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How to Decide Whether To Wholesale, Rehab, Owner-Finance, Subject-To, Sell or Rent

A lot of people wonder how, when and why people decide to do different things with each house flip.

I thought it was a great question and one that deserved a more thorough going over.

It’s not really a simple matter of buying, fixing and selling everything. There are a lot of factors that go into the decision on whether to work the lead and either wholesale the house or buy it and fix it, or whether to sell with owner financing or just rent the place.

Today, I’m going to talk about what affects my decisions and causes me to do one thing over the other. This is just how I operate and is in no way saying you should do the same. Everybody’s situation is different. So what may work for me, may not be something you would want to do.

No Matter What Buy Cheap

No matter what I might decide to do with a house, I have to buy it cheap. Cheap, cheap.

This is why I just like to keep things simple. Buy a house for super cheap and you will have a lot of options. You can even screw up big time and just not make as much as you’d hoped. This is not to say you can’t lose money – I’m sure someone somewhere has still managed to lose money on flip after buying for super cheap.

So, even if a seller is willing to sell to me ‘subject to’ their existing mortgage (meaning they will sell me the house and leave the loan in their name with me responsible for their payments) but the loan balance is more than I would want to pay, I won’t do it. It’s just not worth it. Just because I can save some money on holding costs, doesn’t warrant me paying a lot more for the house.

Property Location And Price Range Is A Huge Factor

My decision to wholesale a deal has everything to do with the location of the property. If it’s in an area I just don’t want to be in, I will wholesale to another investor.

If the seller is asking a crazy low price, I am much more likely to try to just contract the deal and either wholesale or joint venture it though. If they are asking a so-so price, it’s an immediate wholesale.

If the house is in a price range where my 65-70% percent of ARV means too big of a discount for the sellers but they are willing to accept a decent discount, I will typically birddog the lead.

An example would be a house that has an ARV (after repaired value) of $500k. At 65%, I would need to buy the house for $325k, minus whatever the cost of repairs would be. That’s hard to swallow for people that aren’t really motivated. If they would be willing to take something around $400k, there’s probably an investor willing to do the deal. It’s just not me.

When a house is in a lower price range area that is not real conducive to selling it on a new loan (buyer gets a bank loan to buy the house from you), I will consider buying it so that I can fix it and sell it with owner financing. This is one of our ‘retirement’ strategies.

We prefer owner financing over renting because the buyer owns the house and is therefore responsible for repairs, taxes, insurance, etc. We don’t get calls about broken toilets.

The only time I pick up rentals is when the house doesn’t need anything major fixed and there is a good tenant that has been there forever and wants to stay there.

My Workload Also Factors Into My Decision

If a deal might be decent, but I am swamped with rehabs and other things, I am often tempted to just wholesale the deal. If it seems like a good deal (seller seems motivated and what is owed is low enough to provide a good deal), I might look into a joint venture or just wholesale it out.

If I’m not busy, my intentions are usually to buy for rehabbing and re-selling. This is where we make the most money.

I do love wholesaling and would prefer to wholesale most of the time. I’ve talked about strictly wholesaling for years, but it’s been hard to limit myself to that. Rehabbing is just in my blood now.

Seller’s Circumstances Determine Purchase Strategy

We’ve always done purchases with cash, hard money/private money, or owner financing. There have been occasions when I could get a good deal AND the owner was willing to owner finance.

If you can get a seller to owner finance the house for you, you can usually get much better terms than you would from a hard money or private lender. I’ve heard of a lot of people getting 0% interest rates from sellers.

We have bought on “Subject-To” as well and it can provide a way to cut down holding costs. Depending on the seller and their bank you can try to do it either overt or covert. We prefer the overt option because then the seller signs documentation that states that they are still liable which can help if anything ends up going through the court system.

Changing Exit Strategy In the Middle of the Flip

As I mentioned, if you buy cheap enough, you have the flexibility to change your strategy at almost any point in the flip.

I try to buy at 65% of ARV minus the cost of repairs, OR LESS. This usually gives me the ability to wholesale the deal (before and after purchase) if I choose to do so. This is because most investors will buy at 70% of ARV minus the cost of repairs. You can even find a lot these days that will pay more than that.

Even after you’ve fixed up the house, you might want (or need) to change your strategy. You may have trouble selling the house and decide you need to rent it. Of course, if you have a short-term hard money loan, you would have to do something about that.

Depending on the price range and rents for the area, renting the house can be a good option if you bought it really cheap. The cashflow generated might be something you decide works for you at the moment.

It’s good to have options.

Save Yourself Some Grief, Buy It Cheap

I’m gonna say it again. Buy your houses as cheap as possible. Don’t go paying more for properties because you think you got some other kind of terms that sweetened the deal. If those terms don’t allow you to make a good profit, even if you have to change up your strategy or sell the house cheaper, don’t allow them to convince you to pay too much.

This all gets back into making sure that you are a marketing machine. You have to have a lot of leads coming in so that you don’t fall into the trap of paying too much because you finally find a marginal deal.

There are a lot of awesome deals out there, you just have to work hard enough to find them. If you don’t believe that, good luck to you.

