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Jul
06

SO YOU WANNABE A REAL ESTATE INVESTOR

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At DFWproblemhousebuyer we pay cash for homes.

The prerequisites for being a successful real estate investor are:

  1. You must have funds to invest
  2. You must know how to accurately value property
  3. You must be able to accurately access property condition
  4. You must have reliable, trustworthy contractors
  5. You must have multiple exit strategies

I. Funds to Invest

Whether you intend to flip, rehab and retail, or hold for rental; you should anticipate that you will need an amount of cash equal to 35-40% of the purchase price for the property that you wish to acquire.  Let’s explore the most commonly used financing vehicle for each exit strategy.

A). Flip-  In its true, orthodox form; if you flip the house you never actually close on the house.  You do a pass through closing.  The transaction is funded using the end purchaser’s cash.  Therefore, if you don’t have to fund the transaction, then you should not need any cash.  However, it is a good idea to have funds available…just in case the end purchaser fails to perform.

B).  Rehab and Retail- There are three possible financing vehicles available:

  1. Cash
  2. Bank financing
  3. Hard money

The cost of funds associated with these vehicles ranges from almost nothing in the case of cash, to 50% of the deal in the case of hard money.  There is also a direct correlation between loan to value and cost of funds.

C).  Hold for rental- There are only two options for this strategy.

  1. Cash
  2. Permanent (15-30 years) mortgage loan.

II. You must know how to accurately value property.

This is where many investors get tattooed; especially by the so called “wholesalers”.

A solicitation from a “wholesaler” will typically include:

Property description-  Subdivision, room count, square footage, age,
and a watered down description of the property’s condition.

An opinion as to the After Repaired Value (ARV), which is usually overstated.

Comparable Sales Date- While this data may be somewhat valid; if the user does not know how to properly apply the data, then the user may reach an erroneous conclusion.  Garbage in, garbage out.  Here’s a clue-  If the “wholesaler” or Realtor express value to you in terms of dollars per square foot…grab your wallet and RUN!  While dollars per square foot may have some legitimate applications in commercial real estate; it is merely a consequential number in single family residential realty.  The proper method for calculating marginal value for differences in square footage is as follows:

Sale price X 70% divided by square footage divided by 2 = Factor

Factor X square footage difference = Adjustment to sale price.

Alternatively, there is a short cut that will work most of the time:

Sale price divided by square feet divided by 3 = Factor

Factor X square footage difference = Adjustment to sale price.

Comparable sales should come from the same subdivision as the subject property; or at the very least from competing neighborhoods.

Other features that you may need to adjust for include:

Number of baths
Covered parking- number of spaces; garage or carport?
Construction- Brick veneer or Frame?
Year Built
Condition
Swimming Pool
Seller Concessions
Luxury features

How well versed are you on all of the above?  If you believe that none of this matters; or that you can do just fine with dollars per square foot, then please call me when you are ready to make your next investment!

III- You must be able to accurately access property condition.

Here are some things to watch out for:

  1. Electrical service weather mast does not extend above roof.
  2. No extra spaces available in the electrical service panel
  3. No main electric service disconnect
  4. Ungrounded electrical system
  5. Missing gas or electric meters- will trigger costly city inspections!
  6. Low water pressure- may require line replacement
  7. Previous termite infestation- there maybe considerable hidden damage.

These are things that the “wholesalers” ignore.  Unfortunately, these are things that the home inspectors look for.  Add them to your checklist.

IV. Budgets and Contractors

If you lack the experience to accurately budget for repairs; I suggest that you ask your team members for help.   For your team of contractors you need:

  1. Foundation
  2. Plumber
  3. Electrician
  4. HVAC tech
  5. Roofer
  6. Engineer
  7. Drywall contractor
  8. Carpenter
  9. Painter
  10. Tile setter
  11. Carpet layer
  12. Counter top vendor

It is important that your contractors give you fair prices, that they arrive at the job on time and complete their task; and that they advise you of any issue that may need your attention.

