On the phone, the closing attorney mentioned that he and his wife had walked to a local garage sale, and upon speaking with the woman running it, he learned that the owner (the woman’s mother) had recently passed-away. They were selling whatever items they could, and then planned to eventually sell the house. The attorney asked how much they’d be asking, and when he found out that it was a very reasonable price, he called me.

To date, every investment property that we’ve purchased has been an REO property (bank-owned foreclosure), but I’m certainly not opposed to dealing with sellers directly, especially in a situation where I can help them as much as they can help us. So, if this woman really needed to sell the house, it had the potential to be a win/win for both of us.

My wife and I (with baby in tow) did the 30 minute drive up to the house. It’s in an upscale part of town, where houses typically sell for a good bit more than what we are accustomed to buying and selling for. The house was a very nice, 50’s style ranch with a big lot, and the first thing we noticed was a whole bunch of torn-out carpet on the front lawn.

We spoke with the woman running the garage sale for about an hour. Apparently, her mother had lived in the house for many years, and had passed away over the summer. The recent floods in Atlanta had caused a good bit of water damage to the house, and the woman and her daughter had spent many hours tearing out the wet carpet, cutting out some wet drywall, and doing their best to prevent any further damage to the property. That explained the carpet on the front lawn.

We let her know that we were investors and that we had heard she was considering selling the house. She said that she wasn’t ready to sell just yet, but seemed interested in having a potential cash buyer; she mentioned that she had had a couple bids from contractors to remodel the house, and that they had all come in above $50K, much more than she wanted to spend. She let us look around the property, and gave us a bit more information regarding its history and condition.

In the end, we let her know that we were very interested in the property if and when she was ready to sell (we got the feeling she was ready to “let go” of the property just yet). I gave her my card, and she said that she’d definitely give us a call when she was ready to sell, probably in the next month or two.

We’ll see what happens…

For the sake of other wholesalers who are interested in providing me wholesale deals in the future, I wanted to give some feedback on the types of deals I’m looking for, my purchase criteria, and some thoughts I have about purchasing wholesale deals…

- Most importantly, as I mentioned above, I’m always interested in having others bring me deals. I’m looking to buy about 20 more properties before the end of the year, and need all the help I can get to find great deals.

- I mainly invest in Cobb County, GA, specifically in the cities of Smyrna, Marietta, Mableton, and Austell. I’m always looking for great flip properties or rentals.

- I know that a lot of wholesalers are focusing on REO deals these days. To be honest, I have a pretty good handle on the REO market around here (my wife is an agent and we’re friends with a couple of the big REO listing agents), so if there are good REO deals, I’ve probably seen them. That said, other investors might come across something I missed or be able to negotiate a better deal, so I’m always happy to look at any deals (REO or otherwise) that are sent my way.

- My rule is that the first person to bring me a deal is the one I’ll work with on that deal. If several people point me at the same property, I’ll work with the first person who sent it to me. In general, I’m on the MLS first thing every morning, so if you bring me something on the MLS, don’t be surprised if I tell you that I already know about it. That said, if you bring me an MLS deal that I saw but that I purposely chose not to look at, and then look at it based upon your recommendation, I’m happy it to buy it through you if I’m interested. I’ll always be immediately upfront about whether I’ve seen a deal before or not.

- In general, here are some basic property attributes I’m interested in these days:

• Good neighborhoods
• Built after 1965
• Houses under $100K
• Minimum 3 bed, 2 bath
• Brick is better than other siding, but will consider others

- Here are my financial requirements for houses:

• If I plan to rent it out, my maximum purchase price is (generally) as follows:
  
  Rental Purchase Price = ((Rent / 2 – $100) * 150) – Repair Costs
  
  As an example, if a house will realistically rent for $1000/month and needs $10,000 to get it into rental shape, I’ll pay at most:

  (($1000 / 2 – 100) * 150) – $10,000 = $50,000

• If I plan to flip it, basically my maximum purchase price is:
  
  Flip Purchase Price = ARV – $40,000 – Repair Costs
  
  As an example, a house that will realistically resale for $120,000 after getting $30,000 in repairs, I’d be willing to pay up to $50,000.

