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The Third Week

Home » Blog » 34 Weeks Flipping Houses » The Third Week

These are the results of the third week of opening up of my business for you guys to see how my wife and I are building back up to 30 deals a year. If you missed the first post explaining what I am doing, please visit This Post.

Note: There may be some confusion as to whether I go to see all of the houses. For the most part, I only go to see the houses for which I give the repair estimate. I don’t waste my time going to see all of the houses. The first week, I only went to see the house I put under contract. This week, I saw 4 or 5 of the houses.

These are the things I did this week:

Marketing

Total Leads This Week: 13

  1. Bandit Signs I had 40 more signs put out this week. There were not as many calls and it may be because I had them put out in a different area. Some parts of town are more proactive in taking the signs down and I did not drive the area to make sure they were still up. After the next batch, I will definitely check to make sure they were put up and stayed up.
  2. Yellow Pages For a picture of my ad, visit the ‘The First Week’ post.
  3. Buying Website This is a little deceiving because some of the leads are from some of my other marketing materials and the people don’t usually mention where they got the website address. So this part of it is hard to quantify. I need to be better about asking them when I contact them. Some of these leads are likely from the yellow pages ads. You can view my website here: http://www.DannyBuysHouses.com.
  4. Realtors One lead from a REO Realtor that I called this week. Next Tuesday we will be having lunch with one of the biggest REO Realtors in town and I will have the Realtor pay for the meal. Just kidding…come on.
  5. Referral One lead from a private lender of ours. She has an owner financed property she wants to sell.
  6. $20 Marketing Cards I put more of these around town. This kind of marketing doesn’t bring leads in right away. It takes time. You can see an image of the card on the ‘Second Week’ post.
  7. Drive For Dollars We got 75 addresses of vacant properties in our target neighborhoods last week. One of our friends is handwriting letters on yellow notepad paper and hand addressing the envelopes. The letters should be in the mail tomorrow. We will probably pay about $75-$100 for this. This is a great job for a teenager, and they will probably do it for even cheaper. I know I don’t want to do it anymore. Sounds like a great idea to save money and do it yourself, but after about 10 you are dreading the decision.

Leads Analyzed

  1. Townhome Rental[Source: Bandit Signs]

    Tired landlord wants to get rid of a 3 bedroom, 2 bath, 978sf townhome. The seller wants $59,000.

    Here are the numbers:

    Asking Price: $65,000 -> $40,000 (went to $40k after asking how much for cash, ‘as-is’ offer)
    Amount Owed: $0
    Repairs: $Unknown – Needs mostly cosmetic
    After Repaired Value: $50,000
    Max Offer: $15,000 ($50k ARV – $25k profit – est. $10k Repairs)

    This is really a rental property at best because there are several houses that just aren’t selling and I don’t think I’d be able to sell it retail unless it was to a landlord. I am passing this one on.

  2. War Zone Owner Finance[Source: Referral]

    A lender wants to sell a property in a bad neighborhood. The sales price is too high and the neighborhood is baaaad (yes, it deserved more than 1 ‘a’). Asking $40k but I know most investors buy properties for in the teens in the area. Next, please.

  3. Great House, But Can’t Do It[Source: Website]

    Homeowner selling a 3 bedroom, 2 bath, 1500sf house, built 1993.

    Here are the numbers:

    Asking Price: $119,000
    Amount Owed: $116,000
    Repairs: $Unknown – Needs mostly cosmetic
    After Repaired Value: $120,000
    Max Offer: $78k – Repairs

    I shouldn’t have to explain why this one will not work. But, this is the kind of house I am looking for. Not that old, in a middle class neighborhood with good Days On Market figures. Unfortunately, they owe too much. Maybe I will get another lead…

  4. Good Central Location[Source: Website]

    This house is a 3 bedroom, 2 bath, 1200sf house that was built in 1955.

