From Lori Greymont, Rehabbing Adviser...
This is a continuation of our fascinating conversation with remote rehabber Lori Greymont.
Lori’s experience in real estate is varied and diverse. Since 1987 she’s been involved in all matter of traditional and creative deal making – rehabs, wholesale, lease options, sub-2, land contracts, bulk REO, etc...
At the moment Lori’s modus operandi is buying and rehabbing distressed properties across the country, then reselling them in tip top shape to passive cash flow investors as turnkey rentals. She does this remotely from her home base near San Jose, CA, and until recently had never even seen any of the 1,350+ houses she’s turned. Lori has been doing the bulk of her rehabbing in Atlanta for the past two years.
Not long ago we had the chance to corner Lori for an extended, unscripted dialogue about her operation and how she does what she does. We're in the process of sharing some of the key lessons from our in-depth conversation for anyone in Mogul who may want to learn how one of the greats does it, or maybe even follow in her footsteps.
So here’s another slice of awesomeness from our little chat. And keep an eye out for more from Lori to come!
{Mogul Elite members: Download and listen to our conversation in the Power Pack Tools for this lesson.}
What Lori Shares in This Lesson
In this lesson Lori’s going to show you the types of deals she buys and how she finds them. By the time you finish this lesson you’ll have a better understanding of the types of deals you need to be looking for if you want to do remote rehabbing and the best places to look and find those types of deals.
JP: Can you share with us what type of deals you are focusing on, in terms of the type of property and the numbers?
Lori: Our focus has changed a bit since January. Inventory has tightened up so we’ve had to change things a bit. We’ve had to look a bit harder.
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We are buying off of MLS, through wholesalers, REOs and short sales now, not just one source.
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We are looking for 3BR/2BA houses in safe neighborhoods.
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We like it if the house has been sitting empty for a while. If it’s vacant then we get a better deal because they’ve usually been copper mined (that’s when someone breaks into the vacant property and strips all the copper piping out of the house).
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We like houses in general that have been vacant for a long time. We have good rehabbers so we can go in and put in new piping, rewiring, re-plumbing etc. and get them ready to be sold quickly. We can get a significant discount and make a good profit after rehabbing a vacant house that’s been “ripped and stripped.”
JP: So what are you paying on average for these houses and how much are you putting into them for rehabs?
Lori: We are buying them anywhere from $25-$40K and putting anywhere from $8-$15K into the house for rehabs. It’s amazing what we can get done for $15K (new roofs, new hot water heaters, etc).
It’s important to note that we don’t just make our properties rent ready, but we make them flip ready. Meaning that a lot of people, when they are getting something ready to rent, they’ll put the bottom of the line appliances, carpet, etc.
Instead we get them flip ready; installing top of the line carpets, appliances, etc. So when my investor buys the house from me, they rent them immediately with positive cash flow right away. They look great so they rent fast!
JP: What is the average after repair value for these properties you're rehabbing?
Lori: Lately it's been between $55,000 and $75,000.
JP: You said you go for safe neighborhoods. My perspective of what were bad neighborhoods or “war zones” has changed. A lot of neighborhoods that I used to think were bad are really just old family neighborhoods. One’s perspective on what constitutes a bad neighborhood could be subjective. How can you tell if it’s a good or bad neighborhood?
Lori: You are absolutely right. It can be subjective. But one way you can tell for sure is, if the police need to be escorted into the neighborhood, then it's a bad neighborhood! (lol)
The things we are looking for in a safe neighborhood include:
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Are there people living in the neighborhood (or are most vacant)?
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Are people in the neighborhood taking care of their houses? (Are cars on cinder blocks and weeds growing in the yards – does it look like people are trying to take care of their houses?)
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We're looking for neighborhoods where there is some apparent pride of ownership.
We don’t get caught up in the idea of “could I live in this neighborhood.” We may not live in these neighborhoods but other people are and they are fabulous neighborhoods for rentals.
JP: Let's talk about how you're finding your deals in the markets you're in. What are your main sources for bringing in deals?
Lori: We are farming areas by sending out direct mail.
We have a couple of agents mining the MLS. But they aren’t just sending me lists - any agent can do that. They are actually searching through the houses looking for exactly what I want to buy – they know my criteria and then we are writing a lot offers on lot of properties.
We also have about seven different wholesaler teams looking for deals and bringing us deals.
JP: So you've really got your tentacles out there. And one of the keys seems to be that you have market experts working on your behalf to do the initial mining AND screening for you. They know your criteria and they know what you are looking for. They're brining you deals that at least make the "first cut".
Lori: That’s right, you know back in January and before when it was a buyers’ market, you could take just about any property and offer about 75% and have a really good chance your offer would be accepted.
Now, a lot of properties are just going out to owner occupants only to start with for the first number of days – so you aren’t getting access to the leads as quickly. And it’s very cumbersome to make an offer on these properties.
To us, it’s just about numbers. By doing it ourselves, we can't get the numbers we need by ourselves. That’s finding a lot of properties to make offers on to ensure we have a steady flow of properties we are rehabbing. So we aren’t afraid to pay someone to go out and find us deals for us. If the numbers work on my end I’m happy to pay someone for finding me a deal – and I don’t care what they make.
I encourage other investors to not worry about what someone else is making, as long as you’re making what you want to make. Know your numbers and partner up with realtors, wholesalers, etc. who can consistently bring you deals and you both make money.
If you make sure that other people you’re working with know that you don’t care how much they’re making as long as you make what you need to make then they will keep bringing you deals.
JP: Yes, I totally agree with that, and I think any rehabber who doesn't share that perspective is extremely short sighted and really shooting themselves in the foot.
Wholesalers and realtors can be your best friends and bring you a ton of deals if you can be sure to select not only the ones who really know what they're doing and are true market experts, but also if you can make sure they don't have any fear over whether or not you'll care how much money they're making on a deal. Let them make all the money they can, and feel great about doing business with you.
Lori: Absolutely.
JP: If you could wipe out all the ways you bring in deals and just keep one of them, what would you keep?
Lori: Agents on the MLS. Partly because they get the REO’s from the banks and that’s the product we are looking for. Most of the homeowners want to move into move-in ready homes and most of the REOs are far from that.
JP: Are you typically looking for lighter rehabs versus a total gut job?
Lori: We aren’t looking for anything with foundation or mold issues. We are looking for something that’s been “ripped and stripped” (copper, wiring, A/C, missing). Something built in 2000 or 1995 and the roof is showing signs of wear -- things like that, so we can make improvements for the future and get more value for the cost of those improvements.
That's it for now!
Lori shared some pretty amazing nuggets of information here that you can easily use in your own remote (or even local) rehabbing business.
Thanks for tuning into this lesson, and watch out for more coming from Lori soon!
Want to follow in Lori's footsteps? Just to recap, let’s look at the types of houses that she finds are best for rehabbing and flipping to investors or for rental positive cash flow:
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3 BR/2BA
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Safe Neighborhoods
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Vacant for awhile
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“Ripped and Stripped” – copper, wiring, etc. removed/stolen from property
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No properties with major repairs like foundation or mold issues
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Properties built around 1995-2000 that are showing some wear but can easily be repaired with good ROI on those repairs
Lori also shared with us her favorite places to find deals. Here’s a list of people you have to get on your investing team as partners who will bring you deals on a consistent basis and you both can make money. If you aren’t already working with all of these types of people then you need to find each of these types of people to bring you deals:
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REO agents*** (this is huge as they have access to houses that retail buyers don’t want and can get them in front of you first)
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Realtors
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Wholesalers