- I tend to be very conservative with rental comps and resale comps – I don’t look at what’s on the market now (those probably aren’t priced correctly), only what’s sold/rented within the past 4 months within the subdivision (or within about half a mile radius).

Again, if you’re a wholesaler in this area, feel free to shoot me an email, and let’s grab lunch…

Lots of “fun” stuff happened the past couple days:

1. Met with a couple more banks. While they aren’t going to be able to get me the financing I’d like, I may not be in a position to be too choosy; it looks like my best option so far (and I still have some more to speak with) will be high LTV (65-70%) on the purchase price of the property, not including rehab costs. So, if I buy a property for $80K and put $20K of work into it, I’d only be able to get a loan for 70% of the $80K, meaning I’d still be putting up about 45% of the total investment myself. Not great, but at this point, better than 100%.

2. I met a bank rep the other night at the local real estate investors association (REIA) meeting who does rehab loans. Basically, for a small down payment and a couple points, they’ll provide interest-only financing for 12 months at 10-13%. He offered me better terms if I was willing to keep a bunch of cash in a CD in his bank (currently paying 4.25%); specifically, he offered interest-only loans for 12 months with no prepayment penalty, no down payment, 9% interest and 1 point. Not bad compared to some other options, but the part that scares me is the 12 month balloon payment (have to pay off the loan after a year); there’s no guarantee that I’ll be able to refi in a year if the credit markets haven’t improved and my income situation hasn’t changed.

3. I had a great lunch meeting with an REO agent today. She lists a good percentage of the REO (foreclosed, bank owned) properties in the Atlanta area, and thought I had a great plan for acquiring and managing SFH properties. We discussed my goals, my buying criteria, and the areas I was interested in, and I think she’ll be able to bring me some great properties before they hit the MLS, or within 24 hours of hitting the MLS. Without exaggerating, this could be the difference between success and failure in my real estate endeavors. Additionally, she was tremendously pleasant to talk to, had some great insight into the Atlanta REO market, and I think we’d work really well together. I’m looking forward to working with her, and seeing some of the deals she can find.

4. I’m having lunch today with the agent/wholesaler I’ve been working with on a couple offers. He’s done a lot of rehabbing, and has experience as an agent, and I had suggested previously that maybe we should partner on a deal or two (I’d happily do much more of the work if he was willing to “be the brains” and teach me some of what he knows). He and his current business partner want to discuss this idea over lunch. While having partners isn’t a necessary part of my plan, I’m always happy to partner with smart and motivated people, and I think this guy is both.

5. An “Internet friend” of mine (someone who posts on one of the same forums that I often frequent) has been investing large-scale in SFHs for several years now, and has probably learned all the lessons I would likely be learning the hard way. She lives and invests in Florida, and was kind enough to invite my fiancee and me down to Florida to chat, see how she runs her business, ask a lot of questions, and likely learn enough to avoid many of the mistakes I would otherwise make. We’re hoping to arrange something either in the next week or after the wedding, and I’m really looking forward to it.

6. My fiancee and I came to the decision that it would be in our best interest for at least one of us to get our real estate license. This would allow us to access the MLS (the service where all the for-sale properties are listed) and to earn a percentage of the commissions that move around when we purchase/sell properties. For various reasons that I’ll touch on in a later post, we’re thinking she’ll probably be the one to get her license.

So, I’m making the effort…

One night last week I had my first meeting with other RE investors in Atlanta. Specifically, I met with Brad and Jennifer, a two-person team who manage Lang & Thomas, LLC, an RE company focused on acquisition and management of 4-plexes in the north-Atlanta area. While the two partners have only been working together for about two and a half years, they have accomplished quite a bit in that time. They’ve purchased seven 4-plexes, for a total of 28 units, and are continually expanding their portfolio.

Brad and Jennifer had some great advice, and just as importantly, were able to offer plenty of other contacts in the Atlanta real estate game. Additionally, I had a chance to visit their properties (they are smart and have bought all 28 units within a square mile). Who knows what opportunities will arise down the road, but I look forward to keeping in touch with Brad and Jennifer and perhaps getting the chance to work with them at some point.

I would recommend taking a look at the Lang & Thomas blog; besides some great posts, there are also a number of interviews with top real estate experts in Atlanta and around the country.