    Here are the numbers:

    Asking Price: $Make an Offer
    Amount Owed: $0
    Repairs: $23,000
    After Repaired Value: $85,000
    Max Offer: $32,000 ($55k – $23k Repairs)

    Here are the Repair Numbers:

    Paint: $2,000
    Sheetrock: $1,000
    Foundation: $1,500 (part of one side around a corner)
    Roof: $1,000 (back patio cover)
    Brick Repair: $500
    Re-Wire: $2,500
    AC: $4,500
    Kitchen: $2,000
    Baths: $2,000
    Flooring: $1,500
    New Windows: $2,000
    Rotted Wood: $500
    Landscaping: $1,000
    Miscellaneous: $1,000
    Total: $23,000

    This house is one that I am interested in. It does require a lot of repairs, but I feel it would sell very quickly once finished. It is most definitely the ugliest house on the street (this is what you want). The owner lives out of town and has talked with other investors so I offered close to my Max. I offered $30,000 with a quick closing and he said he would call me. This is where you need to try to get them to make a faster decision so that they don’t go and call a thousand other investors. Some will no matter what, so you don’t want to force the matter. Just politely request that they inform you soon because you are looking at several properties and need to know where your funds are going to be allocated. I will call him soon to follow up if I don’t hear from him.

    I have pictures of it here: Ugly House Pictures.

  5. Way Out Of Town[Source: Website]

    This house is over 4 hours drive from where I live and they owe too much (just bought it a couple years ago with little down payment). You will occasionally get these leads on your website (even though it clearly states “San Antonio and surrounding areas” – I guess surrounding areas is sort of vague).

    If the sellers seem motivated, you can push these properties to other investors on online forums and see if anyone is interested.

  6. Duplex Near Our Old House[Source: Website]

    This house is a 1910 duplex with 1/1 on each side.

    Here are the numbers:

    Asking Price: $30,000
    Amount Owed: $0
    Repairs: $40,000
    After Repaired Value: $90,000
    Max Offer: $14,000 ($54k [60% ARV because of amount of work] – $40k Repairs)

    This house is near where we used to live. My wife and I bought a run down historic house and rehabbed the whole thing. It had been vacant for about 20+ years and sort of had the whole Fight-Club-Paper-Street-House thing going on. We finished the inside and moved in. The outside was still a wreck.

    One time, my wife and a friend went downtown for a ladies night out. They had taken a cab and upon returning, in a different cab of course, the cabby kept asking “Are you sure you want to be dropped off here? This house?” It looked like a giant vagrant-filled el dumpo.

    Here’s a before and after:

    This house (the lead) NEEDS A TON OF WORK. Everything from the roller-coaster foundation, to the gas water heater with no vent in the kitchen (they are living there and I had to tell them that was dangerous). Oh, did I mention the fire that burned the back bedroom completely?

    I made the offer but they are sort of delusional about the value of the place (they were told by someone that the lot was worth $75k+).

    The lesson to take away from this one is that the seller was visibly embarrassed about the state of the house. In these situations you really do need to make sure to only mention the potential the house has and that you know how hard it is to keep up an old house. DO NOT RIP THE HOUSE APART. Have sympathy.

    I have pictures of it here: Ugly House Pictures.

  7. Area Not Interested In[Source: Bandit Signs]

    This house is a 4 bed, 2 bath, 2 car garage 1300sf house in a neighborhood that is not so great.

    Here are the numbers:

    Asking Price: $Make an Offer
    Amount Owed: $0
    Repairs: $11,000
    After Repaired Value: $85,000
    Max Offer: $40,000 (60% ARV – Repairs)

    Here are the Repair Numbers:

    Paint: $2,000
    AC Cleaning/Repair: $1,000
    Kitchen: $1,500
    Flooring: $1,500
    Bath (remodel): $1,500
    Lighting: $800
    Pool Maintenance: $1,000
    Miscellaneous: $1,700
    Total: $11,800

    I was contacted by the executor of the estate (basically, it is an inherited property – you will probably get a lot of these – or at least you should hope to). Told him ball park would probably be in the $30’s and he seemed ok with it. But there are two other brothers that need to be ok with the price. I want to try to buy this one cheaper so I can wholesale it.

    I set my max at 60% of ARV, which will allow me to wholesale if I want to. The house also has a pool and sometimes the costs creep up really fast. I am offering $35,000 and have to wait to see what the brothers say.

    I have pictures of it here: Not So Ugly House Pictures.

  8. Small House with Central Location[Source: Website]

    This house is a 2 bed, 1 bath 900sf house.