V. Exit Strategies

First, a little truth.  Things like principal reduction and appreciation are not to be considered when calculating your return on investment (ROI).  To include the aforementioned items in the ROI calculation serves to overstate the ROI.  When an overstated ROI is applied the result is an overstated value.  This practice is routine for most “wholesalers” and some real estate agents.

The hierarchy of exit strategies is as follows:

  1. Flip, or pass through closing, a/k/a assignment of contract.
  2. Rehab and retail
  3. Hold for rental

Flip- In order to utilize the “flip” strategy  you must either buy at a deeper discount, or be a very good liar.

Rehab and retail- In a rapidly inflating market it is not as important that you buy at an extreme discount in order to be profitable.  But, what happens if you pay more than you should, and the bubble subsequently busts?  (Reference 2009-2010).  The answer is that you end up with strategy #3- hold for rental.

If you buy with exit strategy #1 in mind, and it doesn’t work; you still have exit strategies 2 and 3.  However, if you pay a price that can only be justified using cheap money under the buy and hold strategy; you will find that the other two strategies are not available to you.  Trust me… 15+ years can be a very, very long time!

In a nutshell, being a real estate investor is much like baseball.

First Base- Accurately estimate the value

Second Base- Accurately assess repairs and prepare a budget

Third Base- Buy at a price that will enable the use of any of the three exit strategies

Home Plate- Execute your plan and collect your profit.

In baseball, the batter can hit the ball out of the park, but if he fails to touch first base, he’s OUT!  Same deal in real estate.  You can do everything else right, but if you miss first base (value), you may soon be out of the business!

We pay cash for homes.  If you have a house that you would like to sell, please call 469-774-6655, or simply complete the online form.

Mike Brendel
Your DFW Problem House Buyer

Problem House Buyer

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Jul
06

ADVANTAGES OF SELLING TO AN INVESTOR

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You have decided to sell your home.  Assuming that you have ruled out becoming a landlord, you now have two options:  Retail or Wholesale.  At DFW Problem House Buyer we buy houses fast; hence the wholesale route.  At Specialized Brokerage Services we assist with the navigation of the retail transaction, which is described in detail below.

No question that the retail sale to an owner occupant purchaser will net the most money for you.  There is, however, a price to be paid.

First- You must keep your home show ready.  In the good old days I used to tell my sellers to make the house look like President and Mrs. Reagan were coming to dinner.  For some this required very little effort.  For others it was a major undertaking.

Second- Most of your showings will occur at the most inopportune times…evenings and weekends.  Sorry, if you want to sell the house you must let prospective buyers see it.

Third- All of the real estate agents, except maybe your listing agent, are working for the buyer.  This means that in most cases the offers that you receive will not have been written by someone who is endeavoring to obtain the highest price and best terms for you.  In fact, quite the opposite is true.  There is enough to be written about solid contract terms for another entire article; so I’ll save that for later.  Meanwhile, if you need to sell your home via the retail route, and need an extremely experienced agent to assist, please call me!

Fourth- You finally negotiate a deal with a buyer.  In your mind the house is sold.  Chances are that is not what the contract says.  If your contract contains a Right to Terminate (for the buyer); you can expect the buyer to come back for a second bite at the apple.  This may be in the form of a price reduction from the already negotiated price, or other concessions from you the seller.  These demands are usually forthcoming on the day before the last day that the buyer has the right to terminate.  Thus, there is an implied threat that if you (seller) do not cave to the buyer’s demands, that the buyer will exercise their right to terminate; and you will have to start all over.  Most retail agents think that this is just a normal part of the process.  I disagree.

Fifth- Let’s assume that you made it past the option period.  The lender will now order the appraisal.  If your listing agent did their job, and priced your house properly, then no problem.  However, if your listing agent did not do their job; you can count on the appraiser to call the error to everyone’s attention.  Today more appraisals are subject to review than ever before.  Consequently the tendency of the appraiser is to actually appraise the property rather than simply write a report that supports the contract price.

Sixth- Let’s assume that you have a great listing agent who priced your house right and who helped you to negotiate a solid contract.  Your house appraised for value.  Now it’s time for the lender to do their job- which is to close the transaction on time.  There are two schools of lenders:

A-    Committed to never, ever missing a closing date and will do whatever it takes to make the closing happen on time.

