Last week, at one of the sub groups of the AZREIA meetings, there was a guy who talked to the group about his REI business here in town. This was a local investor and was very forth coming with how he approached his business. He's pretty successful, he has bought 10 houses year to date..
Here's some notes:
- He sold all 40 of his properties in the past years to do his new strategy: fix & sell
- 1 or 2 bedroom are not appealing because they have high turnover rates
- He buys directly from owners, no MLS.
- Several kinds of marketing is necessary to be successful
- He places advertisements where only a few competitors are
- Provide multiple offers
- Average profits: 40-50 gross margins 20-25 gross net
- Bought 15 houses in 2004
- Year to date, 10 homes
- 20% are in bad shape..
- Higher the price, the easier it is to get to the Maximum Allowable Offer (MAO)
Price break down:
-4k selling commision ($1000 + 3% to buyers agent for a total of 4%)
-4k closing costs
-4.25k Interest taxes insurances (6 months start to finish)
$ 52,5k Maximum Allowed Offer (MAO) WOW he's buying property at 55 cents on the $$
- Price to buy --> Rule of thumb .70 (price of house) - repairs
- 8 full time employess
- 100 houses --> 10 offers --> 1 deal
- His deals median -- buying 80 k ... selling 120 k