I’m sure you’ve heard this before, maybe even from me. “Open Houses dont sell houses, agents just use them to find new buyers.” Although I love this saying, I have infact sold a rehab from an open house before so it’s more of a generalization than an absolute. With this being the slow time of the year we were determined to get some live bodies through The Target House. If we were in Spring or Summer we’d likely have seen some offers by now. This house sells itself, so it’s just a matter of increasing the traffic. To heat things up a bit last week I dropped the price $20k, we’re not playin’ around here guys and San Diego is waiting. After talking to my ad rep at The San Antonio Express-News classified department I learned there was the City-Wide Open House Edition this weekend in which they run color photos of the homes for you both Saturday and Sunday. I had this great idea to contact the listing agents for the other 4 houses for sale in our neighborhood and get them all on board with me and even had the newspaper agree to running our ads all next to each other to increase the impact. Needless to say none of the other agents took me up on it, even for the measly investment of $129.00 for both days. It’s cool, I’ll be drinking a Corona on the beach in S.D. and their listing will still be sitting there unsold. It still amazes me at how slow the local agents are compared to real estate professionals out West, maybe it’s the size of the commission checks, the heat, I don’t know but when it comes to getting something sold why not try everything possible?, especially after what we went through to get to this point. Without the other agents on board I was still able to work some magic and get my ad front and center, smack dab at the top, #1 spot for both days.
The turnout was great, between both days I had about 50 people through, including some agents, a neighbor, a historic home buff and even another prior owner of the home. This guy is probably 80 years old, he actually flipped my house in 1978. He bought it for $21k, his brother built new cabinets for the kitchen, they painted the whole inside white and resold it 4 months later for $42k. Great story. Yet more history from this house, and also goes to show people have been rehabbing houses forever, you just never heard of it until all the TV shows came out. He spoke of missing items which included a huge crystal chandelier that was in the dining room, my bookcase leaded glass doors that are now missing and a built-in buffet with beveled glass that used to be on the dining room wall, all of which are long gone by now unfortunately. We have another showing already scheduled for Monday which I have a suspicion could be an open house attendee coming back with their agent for a second look. After all this work in getting people through the house it’s important to have them leave with something, a little momento if you will. I made some quality color glossy card stock flyers and attached the mls printout and floorplan to the back to ensure they had something to refer to, and all the info they needed, if they were the slightest bit interested in buying. This is another tool I dont see getting utilized here by the agents in Texas. All in all, the open house was great success, tons of incredible feedback as everybody was just floored by the remodel and getting 50 live bodies through the house might have just givin it the exposure it needed to get something in writing soon. Thanks for following, here’s some parting factoids for you to ponder:
1. Open Houses do help sell houses.
2. Listing agents dont “sell” houses.
3. Houses are not sold, they are bought.
The Target House has been on the market for 22 days now and it feels like I am in some kinda weird holding pattern. No landing, no taking off, just holding course. As soon as this house sells we are moving back to Sunny San Diego so I don’t want to start any new rehabs while we wait. We are sooo excited to move back we can hardly stand it, so its hard not to focus on this sale because there’s so much hanging on the line although its the last thing real estate investors wanna do. House Flipping is in my blood, if I’m not renovating something and using my creative skills I go crazy. To keep busy now we’re working smaller deals while we wait such as the Wholetail House which is due to close on December 15. The San Antonio Real Estate Market stays pretty good all summer but as soon as school starts in September things really slow down. Just like in San Diego, once the holidays start nobody really wants to move so you can easily be stuck waiting for January if your listings don’t sell. Although I totally anticipated this, it seemed we might have got lucky again when several potential buyers returned for multiple showings the first week but we haven’t seen any offers from them yet. The showings were better than average up until last week but now it seems to be tapering off a bit. I’m holding advertised open houses and even hung up Christmas lights so we’re working all the angles. San Antonio MLS has a neat feature where you can perform a “reverse prospecting” search. This allows you to see which Realtors are emailing your listing out and then their clients response if they are interested. As long as I see it getting emailed out, and clients checking interested, we’ll continue to get showings. This wouldn’t be the time to start panicking and dropping your price since there’s way less traffic this time of year anyway but I’ve got some new marketing ideas planned for next weekend that should heat things up.
San Antonio Resale Homes are down 20% when compared to Q3 2009, similar to what’s happening to the San Diego Real Estate Market right now. A lot of this is due to the tax credit which pulled alot of sales forward but I sense a little slowing in general here in Military City USA. The good news is that for this same period prices are up about 8% whereas in San Diego they’ve lost about 2 points. There are 3 factors we’re dealing with right now with the sale of the Target House; the tax credit theft of Fall sales, the usual buying seasonality factor and last but not least the fact that we have a specialty property that’s above the median home price in which the most activity occurs. I always say I only need 1 buyer, cross your fingers that we get him during the holidays and don’t have to wait until spring 2011, after all half of this business is total luck!
