Archive for July, 2015

Market is Hot? Don’t Let It Mess With Your Numbers.

You may have noticed that the Atlanta market in general is hot right now. Prices are going up. The newspaper is telling people values are going up. CNN, Fox and more are reporting more new developments every week it seems. If you are a homeowner, this is the news you have been wanting to hear. ‘Sellers’ market!’ is being proclaimed by agents in recent months and to a reasonable degree, that is the case.

So where does this leave you as a wholesaler? I would argue it leaves us in one of a few positions:

  • Ride the wave and pay more for properties and hopefully wholesale for higher LTV’s
  • Learn more about creative financing
  • If you want to wholesale, stick to your formulas that you know work based on today’s values

Which is the right answer? As a wholesaler, clearly number 3 and to some degree number 2 if you want to branch out from just wholesaling. Yet answer number 1 is the answer that seems to be taken by the majority of wholesale deals that cross my desk.

Why is this? Many times it is new investors that are simply getting caught up in the excitement of getting that ‘first deal’ in hopes of a quick check. Sometimes it is wholesalers with larger Buyers list who ‘hope’ someone will bite on their deal. Sometimes people ride, in my opinion, the rather slippery slope of speculation of future values. Sometimes, some people just need to keep pushing inventory just because they do ‘volume’.

Regardless of our thoughts on any of these strategies, the bottom line is the focus on numbers that make sense seems to be secondary to whatever ‘hype’ is floating around. This is not a good formula for you or for your Buyers.

For instance, let’s take a look at East Atlanta. Considered a high competition area, wholesale deals here are now being put out as ‘deals’ for triple if not quadruple where they were just nine months ago. This is pretty drastic. While values of renovated homes or new construction have indeed risen, it is nowhere near as much as the price of several deals. This is not the formula you are looking for!

Consider the rehabbers stock formula (and yes some of your Buyers will use 60 or 65% instead):

ARV x .70 minus repairs minus wholesale fee = your maximum offer

Example deal that crossed my desk that doesn’t work:

                        $369000 x .7 = $258300 – $70000 – $10000 = $178300 maximum offer

On this deal above, the asking price was $220000 to me as a Buyer. We estimated the actual rehab as $150000-160000. As you can see the numbers are off and by a significant amount. We will not get into the issue on estimating repairs as a wholesaler as that is for another day. What I want you to notice is the deal simply does not work without a massive amount of risk or by hoping you have contractors that work for nearly free and Home Depot is in the ‘donate to an investor’ business. And while I recognize many rehabbers have different numbers, in our market, Buyers don’t tend to be off by $80000 from each other in renovations for this price point.

Here is another real deal with numbers that work:

                        $350000 x .7 = $245000 – $80000 – $10000 = $155000 maximum offer

In this scenario which is a real deal I am looking to close right now, the wholesaler is into a property for $152000 and is selling to me for $162000. He will make 10k gross on this deal and I get the house.

This particular deal is a lot harder to come by these days in our market with prices rising but they are out there! You as a wholesaler must stick to your guns and not get caught up in the hype of ‘low inventory!’, ‘prices are rising!’, and ‘you have to pay more to get anything!’ And while there may be some truth to these statements, the reality is the deals where the numbers make sense are still out there. You may have to dig harder to find them. Don’t pay more just because it ‘seems like you should’. This is a recipe for disaster in our market. Each market is different so if you are outside of Atlanta, adjust accordingly but stay conservative!

The above mentioned deal has been worked on for months before the Seller finally decided to part with it at a price that made sense for everyone involved. However it took lots of patience and follow up.

So what should you do to ensure you are getting deals that make sense for your Buyers?

  • Market, Market and Market consistently
  • Make sure you know what your Buyers want and the numbers/formulas they typically use
  • Don’t overpay
  • Use verifiable MLS comps that make sense for the deal within the last six months
  • Don’t overpay
  • Get the full scoop on the property to the best of your ability so when you present it, your Buyer quickly gets a ‘feel’ for it to make a quick decision
  • Don’t overpay

You may have noticed a theme… No matter what you do, Do Not Overpay!

For example, if you are at 75% ARV and the ARV is only 80k, these are small margins considering the work that goes into a rehab. Even if it were at 70% or even 65%, the margin is still rather small. It may not be worth your Buyers time if the rehab is of any significant size. If the values are higher, the spreads are bigger but also remember the Buyer pool for your Buyers is smaller so the percentages to use still don’t change very much, if at all.

As this market continues being hot, stay diligent and stick to your numbers! You’ll be much happier as you will have success allowing you to rinse and repeat. It may take a little more work with the increased competition but if you are consistent, it will pay off.

Stick to the numbers, don’t overpay and success will meet you at the finish line of most every deal you get.