    Here are the numbers:

    Asking Price: $25,000 then mentioned $20,000
    Amount Owed: $22,000
    Repairs: $Unknown
    After Repaired Value: $40,000
    Max Offer: $15k – Repairs

    If you noticed, I mentioned the seller was willing to consider taking less than what they owe. They would have to come to the table with money (or convince the lender to take less). That spells motivated to me. It’s a shame the area the house is in is not better.

    I passed this one on to see if someone could make a deal out of it.

  9. Good Inherited House[Source: Website]

    This house is a 3 bedroom, 2 bath, 1272sf house built in 1974, just the way I like ’em.

    Here are the numbers:

    Asking Price: Make An Offer (darn)
    Amount Owed: $0 – I really cannot believe my luck lately with nothing owed. πŸ™‚
    Repairs: $16,800
    After Repaired Value: $80,000
    Max Offer: $35,500

    Here are the Repair Numbers:

    Paint: $2,000
    Sheetrock: $1,000
    Foundation: $5,000
    Roof: $3,500
    Garage Doors: $500
    Lighting: $800
    Baths: $1,500
    Kitchen: $1,000
    Flooring: $1,500
    Total: $16,800

    There is a lot for sale in this neighborhood. I was conservative with the ARV to account for it. This house was inherited and the seller is just wanting to be done with it so she can move before a planned surgery.

    The house showed signs of settling and I just included an estimate to cover having most of the perimeter leveled if need be (It didn’t seem to slope much, but is hard to tell when full of furniture). I offered $30,000.

    I have pictures of it here: Ugly House Pictures.

  10. Townhome In Good Location[Source: Website]

    This house is a 2 bedroom, 2.5 bath, 1700sf townhome built in 1972.

    Here are the numbers:

    Asking Price: $115,000
    Amount Owed: $92,000
    Repairs: about $5,000 from the sounds of it
    After Repaired Value: $130,000
    Max Offer: $84,000 (65% ARV) – Repairs

    Too much is owed on this property for me to be able to buy. I am going to send this out to some people to see if they can make it work and pay me a birddog fee if it does. πŸ™‚

  11. Property Saved From Foreclosure[Source: Website]

    This house is a 3 bedroom, 2 bath, 1600sf house built in 1986, and this one is has the smell of money.

    Here are the numbers:

    Asking Price: Make An Offer (ok because situation is ripe for good price)
    Amount Owed: $900
    Repairs: $Unknown
    After Repaired Value: $100,000
    Max Offer: $65,000 – Repairs

    This is a couple of doors down from a house we did a few years ago. That is one of the things I love about this business. We can drive around in most parts of the city and point out properties we have done. It doesn’t seem like a whole lot when you are doing them, but it really adds up. Especially in the neighborhoods we like. We tried to get one on every street in one neighborhood.

    The seller of this house lives out of town and saved the house from foreclosure for his ex-girlfriend. I’ve never had this situation before, but it represents a good opportunity. I was scheduled to see it today, but the tenant was not available to show it. Now have an appointment for Saturday morning.

  12. Foreclosure With A Pool[Source: REO]

    This house is a 3 bedroom, 2 bath, 1700sf house built in 1960, with a converted garage.

    Here are the numbers:

    Asking Price: $117,000
    Amount Owed: $0 – Bank Owned
    Repairs: $35,000 (this place needs everything)
    After Repaired Value: $155,000
    Max Offer: $65,000

    This bank-owned home has a pool that has not been taken care of. I guess you could say the whole house wasn’t taken care of. It needs new kitchen cabinets, countertops, apppliances, sheetrock repair, painting, flooring, light fixtures, new ac, pool work, new doors, new flooring, demo, etc.).

    I’ve offered quite a bit below asking price ($60k). Don’t be afraid to do that with bank-owned properties. If you are building a relationship with an REO Realtor you don’t want to make them submit an offer this low if the house was just listed or they tell you it is a waste of time. Do NOT waste their time. If a Realtor calls you with a deal, try to drop everything and head over and then get back to them as soon as possible. If you hustle, even if you don’t buy the property, chances of them calling you with another are better. (Note: Do not try to make a deal out of a non-deal just to build a relationship with a Realtor. If you go out of business, your relationship won’t matter one bit.)

    My offer was not accepted and I will keep an eye on this one.

    I have pictures of it here: Ugly House Pictures.