B-    Recognizes the closing date.  They will surely try, and if the moon and stars line up just just right, then the deal will close on time.  If not; then you can expect the lender to start reading  from their favorite book entitled “The Litany of Excuses”.

Most retail transactions do ultimately close; and most with varying degrees of drama along the way.  If you are contemplating the sale of your home via the traditional retail route, and you recognize the benefit of having a seasoned pro on your team; I would be delighted to assist you.

On the other hand, if you would like to enter into a simple agreement with a buyer who will buy your house in its present condition, for an agreed upon price, with the closing to occur on a agreed upon date; with none of the drama and shenanigans associated with the retail transaction; call me.  We buy houses fast… for cash.

In a nutshell:

Retail- A little more money.  A lot more hassle

Wholesale- A little less money, no hassle.

I would be happy to do business with you as a wholesale or retail customer.  Take your pick. So when you are looking for someone to help……. remember “we buy houses fast”, please give me a call at 469-774-6655.

Mike Brendel
Your DFW Problem House Buyer

Problem House Buyer

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Mar
22

General Market Information

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As of May, 2014 the Seller’s market continues.  However, the winds are beginning to shift to the East.  Consequently, many sellers may soon be looking for someone to buy my house now!DFW Problem House Buyer

If you know anything about sailing, then you know that the Easterly winds are the winds of change.  What change?

  1. Inventory.  While the number of existing homes for sale is still low, the inventory is increasing.
  2. Sales rates are slipping.

The first two items can be attributed to greed.  Many sellers apparently believe that their property will sell at any price.  At the same time too many real estate agents will accept a listing at any price.  There’s just one problem… the buyers are passing!

  1. Increasing interest rates.  Despite the Federal Reserve’s best efforts to hold rates at artificially low levels, market forces will prevail.  I predict double digit interest rates by Summer, 2016.

There are other factors such as the corporate federal income tax rate, the labor participation rate, real unemployment and the number of Americans receiving some form of welfare payment.  These conditions do not point to a healthy economy. 

I have witnessed four recessions during my real estate career.  The first in 1981-82; then the market correction of 1991-92; followed by the dot.com bust of 2001-2; and most recently the subprime mortgage bust of 2009-11.  So far I have survived; and plan to be here for a few more years, regardless of what change may occur.  So when you are looking for someone to “buy my house”, please give me a call at 469-774-6655.

Mike Brendel
Your DFW Problem House Buyer

Problem House Buyer

 

 

 

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Mar
22

Investment Facts

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DFW Problem House Buyer- Investment Facts

Definition of a “Good Deal”- The seller is able to quickly and painlessly convert a piece of real estate to cash.  The buyer is able to improve the real estate and realize a reasonable profit upon resale of the same.

DFW Problem House BuyerAt DFW Problem House Buyer we buy houses FAST!. 

We will purchase a property in almost any condition. That means that you, the seller, need not do any repairs.  For simplicity we normally structure our offers such that we pay all of the normal closing costs-even the title insurance premiums!  By doing business in this manner there are no hidden fees for the seller to pay.  Again, we buy houses FAST!  We can close quickly; or on any mutually agreeable date.

To learn more about a quick and easy way to convert unwanted real estate to cash, call us today at 469-774-6655

Mike Brendel
Your DFW Problem House Buyer

Problem House Buyer

 

 

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Mar
22

Specialized Brokerage Services

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We recognize that all real property has value.  To wit, the definition of real estate is “land and improvements”.  Therefore, nearly every piece of real estate has some value, regardless of location or condition.  Specialized Brokerage Services offers a hybrid plan that enables you to sell your house fast, for a price that is almost retail.

DFW Problem House BuyerAt Specialized Brokerage Services we begin with an estimation as to what the value of your property would be if it were in pristine condition.  Next we do a thorough assessment of the improvements that would be necessary in order to bring your property from it’s current state to excellent condition.  We then provide to you our estimate as to how much you would spend to correct the condition issues.  Finally, taking into consideration all of the above, we recommend a price that will enable you to sell your house fast, it’s current condition.