Frank IglesiasFrank Iglesias is an active wholesaler, rehabber and landlord in the Atlanta metro area who enjoys creating win-win real estate transactions. Leveraging a mostly virtual staff, Frank has taken working with virtual assistants (VAs) to a high level where they do the majority of the work necessary to run his real estate investing business. As a result, Frank is able to do less while accomplishing more so he has the freedom to spend more time with friends and family and teach others to do the same. Frank is also the leader of the Atlanta Wholesalers Group.

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Why You Should Be Using Mobile Apps with QuickBooks

Intuit discontinued its own QuickBooks mobile app a while back, but there’s still plenty of processing power available for your smartphone or tablet.

In days gone by, running a company was a 40 hour per week proposition. You might have taken work home some evenings or gone into the office on weekends.

Those days are over, thanks to the internet and mobile technology. This fundamental change in the way we do business means that it’s now hard to get away from work. Your smartphone and tablet are usually within easy reach, and they’re always tempting you to check in.

On the flip side, that kind of 24/7/365 accessibility has numerous benefits. There are, for example, apps that can be integrated with your desktop QuickBooks company file, which enable you to:

  • Make sales wherever you are,
  • Document expenses as they’re incurred, and
  • Monitor employee time for payroll purposes.

Let’s take a look at these in more detail.

Mobile Sales

Figure 1: One of the oldest apps that integrates with QuickBooks is GoPayment. You can process transactions on your smartphone or tablet from anywhere.

Payment-processing on smartphones has become commonplace these days. You’ve probably seen merchants accepting credit cards on mobile phones in one of two ways: by swiping the card on a small card reader that attach to their device or by entering bank cards numbers directly.

Intuit’s GoPayment lets you do either. You can download the free app and process a customer’s payment on your smartphone. However, you still have to download it into QuickBooks and either create a sales receipt or match it to an open invoice. This isn’t a difficult process once you understand it, but you must be sure to do it correctly from the start. We can do some practice runs with you.

Benefit: Improved sales that aren’t dependent on location

Travel Expenses On the Go

One of the smartest, most useful apps that has ever been created is the expense reporter – particularly when used by your road warriors for on-the-go expenses. There are a handful of these. Travelers can record expenses in two ways: they can either enter the information directly or snap a picture of a receipt with a smartphone. When your employees get back to the office, they’re able to prepare complete expense reports, whose approved data can be transferred into QuickBooks.

Concur is one of these apps. When you set it up, it imports Account Codes, Customers, Jobs and Classes, and Vendor and Employee Records from QuickBooks so that these can be assigned for each expense entry. Credit card transactions can be imported directly. When an expense report is completed, it can be sent to a manager for approval, and reimbursement is then deposited in the employee’s bank account.

Intuit's App Center
Figure 2: Intuit’s App Center is home to hundreds of add-on applications for QuickBooks.

Tallie works similarly. It can automatically categorize expenses and alert approvers to expense policy violations. Used in conjunction with and SmartVault, it can accommodate a sophisticated, seamless accounting workflow. We’ll see more multi-app integration as cloud-based financial solutions mature, but if you’re going to attempt such a setup, let us help you with the initial mechanics.

Benefit: More accurate, policy-compliant expense reports

Time-Tracking and Timesheets

If all of your employees walk through the office door every morning and stay there, you don’t need a mobile app for time-tracking. But for businesses whose cash flow depends on recovering and recording every minute of billable time, a smartphone time-tracker is ideal.

TSheets Time Tracker can help improve your bottom line in numerous ways. This particular app:

  • Accommodates real-time mobile data entry,
  • Tracks employee locations using GPS, and
  • Creates timesheets that can be synchronized with QuickBooks, tracking billable time by customer, job, employee, etc.

Benefits: Employee accountability; recovery and correct classification of all billable hours; and less time required to create timesheets.

Moving Toward Integration

Given the size limitations of smartphones, some mobile apps contain only a subset of the features found in their desktop counterparts. But that subset is chosen based on the needs of mobile users.

Fewer features mean that your learning time for the mobile apps that integrate with QuickBooks will be minimal. But the steps to sync with QuickBooks must be followed to the letter, and you may not be familiar with such a process. We want you to experience the benefits that these smartphone solutions can offer without compromising the integrity of your QuickBooks company file. Let us introduce you to these forward-looking, beneficial tools.

Karen BershadKaren Bershad is The Small Business Advisor. Most small business owners have a challenge handling all the different areas of running a business. The accounting can be a challenge, particularly if the software seems overwhelming. The Small Business Advisor is what you may need to get you to the next level of your business. We work at your office or provide off site assistance in getting things under control by providing a wide variety of services that are specifically for the small business.

Contact Karen Bershad

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