Dallas-Fort Worth Real Estate Investor Club

Kelly,

As long as I've been in the Real Estate Industry I've heard from other investors that same exact thing.  No one will pay xx.xx for that property.  I often times have had visions of showing the HUD statement to that person so that they'd look at me and say...."I am sorry, but I really didn't think anyone would buy it at that price" and then somehow they would miraculously come to me and offer to pay more on a future deal.  But that has never happened.  

What I've learned is that no matter what your perspective may be on price, repair costs and ARV, there will always be someone who doesn't agree with you.  It all depends on their level of risk taking.  Some investors will pay a higher premium for the same property because they have a different logic when it comes to what they think is a deal.

For example, Hedge Funds are out there buying up multiple properties at a higher premium.  The reason they can pay more is that they have the financial power to do so.  They look at future values as an indicator rather than just Sold Comps today.  They also look at an income value approach vs ARV.  So let's say there's an ARV of 100K.  The asking price is $90K.  But the property is rented and the rents coming in are $1100.00/month.  The repairs are minimal.  So a REHAB or Fix and Flip Investor would laugh at you.  But a long-term buy and hold investor may take a closer look.  Even though they are paying $90K today, the $1100.00 per month return on their investment might be worth it to them.  Especially if you can prove that the tenants are taking care of the property and are on time with rents.  Heck, I'm happy with late paying tenants as long as they pay the late fees.  That type of tenant is actually increasing my annual income.  It all depends on the way in which this game we call investing makes sense to them.

I had a property for sale recently.  An investor low balled it big time.  I seriously wanted to shout at her and say...are you nuts?  There is a deal here at the price I'm asking!  Are you blind?  I knew it was a deal.  And someone else did too and paid my full ask.    If you truly have an opportunity, someone will buy it.  It might just take a little longer.  

And you know I'm one of your A buyers now, right?  Because even though I wholesale properties, I also buy them for myself too.  

P.S.  One of the things you can do is to actually speak to some of the investors on this board.  Ask them what makes them comfortable with a deal.  You might find out something that you never thought about.  I had a townhouse for sale.  I didn't understand it at the time, but they didn't want to buy a townhouse vs a single family dwelling.  I thought as long as the numbers were there, what did it matter.  It did matter to some.  They had their reasons such as lack of control of the neighbors beside you.  Or they just simply have their minds made up that they don't want that type of a property.  We all get comfortable with what works for us.  So hang in there.  I understand how you feel.  Just keep in the back of your mind, if one won't, but one will!!

Hi, I think Stacie nailed it... I can tell you that I'm one of "those people" who if the numbers are even $1 off (i.e. I cant negotiate to where I need to be)  I'll walk away.... My numbers are fixed and I will never deviate from my formula or make a judgement call... I have lost some deals that in hindsight would have been positive.... As Stacie said, it's really your own comfort. I don't push the envelope and therefore have not had a single bad deal in a long time (I had some growing pains early on in my REI ventures)... Am I leaving $$ on the table? Certainly, but my risk profile is very favorable. It's all about your own level of comfort. Good luck out there.....

Brian R. Baker, MBA

5 wholesale deals in 1 month as a new investor... That's remarkable, congratulations! 

-Brian 

5 deals for a newbie with little to no marketing is unheard of (from my perspective)... Feel fortunate for sure. There are many investors who get ZERO deals in their first few months (and beyond) and I didn't start getting consistent deals until I started doing specific things to make it happen... Deals certainly didn't fall in my lap, and with the competition in DFW, to have 5 deals in a month for even experienced investors is pretty remarkable... I was in Vegas last week for work, I should have brought you with me! 

Congrats and keep up the optimism! 

Brian R. Baker, MBA  

I've said many times that the deals I regret the most are the deals that, for one reason or another, I didn't do.  I have also paid "too much" for properties before and later said that I was very glad I did.  As an experienced cash buyer, I have come to realize that I will be far more successful buying as many good deals as possible rather than insisting that every deal be a perfect deal for me.

Please don't forget the optimism and wisdom I shared above as you read the following.  We've had some good stuff shared in this thread, but I would be remiss as the President of DFW REI Club if I didn't expand this topic just a bit.

First of all, if you're an experienced Real Estate Investor, you can make good money in Real Estate regardless of whether the market is up or down.  The ability to do that comes with education, experience and consistently adhering to the fundamentals.  That's why we teach the class on Wholesale Real Estate Investing.  That's why we hold weekly meetings.  That's why DFW REI Club exists.

We are now and have been for a while in a strong seller's market.  This is a good thing, BUT you've got to do your own due diligence on every deal and keep an eye on the market horizon.  Before the sub-prime mortgage meltdown happened, a lot of people were livin' the dream, making lots of money, etc. but they weren't paying enough attention to the peripheral forces that influence the Real Estate market.  Those folks who got lazy on the basics of deal evaluation and those who had not positioned themselves and their Real Estate businesses to appropriately handle a market shift got caught holding the bag as 2008 began to wind down.  Don't let this be you.

From the perspective of a wholesaler, you may be willing to roll the dice on putting deals under contract for a higher price in a seller's market, and, with so many hedge funds still out there paying more than individual investors normally would, you can probably sell those deals for a profit.  I have no problem with that.  As long a wholesaler sets their buyers up for success, I'm all for it.  As long as the market stays strong, everybody should be happy.  BUT... here are a couple of points to consider.

1. Even in this strong market, I've had WAY too many inexperienced buyers tell me their tales of woe after buying a property where the cost of repairs was MUCH higher than the wholesaler had told them and the ACTUAL retail price they were able to get from the fully rehabbed property was MUCH lower than they were told by the wholesaler.
2. I realize there are multiple possible reasons for what I described in point 1 and that some of them could be the fault of the buyer, but I think the failure of an inexperienced buyer can and should be mitigated by the wholesaler.
3. Unfortunately, many wholesalers will add CYA fine print to their contracts which "warns" potential buyers that the market values and cost of repairs are just estimates and that the buyers should do their own independent evaluations, blah, blah, blah.  While that may make the wholesaler feel covered, it's not wholeheartedly looking out for the best interest of the buyer.
4. I am my brother's (buyer's) keeper.  I hope everyone reading this is too.

For the record, I'm not saying that any of the participants in this thread are unethical, immoral, manipulative, etc., but, unfortunately, and I hate to say this, there are plenty of wholesalers who are.  I encourage everyone reading this to do as many deals as you can.  Just be sure to do them the right way whether you're a wholesaler, rehabber or landlord.