bathroom. Can you imagine having 5 people going to the bathroom at once? Id hate to say it but this sounds like an ugly deal and Ive had many of deals like this. What I would do is add another bathroom, lol or do a lease option. Really there's so much equity that you can just assign it, but you're just giving away money in my opinion.

[530HELP]

lease options strategy. Charge the home owner and tenant buyer 2k. show seller of property rent to own candidates and let them pick show them there credit and structure the deal for them you charge tenant 2k for finding them a home with owner finance and never have to play landlord

[localmentor]

This just doesn't make sense to me.  Get a license and play realtor if you want to play tour guide - and you can do it without risk. If you want to play the lease option game create real paychecks, up front, monthly passive income and a back end payday that's huge. No one wants to learn how to deal with tenants, but tenants will make you wealthy. Flipping makes money, but holding property pays you the rest of your life. couple L/O with Owner Finance and 1031 and you can retire in 10 years.

[mstrmd1]

Hi Michael,

I have a couple of properties I want to make an offer on to wholesale. Can't seem to just do it! 1. really distressed, listed as estate sale for $110K. Can I put my name with &/or assigns, since its a regular owner selling?  2. Bank owned

I know you said to open an LLC. my question is what do I use for an exit stratgegy on both of these?

I guess thats my biggest concern. How long should I take to close when the contract is written up?

[localmentor]

How quick you need to close depends on your buyers. If you have cash buyers, 10 days is plenty. Lower the price, the more cash buyers will be attracted and the quicker you can close, the more marginal the spread, the less cash buyers you'll have interested, but you will get those who can get a mortgage or hard money lender involved, but you'll need more time. Less sophisticated buyers need some hand holding and TIME to make a decision. Give 30 days and a longer inspection period.

[localmentor]

70-76 seems reasonable, but check comps in the area for what other investors are paying for similar houses (REO and Foreclosure comps, not retail comps). Right now in my area, i just wholesaled one at 80%-repairs, which is where quite a bit of MLS REO's are selling at.

Nice Job! rinse and repeat! ;)

[Lbg801]

I have house that I picked up from the bank for 52k the bank listed it at 100kgot them down to 52 in 5wks I offered cash for the deal comps in that area from the last 6months came in at 120-130k needs about 10-15k put in I was going to fixs it up my self but I dont want to go through the hasle dealing with contract and building codes so I'm going to wholesale it for 70k is that to much to ask for.

[localmentor]

build your own buyer's list or partner with wholesalers that already have a buyers list and cut them into a piece of the deal for putting it to their list. You'll build your list out of other wholesalers lists.

craigslist is an amazing tool to build a buyers list quickly and easily. Twitter as well, but use those tools to generate a lead and then start a RELATIONSHIP with your buyers before you offer a deal.

[220lucci]

I tried to sell an reo to an investor but the investor working with an investor out of country who buys the property and my in vestor tring to make something off the deal also...my broker said that the property has to be bought from the bank first to sell for my amount so my investor back off...the property was listed at $8,900 i was marketing it for 12k and she wanted 2k off the deal which is 14k...which made if a lil difficult to do ...what advice can you give me from this???