Some properties that we sell using specialized brokerage services are sold to individuals who prefer to fix up the house themselves and reside there.  Others are sold to other investors who will rent the property.

Whatever your situation, and whatever the condition of your property; if you want to sell we at BMW Properties and Specialized Brokerage Services have a solution.

Learn more about how to sell your house fast by calling us at 469-774-6655.

Mike Brendel
Your DFW Problem House Buyer

Problem House Buyer

 

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Mar
22

As Is Cash Purchase

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Every real estate transaction involves people.  Each individual is unique.  Therefore, every real estate transaction (especially residential) is different.

DFW Problem House BuyerAt DFW Problem House Buyer our primary business is the acquisition of distressed properties that we buy “as is” for cash.  We then do a superb job of repairing and updating those properties; which we then sell to owner occupant purchasers.  It’s a win-win-win-win business.  The seller is able to dispose of an otherwise unsalable asset by selling a house as is, for cash.  The neighborhood gets a lift after we complete our repair work.  The end buyer gets a great house.  And, hopefully, DFWPHB earns a reasonable profit.

Every situation is different.  If you have a problem rental that you wish you had never bought; perhaps we can alleviate your pain!  If you have inherited a property that is in poor condition; or maybe you just want it gone quickly- we can help.  If you are going through a divorce and circumstances dictate that the house which was your home must now be sold- we can help.  If you have a house that is in poor condition, rather than fix it, why not look into selling a house as is, for cash!

Since 1999 we have purchased approximately 300 properties.  We have never failed to close; in fact, we have never failed to close on time.  We will buy properties in almost any condition.  Normally, just to make things simple and straight forward, we pay all of the usual closing costs, including title insurance.

We are wholesale buyers, not owner occupant purchasers; yet our offers are fair.  If you have a house that you want to sell quickly contact us to arrange an appointment for a quick visual inspection.  See how quick and easy selling a house as is can be! Call us at 469-774-6655.

Mike Brendel
Your DFW Problem House Buyer

Problem House Buyer

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Mar
21

Guaranteed Sales Plan

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BMW Properties | Jay & Gabriela Testimonial from Short Productions on Vimeo.

What a dilemma!  You’ve found the perfect home for your family.  There’s just one problem.  You need to sell your existing house before you can buy that new home.  And, prices are going up… rates are going up… there’s only one creek lot left… what to do!?

You need a real estate professional with a plan that will result in a guaranteed home sale for your existing house.  In other words, if I don’t sell your house, I’ll buy it, at a price agreeable to you.

BMW Properties Guaranteed Home Sale Plan offers the following:

  • Purchase price agreed to up front
  • As is purchase- you will not be asked to do any repairs
  • Will attempt to coordinate closing date with the move in date for your new home.

We will buy your existing house a price that you agree to, up front.  We will coordinate our purchase of your existing house with your purchase of your new home.  You can even wait until after the closing to move!  Seemless!

For more information on the BMW Properties Guaranteed Home Sale Plan give us a call at 469-774-6655!

Mike Brendel
Your DFW Problem House Buyer

Problem House Buyer

 

 

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DFW Problem House Buyer buys problem homes for cash, whether it’s due to divorce, inheritance, a problem rental, poor condition, or any other life circumstance that requires you to liquidate a home fast for cash. DFW Problem House Buyer offers “As Is” Cash Purchases, Specialized Brokerage Services, and/or Guaranteed Sales Plans. DFW Problem House Buyer serves Denton, Tarrant, Dallas, and Collin counties, including but not limited to: Fort Worth, Arlington, Hurst, Euless, Bedford, North Richland Hills, Colleyville, Grapevine, Trophy Club, Keller, Roanoke, Argyle, Robson Ranch, Grand Prairie, Mansfield, Dallas, Richardson, Garland, Mesquite, Plano, Frisco, McKinney, Allen, Denton, Corinth, Carrollton, Lewisville, Highland Village, and Flower Mound. © 2013 DFWProblemHouseBuyer.com. All Rights Reserved.