Deal #3 in the works

congratulations on your deal #3, but what is happening to the renters? do they have another place to rent?

Hey Val,

The renters have been on a month to month and have trashed the place, so the sellers are not worried about them. From what I understand I am not interested in getting involved with helping them find a place either.

We closed on our house today and are looking at the options we have. The builders have not flocked to us with the $ we thought but there is one that plans on putting an offer in tomorrow and told us he can close in 5 days, BUT, we are tossing around the idea of rehabbing it ourselves. We bought the house for $100k and it will take $200k to rehab/addition the property. That will include adding almost 1700 sq ft to the back and up on the house. There are alot of rehabbers and builders in the area buying these houses and rehabbing or building new. There are 3 going on right now that we know are already under contract, so its a hot area. We are told if we have a decked out 2500 rehab in the area we could but a price of $450k on it.

Would you take $120k from the builder, and split that with your partner($10k each)or pay your partner his $10k and go for the big numbers?

Congrats on deal #3! Nice to have options!

"We are told if we have a decked out 2500 rehab in the area we could but a price of $450k on it". Before you make any final decisions, make sure that what you are being told is what is actually happening and not just hot air. I say this because you also have this- "The builders have not flocked to us with the $ we thought"

You also need to consider, do you have the time and the funding to personally do or oversee the rehab? That is a MAJOR rehab! And it will tie you up in a big way when you could be out wholesaling a lot of other properties possibly making as much money and maybe more with a LOT less headaches.

These are just thoughts. I'm sure whatever you decide will be a good decision. And isn't it wonderful to have this problem???

I'm happy for you.

Karen

Man I love when a deal like that falls into place. Great job on putting it together...NOW GO GET SOME....

Hey Karen,

Yes its cool to have options but also nerve racking, trying to figure out, do we take the quick or go for the big. The 'what if' starts coming into the mind. We have thought that all we could do was wholesale deals if we go forward with the rehab since most of our money will be tied up, or we could take the quick and then keep an eye out for the easy rehabs for a quick $15k-20k. We plan on bringing in a partner for 1/3 of the project if we go forward with the rehab, this way we are not cash poor or ira poor and then we'll split our 2/3 between cash and the ira.

As far as wholoesaling, I have never done one, but have been asked twice to help a new investor to wholesale something they locked up, but then we ended up buying it ourselves to rehab. Not sure thats how its supposed to work but its come out positive so far. We have wasted a good chunk of $ the past month with letters to adsentee owners but then not being able to follow up with them. I think we are going to hire that one company that answers the initial calls that come back from the letters, so they can screen through.

As far as the rehab, we'll be hands off, go by the project once or twice a week, and just let the GC handle it like we did the last project. It really was not much stress and so much easier then trying to manage subs and all. With work full time, Michelle running our travel agency, our non profit, and 2 teenage boys, we need to outsource what we can. Keep an eye of for updates!

Trying to GET SOME!! Now if I can just get a handle on the responses from our letters to absentee owners I might actually being able to make a go of this wholesaling!

Good job! Me, I would wholesale that thing in a heartbeat. Money in pocket, no risk involved. In the process you will add real buyers to your list! Big time frame on a $200,000 rehab. Who knows what you will run into and what delays will occur. AND then will it actually bring the $450,000 in a reasonable time frame. (90 days after completion?) There is always risk involved and that is how you get the bigger paycheck. I would like this deal a lot more if you paid $200,000 and it needed $100,000 rehab. Just my thoughts.

Good luck which ever way you choose. Decisions, decisions! Isn't REI GREAT?

Michael Mangham
Mentoring/Team Building Nationwide
MD Home Acquisitions LLC

Have you used your IRA to do this before? The reason I am asking is when I took a course about using the IRA, I understood that you have to put ALL of the profit back into the IRA also. That you are not able to keep part of it as cash. Maybe I am wrong, but you might want to check. That could have an effect on your decision.

Actually, my REI club meeting tomorrow night is on that exact subject. I will ask.

Would all your portion be coming FROM IRA? I want to make sure my facts are correct for my question.

Karen

Hey Karen,

We have never used our IRA for REI yet. We just had it moved from a 401K in the last month. We are told we can use our IRA to partner with but the % of the money that the IRA is in the project, is the % of profit that it gets and has to be put back into the IRA.

"and then we'll split our 2/3 between cash and the ira."

I think I was misreading this. You are saying you are FUNDING with both cash AND IRA. I was taking it as funding totally your part with IRA and then from your profit you were going to take part of it in the form of cash and return part to IRA. But, If your share was TOTALLY funded by IRA, your TOTAL share of profits would have to go back to IRA. Right?

I am actually just clarifying that the way I understand it is correct and I think that that is what you are saying also. Right?

Also, it helps in spelling it out to other readers that are not familiar with using self directed IRAs.

