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Here’s the good thing about being down and out. You learn. You learn to adapt, you learn to fight for survival, and if you’re smart, you learn how to talk to people into getting what you want. That’s called negotiation my friends. Being broke is no exception. That’s not to say when you’re broke you don’t wish you had a fist full of dollars to wipe your ass with, but when your piggybank no longer rattles and rolls when you shake it, try not to think of being broke as a bad thing altogether.

Au Contraire Mofrer: You Can Buy a Home Without Your Own Dinero & Without a Deposit.

PRIVATE MONEY

Ok, so I don’t speak French or Spanish, but damn I sounded sexy, huh? If you don’t have enough money or any money for that matter for property investment, what’s the obvious next step? Drum roll………………….find a private money lender who will loan you the money for purchase and renovation costs – 100% of it if necessary. Will some lenders turn you down? Of course! So get a set of cajones and power through it. Be persistent, confident and always be humble, and sooner or later, you’ll get the loan.

Flip Tip: Be willing to give up some of the deal. I’m not gonna try to blow wind up your skirt, if you have no experience, its gonna be pretty hard to get private lenders to fork over hundreds of thousands of dollars for you to sink into some crappy house. Heck, I wouldn’t lend my mother that much money – if she had no experience. Unless of course she was willing to “sweeten the pot.” Always be willing to sweeten the pot.

NO MONEY DOWN

Let’s say for instance that you find a house for 100,000, and you are absolutely sure the rehab required is, $45,000 – and comps show the ARV is a solid $250,000. But you have no money. You come to a guy like me and say – will you lend me the money? I say, uh….sure it will cost you 15% interest and 50% of the deal. What do you say to that? Do you walk away in disgust, or do you jump at the offer and chance to work with an 8 year pro who has done hundreds of rehabs? I don’t know about you – but I’d jump at that offer. In fact, I did. I had no money – not one dim for my first rehab. My father-in-law to be put up all the scratch, and I did the work. In 90 days, we rehabbed the house and split a total net profit of $98,000.00. I didn’t spend a dime of my own money and I netted, $49,000.00.

I’ll ask you again. What would you do?

REAL ESTATE SUCCESS

Those who have mo’ money than they know what to do with (bastards) are experiencing real estate success right now. Good for them, right? But listen- you can too. Be persistent, work your plan, and tell everyone you know that you are trying to get in the game. Ya never know – that next person you tell just might be enchanted enough to be your Sugar Daddy!

 

You wanna buy a house, and you want to make a profit. But how do you know what price is right? Ask Bob Barker? C’mon, I love Bob but he’s ancient! You’ve got to have a winning investment formula. For you veterans, this info is older than your Grandma’s pound cake recipe. Newbies…. check it out – I’m about to drop some mad rocket science on you:

MAO = ARV – Rehab – B/S/H – Investor Profit – Assignment Fee

·         MPO (Maximum Allowable Offer) is calculated by determining what the house will be worth after renovation

·         ARV (After Repaired Value) less the rehab dollars required, less the Buy/Sell/Hold (B/S/H) costs,  less profit for the rehabber less the Assignment Fee (your profit as a wholesaler)

·         If you plan to rehab the house yourself, just delete the Assignment Fee from the formula

DOWN & DIRTY FORMULA

Another More “Down and Dirty” Rehab Formula:
MAO = (ARV * .70) – Repairs – Assignment Fee

Now look, in this market – I play super safe when I can. I’ve been using a multiplier of .60-.65. What’s that mean Mr. Einstein? Well it means that I’m starting at 60-65% of the After Repair Value (ARV) then subtracting my repairs. This gives me a cushion bigger than J-Lo’s ass, and it accounts for all my holding costs, closing costs, and realtors fees. Problem is, in crazy market where investors are paying way too much for deals, you’re gonna get knocked out of the game on every deal if you use a 60-65% multiplier. Your offers will be too low. So go in at 70% for now. Be very sure about your ARV. Check out comparable sales data.

TIP: Be sure to also look at houses under CONTRACT or PENDING. Call the listing agent for those properties and simply ask, “I’m looking at buying a house around the corner. We’ll rehab it to a beautiful state. Can you tell me, did you get close to your list price for your house?

COMPS are KING

Are comparable sales recent (60-90 days) and close to the house your considering (.5 -1 mile away)? Are the home amenities, features, renovations, and square footage similar? If the house you’re considering is in a Desperate Housewives-type neighborhood, and you’re looking at homes in a Compton-“Bring your own gun” type neighborhood, you best be researching the definition of “comparable” – after you strap on your bullet proof vest and put on your best badass, don’t “f” wit’ me I’m a gangsta face.

Look at the home through the eyes of the future homeowner, and remember that renovation costs differ from house to house. It’s the scope of work that counts and what’s required to make the investment look like comparable houses? Confused yet?  Stay at it. If I can do it, so can you! I’ll be talking a lot more about this topic so stay tuned.

Just follow the formula to make offers, and apply an $8,000 – $10,000 assignment fee to make the deal worth your while if you plan to wholesale. Finally, don’t forget about those two little words – investor profit, which is the amount left for the investor to make the deal sexy. Stick with the current market trend (for investor profit) and start with $25,000 – $30K for an average price house.