There are many ways to make money in real estate. If you are a regular follower of the blog you know I specialize in major structural rehabs referred to as “Real Estate Merchandising or, Retailing”. Real Estate Wholetailing refers to an investing avenue that is a hybrid between traditional Wholesaling and Retailing.
When Wholesaling Real Estate typically the investor ties up a house under contract after finding a great deal and then scrambles around trying to sell his option, rights, or contract to another party who actually has the funds to close on the deal. Many wholesalers don’t actually have funds to buy the properties but simply act as bird dogs searching out the deals. Good deals always find money. Wholesaling real estate is also referred to as flipping contracts because you rarely ever take physical possession of the property. It’s challenging because since you don’t actually own the property you have a short window of time to line up a buyer who also must have cash to close the deal. Flipping REO’s is common as well and investors find these deals in MLS. Here in Texas the purchase contract actually allows for a option period for up to 2 weeks with as little as $100.00 down. If you write “or assignee” after your name as the buyer you can assign your rights to your third party buyer at the title company. This makes it very easy for wholesalers to tie up deals and then shop them around. In other states like California you would use typical contingencies to let yourself out of the contract and your earnest money would be on the line. Wholesalers typically use bandit signs, buyers lists, Craigslist and other grass roots methods to market their property quickly and try to line up a buyer at a slightly higher price in order to make a profit. A typical wholesaling fee would be around $3-5k but this isn’t much for passing off your deal unless you are wholesaling 5-10 properties a month. In order to find a buyer fast without the exposure of MLS you must have a great deal and pass on the equity to the next investor with a sales price around 55% ARV. This would get you to the 60-70% ARV less repairs that most investors look for. If this is all new to you and sounds great, be careful because if you go around your town tying up a bunch of houses and dont close on them, you’ll quickly get a bad name and the REO agents wont accept your offers anymore.
Wholetailing Real Estate refers to the practice of finding this same deal but closing on it instead of selling your contract rights to another investor. When Wholetailing we like to close on the house quick vs. Wholesaling where we want as much time as possible to find another buyer. You must have the funds to actually buy the house in this case but as the actual owner you are able to put the property in MLS and have way better exposure to potential buyers and increase your net profit. Not all houses make good wholetailing prospects. I look for clean, solid houses in good areas that someone could actually occupy themselves right away. Fixer uppers sell fast in MLS if they are priced right, usually even faster than retail homes. A wholetail house would be something clean enough to live in but priced way below the comps that maybe needs a little TLC. Sometimes its nice not to always butter the houses up with all the latest faux perganteel finishes, and drive retail prices to the max, there’s always a good market out there for solid modest homes at lower prices in good areas.
I bought this house in a great high owner occupied neighborhood here in San Antonio last week for $115,000. It’s a fairly clean original condition 3/2/2 1600 s.f. ARV is $229,000 all day long, so I paid 50% of the value of this home if it was fixed up. My options would have been to rehab it with a new kitchen, both baths, flooring and paint and spend about $40k in repairs in order to sell it for $229k or in this case I am opting to Wholetail the property in MLS for $159k. At this price its a scream of a deal and my phone is already ringing off the hook. Why did wholetailing make sense on this deal? If I were to have rehabbed it I’d have a cash basis of 115+40=$155k. Selling it to a retail buyer for around $225k, paying some fees and closing costs would have maybe netted me about $65k. Wholesaling the deal would have only brought me about $5k. With my Wholetailing method if the house sells for $159k as it easily should, the profit would be around $45k less 2% realtor fees for only spending a few hours on the phone and taking 2 trips over there. With this deal we advertise it As-Is so we dont have to contribute to repairs or closing costs. Additionally, I have way less risk at this sales price compared to a full retail sale competing with all the other homes in the neighborhood. A great exit strategy also exists as I could dump it in a day with one phone call for $125k. If you also figure I don’t have to put $40k in for the rehab, my ROI is also actually higher, holding time shorter and less personal time involved in the deal. Consider wholetailing the next deal you get if it makes sense!
An end to our San Antonio chapter has come… The Target House is done! It’s going to make someone the ultimate urban nest located in the heart of the Broadway revitalization area. It didn’t go down without a fight however, yesterday right before photo time my lawnmower broke so I had to rush and buy a new one. Then on the way back I happened across a guy with a 1923 Model T who by chance was just 2 blocks away from the property, I was so excited to get him over for the photo shoot I dropped my camera. It’s really crazy because a couple of weeks ago I had this idea to include an old car but it didn’t materialize until the “day of ” and then it literally fell in my lap. Needless to say we postponed the shoot one last day and had the guy bring the truck back, so early this morning I got everything handled and it’s now officially done and For Sale in MLS for $399,000. Any serious preapproved buyers should call me at (210) 388-2952 for a private showing. I’ll make a before and after video as soon as I recover and get to know my family again (if they recognize me). I inserted tons of house porn below, please leave me some comments!