  13. Facing Foreclosure[Source: Website]

    This house is a 3 bedroom, 2 bath, 1700sf house built in 1977.

    Here are the numbers:

    Asking Price: $137,000 (but know they won’t get that)
    Amount Owed: $77,000
    Repairs: $Says Cosmetic
    After Repaired Value: $140,000
    Max Offer: $91,000 – repairs

    The sellers are facing foreclosure but say they have to ability to avoid it. They just want to see about selling it and collecting some of their equity. Not sure why they let it go into foreclosure if they have money to make the payments…

    I told them I would give them a ballpark because I am still trying to feel them out for their level of motivation. Told them I would probably be in the 80’s depending on repairs. This is worth following up on. Time tends to change people’s minds.

Summary

Had some good leads this week. Nothing under contract, but I feel one of these will be given some time.

Still working on getting the absentee owner list. Should have something early next week.

I ordered 200 more bandit signs from supercheapsigns.com. They are having a promotion for 10% off with code ‘HOOPLA’.

[fj_optin type=”random”]
Plans For Next Week

  • Get List of Absentee Owners.
  • Prepare first letter to send to absentee owners.
  • Send Letters to Drive For Dollars Properties
  • Call more REO Realtors.

The fourth week’s installment might be next Friday or Saturday because my brother-in-law and I are going to fly to New Mexico for a couple days next week (weather permitting). Carlsbad Caverns is the destination. Should be fun.

If you have not subscribed, please do so on the right side of this page. This way you will be notified when my new posts are posted. Besides, don’t you want to read about the crazy adventures you can experience as a house flipper? Flipping houses is the best business to be in, bar none.

Stay tuned.


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Comments (52)

  • Michael Johnson

    Great post. I really enjoyed reading this article. Can I borrow $10.00?

    • Danny Johnson

      Yes. But only because you are my brother. You prankster.

  • Dan

    Hey Danny, just wanted to say that I really appreciate what your doing here. I love the addition of photos and the detail you give on some of the potential deals. It seems I stumbled upon your site at the right time.

    While I am by no means an expert, after seeing some of your pictures along with your repair estimates I thought your repair estimates were remarkably low. How do you find such cheap labor?

    • Danny Johnson

      We keep our crews busy and get better prices because they get a lot of work from us. San Antonio is not a very expensive city to live in either.

      Thanks for the compliments.

  • Tara

    Hey Danny!
    Great blog…..I noticed you don’t get leads from wholesalers, any reason? I know alot of wholesalers stink at providing value and a good deal. I’d imagine if a wholesaler packaged the deal up with pictures, comps, repair estimate, etc it would get your attention!
    See ya

    Tara

    • Danny Johnson

      Now that you mention it, no I don’t. I used to get emails from wholesalers but was sick of competing with the hundreds of other investors that were getting the blast. If a wholesaler called me up personally, I would look into the deal. If I noticed a lot of leads coming from one person, I would try to build a relationship with them. But there weren’t that many that lasted. The problem I found in the past was that there was not enough room in the deals.

      I do welcome all wholesale deals. I just prefer to receive a call that I know it is just going to me or a handful of other investors. This has got me thinking. Maybe it is time to reach out to more local investors.

      Thanks.

  • Tara

    That’s what I’ve found. Wholesalers just blast out an email to all these investors. No one will sit down and ask what I’m looking for in a deal area, profit needed, etc etc. I know a guy up in Minnesota who averages $22,000/wholesale…..and that is on houses with an ARV of $130,000 or so!! He packages the deal up, real professional stuff and has no problem wholesaling.

  • Joyce

    Hi Danny!

    What a great idea, to let people ‘walk along’ while you are doing your deals.
    It is especially good for those of ue who keep studying and studying and still don’t have a clue!
    I hear all the time, just DO IT, but I am still afraid that, when they start asking questions about this or that, I will not be able to answer.

    Thanks!

    Joyce

    PS Do you have (I just signed up today so I don’t know yet) a place where people can sign up (for everybody to see) with rehabbers (they should add that distinction and the areas where they prefer to work, to their name), wholesalers, flippers, investors, etc. etc.?
    A list of private or hard money lenders?

    Sorry if asking too much.

    • Danny Johnson

      Joyce,

      Thank you.