Karen

Hey Karen,

Correct, if we were just using the IRA, the IRS gets all the profit, but we will be using some(1/3) of our own cash, some(1/3) from the ira, and some(1/3) from another investor. Everything will be split three ways, all expenses and all profits. Meeting with the GC/engineer/architect out there today to start planning.

So we decided to go with the rehab/addition. We can ramp up our knowledge and execution of our wholesaling side while thats going on. The best offer for selling was $110k, about $8k profit after both closings that would need to be split between the Marines that brought us the deal and us. So we decided we would go for it. We paid our friends $4k(1/2 of profit if we took the $110k) for a wholesale fee and now we are on the road of no return. HA HA We should have the front elevation pics today or tomorrow, we hired a local hot shot GC/designed/realtor that has rehabbed over 80 houses in some of the hottest neighborhoods in the city. Alot of them were exactly what we are doing, going back and up on the addition.

I don't think I'll make this mistake again. When using your self directed IRA, you have to purchase the house in the name of the IRA and then can partner with it, not buy it in an LLC and then plan on partnering up with your IRA. So now we can't use it for the rehab so we are on the hunt for the best private money. Looking for $100k. I have a 26 year old mentor/friend here in Charlotte that has been rocking rehabs for 4 years and he has already offered PML, as well as another buddy wanting to get in the deal. Plus we have other options so its a go either way, just can't wait to start seeing work being done. The GC says with having to design it and get the plans and all approved by the city and all, we are 3-5 weeks from starting. Meeting out there tomorrow with another local investor/lender who is interested in the project as far as lending, not sure of his terms yet but I think they will be higher then I want.

Fired up and excited about this project! Another great learning time for us in our journey in real estate. THANKS DEAN for your infommercials, website, and books that got us in the game!

We have the front elevation picked out. The designer sent us the first floor plans but Mama and I didn't like them. So we spoke to our mentor to get his ideas, as well as walked through 4 houses today that are in various stages of being built in the neighborhood where our house is and came up with 2 ideas that we are now sending to the designers. I also went around and met a few of the neighbors, gave them my business card and talk to them so they knew that we bought it and what our plans were. They are as excited about this as we are. They said the folks that lived in the house before we bought it were bad news, nothing but trouble. We hope to have all the plans finished this week and in for approval to the city. We are SO ready to get this going. We met at the house with some friends that we bought on as silent partners.

It's so much to learn! I want to be on the fast track on learning all these different ways of making it happen!

Floor plans are finalized, the draftsman is finishing them up on paper, then to the engineers, and then to the city to be approved so we can pull permits. Excited about this, can't wait to get moving! Will keep you all updated!

Don't know what would be a thumbs up symbol, but you get the idea! \O/

Karen

Work. I've just sat here and read your whole post and I think, no! I know I can do that as well. I'm still waiting on my first deal. It's like when you think it's the one. Something else comes up. I'm the next Success Story ready to explode. I feel it! Way To go guys;-)

Hey Karen, we are trying! We are trying to learn patience with these flips and all. Not one of my strengths but little by little I guess we'll break that wall down. Wecan't wait to get our first wholesale deal down along with this flip. Loving the DG IE webinar going on, flat fired up!

Hey Karen, we are trying! We are trying to learn patience with these flips and all. Not one of my strengths but little by little I guess we'll break that wall down. Wecan't wait to get our first wholesale deal down along with this flip. Loving the DG IE webinar going on, flat fired up!

Hey Rhonda, this is the place to be to get that motivation and knowledge to make that first deal. Fill in your profile with some info so folks will know something about you. Hope to see your success STORIES soon!

The GC sent me an email, the permits are done, we are a go for the rehab! They start digging footers and start demo next week. It took alot longer then I expected, we closed 9 weeks ago yesterday, but with the plans and all I guess thats the way it is. Just glad we don't have any hard money out yet. Stick around for updates.

The project has started. We started the demo just over a week ago as well as digging out for the footers and area for the garage. The footers were inspected on Fri. Can't wait to see what happens this week. You can find pics of the rehab on my facebook under Kingsbury. We hope to post the updates weekly.

Wow, Keep up the good work! When is the house scheduled to be finished by... Christmas? It looks like you found the funding to get it going.

Congrats on your third deal. Good luck and hope everything goes as plan for you.

Great to see the deal progressing!

This rehab/addition won't be done until Mar some time. We are adding 1800 sq ft to just over 800 sq ft. Hopefully we'll have buyers before its done. There have been some recent sales in the neighborhood for houses rehabbed like this and also new builds where they bought a house like mine and scraped it and started fresh.

We're getting there! Can't wait to go through this rehab, should be a great learning experience. Loving that we have a GC running everything, just show up some during the week and talk to him a couple other days. Locked up our first buy and hold the other day also!