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Private Money for your Fix and Flip Project

We have created a large pool of cash investors. We currently have more capital available than projects, so we are looking for partners that need capital partners.

Let me first explain what kind of projects we would be willing to partner on and what information we would need to review:

  • Fix and Flips in the Greater Seattle, WA Area for now, we are open to expanding to other markets and are willing to take a look
  • A minimum of 2 previous projects but prefer 5 or more, with financials
  • How long have you been doing projects, what other pertinent experience you have
  • A breakdown of your current business structure (personnel, responsibilities and splits)

That is the initial info that we would need to review, if we are interested we will follow up with any additional questions. We would like to create our partnerships to be able to last over multiple projects, so even if you do not have a current project that you would like to partner on we can get the ball moving. If there is a specific project that you are looking for funding for the additional information that we would need for the individual projects are as follows:

  • A Proforma (a financial statement showing all costs and profits projected for the project)
  • A scope of work with costs
  • ARV (After Repair Value) and comps to support that
  • Photos of the current condition

Depending on the project we may require more information but this is the minimum.

To give you an idea of what kind of terms we are willing to provide:

  • We will go into 2nd position with a deed of trust, behind a hard money lender with a construction loan (we have connections with many different lenders and can possibly help you get better terms, depending on your needs)
  • We will require a promissory note with a personal guarantee
  • The base term of the note will be 6 months for 2 points with 1 month extensions available for a point each
  • The rate will be between 12-20% based on the risk factors since there are many being in 2nd position
  • The 2 points will be paid up front, but can be taken out of the loan amount

If this is of interest to you, send an email to crown.estates.wa@gmail.com and include at least the information that is in red, if you have a specific project include the info that is in purple as well.

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Networking for Real Estate

We believe that networking in real estate is essential, but we believe that it needs to come into the digital age.
Like with many things, there is a resistance to change and some people believe that the old way is the only way and that it is the best way (We have included some articles that represent some of those strategies).
If those ways are you preferred methods, by all means continue to do that, but if we could add to that wouldn’t you want to be able to increase your network any way possible? That is what we are attempting to do with NobleTower.com. At normal networking events, you have a finite amount of time, you may not have the kind of contact that you are looking for there, if the contact your looking for is there they may also be looking for a specific kind of contact and you may not be it, even if you do end up talking to someone that seems to fit the mold of what you are looking for they could end up being unreliable, unethical or any other undesirable trait as well and there are many other constraints that may apply.
We aim to reduce if not eliminate those constraints all together, we want to be able to connect everyone with who they are looking for and make it as convenient as possible. So check out the site, if you like what you see, sign up and join the Noble Tower Network.

https://www.entrepreneur.com/article/281743

https://www.inman.com/2015/02/09/power-networking-is-secret-to-endless-real-estate-referrals/

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Wholesale Real Estate Properties in Seattle

Buying from wholesalers is a great way to buy a property to flip. Some of the challenges is getting access to those properties. Currently wholesalers build their own buyers lists by networking and having list sign ups. For buyers, they deal with the issue that all of these wholesaler’s lists are private, so you don’t know if you are on their premier list, their basic list or their scraps list (where the only deals coming to you are the ones being daisy chained, meaning that the person sending you the deal doesn’t have the deal but they want to add a fee for forwarding you the info). Noble Tower hopes to be able to fix this problem by allowing all buyers the ability to view the possible deals and properties. This will hopefully allow both sides to focus more on the actual business that you are in, either buying properties or getting them under contract for wholesale. Of course we know that we will never completely replace all of the networking aspects that take place in Real Estate, but we hope that we can be a great tool and free up some time for many to spend more time with family and friends instead of feeling the need to go to networking events every day of the week, plus we are collecting additional resources that can help you in all of your real estate investing.

Check out our static site (this means it does not contain current deals and resources) to see if it looks like this could be a good tool to add to your real estate toolbox.

If you want to see the current info within our database (which is changing all the time), sign up for FREE, you will be able to view all of the current content, you will need to complete your profile before you will be visible on the site (meaning, that you are able to add your own deals, reviews, make direct connections). Here are a few quick links:

Sign Up              Wholesale Properties            Contractors

Our plan is to be the go to site for wholesale properties in Seattle. We are unlike the other wholesale property sites in Seattle that claim to have listings but they only allow you to sign up for their mailing list. This means you will not get to explore properties in foreclosure, bank owned foreclosures, wholesale properties for sale, handyman deals, fixer uppers, discount homes, or other distressed properties. You have to sit and wait until they decide to send out a deal to you which depends on what buyers list you are on. We allow everyone the same opportunities with wholesale properties in Seattle. If you are a buyer you can look for wholesale properties that meet your criteria. If you are a seller, you can list your wholesale properties and get exposure to the whole community without having to network around and build a giant list of buyers, or deal with others daisy chaining your wholesale property around.

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Financing for Fix and Flip

One of the biggest hurdles for people to doing fix and flips is the capital needed. There are many different options. Figuring out how to finance your project is a crucial step to becoming a successful real estate investor. Here are some articles that show a few different possibilities.

https://www.investopedia.com/articles/investing/012617/how-get-loan-flip-house.asp