      No matter how experienced you are, you will never be able to answer all questions. That is what you have mentors, lawyers and title companies for. There is no shame in letting someone know that you will have to check into that and get back to them.

      No, I do not currently have what you mentioned. Though, it is a good idea and I will consider adding something like that.

      I am working on a free lead tracking part of the site (I’ll explain this in the near future) and that would be great place for it.

      Thanks.

      Danny

  • Brian

    Thank you for taking the time to share this information. I am finding it very interesting! How do you determine the ARV? Is it through experience? You’ve looked at enough houses and sold enough houses to know what they will sell for?

    How would you suggest a newbie starts out determining what the ARV would be?

    Thanks!
    Brian

    • Danny Johnson

      I am checking comps on my local MLS. As part of your team, you should build a relationship with a Realtor or two. They will be able to run comps for you to help you determine the ARV for properties.

      Some people use realquest.com for determining ARV. Just make sure you are not in a non-disclosure state as they do not report what houses are sold for and the data is usually a best guess in those states (Texas is one of them).

  • Matt K

    Good info Danny.

    Gotta love those inherited houses that need work! Those always seem to turn into good deals.

  • Mathew

    I have a question that relates to the negotiations. When you make offers that are significantly below asking prices (which most are if one’s doing things right), how do the sellers react? Do you try to justify your offer by explaining specifically how you reached your offer? If you tell the seller your offer formula, then wouldn’t you be showing your hand and losing your negotiation power?

    Do you still have leftover bandit signs from the first 100? On average, how many do you put up per week?

    • Danny Johnson

      Mathew,

      Sometimes sellers are disappointed, sometimes angry. Most of the time they understand. I tell them that I aim to make a profit and cannot pay full market value. When my offer is really, really low, I try to explain the things that they may have not thought about. I never tear the house apart, ever. The formula is usually not given out.

      I’ve been trying to put out 50 signs every two weeks. None left of the first 100. Halfway through the 200 I ordered.

  • Shola

    Hi Danny,

    What are some of the best ways to drive traffic to your “Buy” site?

    Do you use red ink pen and invitational envelopes with your yellow letters?

    Thanks,

    Shola

    • Danny Johnson

      Shola,

      Best ways to drive traffic to your site is to use your web address in your other marketing. And, of course for any website, pay-per-click and SEO.

      I have used red ink before and it did not seem to make much of a difference. Right now we are using just plain white, letter size envelopes. I’ve used invitation type envelopes in the past and got the feeling that people felt deceived when they opened them. Not sure if it made much of a difference. I think the hand addressed envelopes with a stamp do well getting opened. Here’s a great tip: If you use a PO Box for your return address, use the actual street address for the post office with your box number as ‘#boxnumber’ like an apartment number, instead of PO Box.

      Danny

      • GaryParker

        Great tip on the return address. I am going to verify with my local PO and start doing that.

        • Danny Johnson

          Thanks. I remember finding out about that and thinking what an awesome way to not make your letter not seem like junk mail.

  • Barry S.

    Hi Danny,
    I just signed up for Biggerpockets.com and stumbled upon your blog. I am a newbie in the Denver metropolitan area. Your blog has been a great motivator to get me to make my 1st purchase. I look forward to your next posts.
    Thanks.

    • Danny Johnson

      Glad to hear it Barry. Just make sure you take the time to thoroughly do your due diligence before signing anything. Let us know how things progress.

  • Steven Blanton

    Once again great info you’re awesome!

  • Steven Blanton

    Also, you had said previously that you don’t want any rentals right now. I understand your reasoning but do you have any at all? Did you try turning the management of them over to a management company? I would like to have a good mixture of rentals and flips in my bag at all times if possible.

    • Danny Johnson

      Steven,

      Great, great question. Let me explain a little. I just prefer owner financing to rentals. The buyers actually own the house and are required to do all repairs and everything associated with owning a house. All we have to do is make sure they are paying. I’m not against rentals, they are just more work. I do have some, but I don’t actively seek more. Rentals are fine and good, but I’ve seen a lot of people run into problems when they have a lot of units and vacancies get out of control. Management can curb that, but some people also finance rentals to the hilt and get burned really badly when they find out this is not a perfect world. Things look good on paper, but when you’ve got new tenants ripping your house apart and not paying, those numbers can go out the window. Cash reserves are a must.

