Next Steps

I decided I could buy this house.

The numbers looked like:

Purchase price: $45,000
Rehab costs: $10,000
(I include my marketing and holding costs as part of the rehab.)
We are guessing the appraised value will come in at $90-95,000. At $90,000, my hard money at 70% of the as-repaired value would mean my mortgage will be $63,000.

Let's do the math backwards and see how this works:

Assume my mortgage amount to be $63,000
- minus $45,000 (purchase price)
- estimate $5,000 for closing costs (probably high)

This leaves $13,000 left for the rehab. What isn't used for rehab is mine to keep (and to pay interest on).

So for this property, I will have enough to buy the property, rehab it AND put a little in my pocket.

So I decided to buy it.

I called my wholesaler immediately after inspecting the property and told him I'd take it.

The next day we met and we filled out an assignment of contract. This is nothing more than a document where I agree to accept the sales contract that he's got on the house for a fee. The fee is how he makes his living.

Here is a sample assignment of contract

So, do I care that he's making $5,000 on the deal. Heck no! I stand to make plenty. I know folks who really get hung up on how much a whoesaler makes. I really don't understand that. As long as the wholesaler leaves room in the deal for me to profit, I don't give a hoot about what he's making because it just doesn't matter to me. He's got the house I want, so I gladly pay what he's asking so that I can move my financial goals forward.

If you have endless hours to ferret out deals and you want to tied them up with a contract in hopes that you can find a rehabber to fix them, go for it. For me, my time, and my goals, I rehab.

Now, what I'm looking at is a no-money down deal. In fact, I'm making some money at the beginning! You know, I do these deal quite frequently, yet I still have folks tell me that you can't do no-money-down deals. Or, they look at me funny like I'm pulling a fast one. Folks, these deals ARE out there!

Tomorrow, we talk about appraiser toils and trouble!