      Danny

  • Steven

    Makes perfect since. Great point!

  • Chris Crawford

    Hey Danny, it seems like most of your deals are from marketing? Just wondering why you don’t go after REO’s? Make a lot of lowball offers and hope to get a few bites.

    • Danny Johnson

      Chris,

      It’s always about cycles. When I first started (about 8 years ago), I did mostly motivated seller marketing, like I am doing now. Then, after the housing bubble burst, the competition declined big time and we bought mostly REOs and barely did any marketing. Now we are back to where there is a ton of competition and the Realtors have little reason to call me when they have 10 other people willing to pay way more than me for their listings. I was making offers on listed properties but it has proven to be a waste of time because I keep getting outbid. My time is better spent where there is a lot less competition. Everyone is going after the low hanging fruit. You really have to reevaluate your strategy every several months and change with the circumstances.

  • william (Bill ) Hall

    From the time that you buy a rehab. What is average time that it takes to sell, once the repairs are complete?

    • Danny Johnson

      Bill,

      This all depends on the area the house is in and the level of rehab we do. Sometimes we will sell a house within a month (not often these days), but typically it has been 90-120 days for us as an average.

      We do start dropping the price to make properties move if there is not much action. Some investors get stuck with properties because they refuse to budge on their price.

  • william (Bill ) Hall

    If I have to wait 90-120 days after the rehab, I will be in trouble. If you were in my shoes, would you stick to wholesaling 100% until reserves are met. How much of a profit should I expect to average per house by wholesaling and what is the time frame from buy to wholesale?

    Thank you

    • Danny Johnson

      Bill,

      The holding period may be different in your area. You really need to have your Realtor find out what the Days On Market is for any investment property you are looking to make offers on. This will help you to determine how long it might take to sell. The days on market can vary quite a bit from neighborhood to neighborhood.

      It is much safer to wholesale at first to build up some reserves and to have some money for marketing. When wholesaling, profits can vary from around 2,000 to 50,000 or more, but typically about 5k is what a lot of wholesalers shoot for. It all depends on how much the end buyer investor is willing to pay for a certain house. The best way to wholesale is to find active investors in your area and find out exactly what they want and what their buying criteria is and then finding them those properties.

      You can even birddog some of the first leads and ask that they show you how to determine if it is a deal or not so that you know how they are analyzing them for future reference.

      Make sure to look for the real players to find houses for. You don’t want someone that buys 1 or 2 houses a year, because they won’t be interested or able to buy much from you. You want someone buying a lot so that they will likely buy whatever fits their criteria.

  • william (Bill ) Hall

    FYI on the 3rd week #6. This will not open for me on my Mac or PC.

    Here’s a before and after (click to view larger image):

    • Danny Johnson

      Bill,

      Thanks for letting me know. I’ve already fixed it.

  • william (Bill ) Hall

    Thank you for taking the time to answer so many questions from everyone!

    • Danny Johnson

      Thanks for taking the time to say thanks. I know it is appreciated, but I always like to actually hear that it is.

  • william (Bill ) Hall

    What was the cost of the “after” on number 6. It looks like a lot. Great house you have there. If you have the rehab numbers, holding time… that would be great.

    • Danny Johnson

      Bill,

      That was my previous private residence so I would prefer to keep those details private.

  • Larry Copling

    Danny:

    I moved here to Dallas about 2 1/2 years ago, after living in South Florida for a total of 14 years. My wife (at that time) and I first got involved in REI there and I am very familiar with the South Florida market. However, it has now been a few years and I am not very familiar with the Dallas (or TX market) and I would like to get back into real estate investing. Your information here is very helpful, in that regard, but I do notice one thing you don’t seem to do- Sub2 deals (subject to existing financing, signing over deeds). Has there been a change in the law, or is that something that doesn’t fly in Texas? It seems like you are leaving lots of money on the table when little or no equity is the situation.

    • Danny Johnson

      Hey Larry.

      It is really simple when it comes to how I do things. I want a fantastic discount no matter what. Getting a house sub2 without any equity or very little equity is not a deal to me. Just what I prefer.

      People do make money doing those deals, I just feel like there is more work and risk involved. Buying a house super cheap is not really risky.

  • Sarah

    House #6 looks extremely expensive… was it worth all the fix you put into it.. i was planning on buying a house in los angeles and putting a lot of money into it… to make it look like #6.. it looks amazing.. i’m wondering after you fix it.. will you be able to sell it for a lot.. becuase it looks like a masion… what if your house (like #6 looks like a mansion) but the comps dont sell for as much but you put so much work into it .. will you get back that amount?

    • Danny Johnson

      Yes it was worth what we spent to fix it (even though we spent almost double what we estimated to repair the house). But, that only worked because we bought it at a price that allowed us to do that and still make out. It is really all about buying the house right so that mistakes or hidden costs don’t put you upside down. Had we spent 3 times what we intended on the rehab, we would have lost money.

  • Sarah

    Also could you show some more before and after picture of other houses you do… #6 is absolutely amazing… do you do that type of work for all your houses…

    • Danny Johnson

      That one was a special case because we actually moved into that one and fully intended to do that when we bought it. We do not do that level of rehab on all of our houses.

  • Sarah

    Just have to say again.. House #6 is amazing. Danny, need your help. I am purchasing this house and I am going to renovate it and live in it but i want to make it as amazing as your house. Any ideas what i can do to the inside and outside to make it spectacular like yours.. here is how it looks now.. http://i41.tinypic.com/mcckdi.jpg what can i do to the front and the inside ?

    • Danny Johnson

      That’s a tough one. The house we did already had all of the architectural detail and we just rebuilt and spruced it up. If the house does not already have the character, it takes a lot of creativity (read money) to get it looking like something spectacular. Paint does go a long way. The right colors and awesome landscaping will go a long way on that house.

      Sorry I couldn’t be of more help.

  • Sarah

    When you say read money you mean the magazine?

    • Danny Johnson

      No. I was just referring to the fact that it can get expensive and require a lot of money to change the details of a house to make it more architecturally pleasing.

  • marjorie

    Hi Danny,

    When you make an offer on an REO are you a cash buyer and is it in your name or company name. I heard that banks are starting not to accept offers in LLC or are not allowing you to do double closings. I’m just trying to understand how to write up an REO as an investor without jeopardize my license. Help!
    Are you a private lender?

    • Danny Johnson

      If you are a cash buyer, or intend to sell it to a cash buyer, write it up as cash. If you are going to be using a loan, you should probably state that. Most won’t be happy if you state cash and then end up telling them a loan will be involved (even if private money loan or hard money) because they have cash deeds they use for cash sales.

      I’ve not heard about any banks not accepting offers from LLC’s.

      I’m not a private lender.

  • Howie J

    This may seem like a dumb question, but when how do you conjure up your AFV on most houses? AS well, when someone owes a larger amount on the house, does that scare you away in the sense that even with you buying the house, they will still be in the negative? Basically what I’m asking is where do your profits come from in cases like #13?

    • Danny Johnson

      Hey Howie.

      These are good questions.

      I figure out the ARV by looking at comps (houses that are similar that have sold recently) from the MLS. This is done right after I get the lead. If you are not a real estate agent, you should work on building a relationship with one so that you can get these comps to determine ARV for leads.

      If someone owes a lot on the house to where there is not enough equity to work for me, I don’t bother with it. I just pass on the lead or throw it away. Some investors do what is called a short sale where they offer less than what is owed and the bank will decide whether to accept or decline the short sale. Short sales can be quite a bit of work and you never know if the bank will accept it (which could put the seller in a tough position). There are some other options like buying ‘subject to’ the existing mortgage, etc., but I don’t recommend those most of the time. My philosophy is to just buy a house as cheap as possible so that you have a lot of options.

      They won’t be in the negative because I cannot buy the house because they owe too much. When I buy a house, the liens have to be paid off. Number 13 has enough equity as they owe less than what I would probably need to buy it for (as long as the repairs do not cost too much). The difference between the ARV and the Max offer provide the room for the repairs and my profit (as well as closing costs and holding costs). In this case, had I bought it for $80,000. There would be a spread of $60,000 for all of those costs and profit as the ARV (resale value) was determined to be $140,000.

  • Perry

    Wow, this is such an amazing blog! Thank you so much for your hard work! πŸ™‚ Could you tell me how do you find contractors? πŸ™‚

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