I wondered if there was anything substantial in the claims that you can get into real estate with zero money down. Too good to be true, right?
I watched dozens of videos and all that I got out of it is that if you pull a Homemade Home and find an off-market vacant house that the owner cannot sell due to some problem, you solve that problem, and then instead of making a deal with them, you find someone to buy it in exchange for $5,000+, yes, you can get into real estate, and all that you need to do is read this run-on sentence.
I believe that Homemade Home sold one house because he felt that it was too much of a hassle. He usually fixes them and rents them out. This video is about that first house, he paid $5,000 for it, and after renting it out for eight years, which more than paid for itself, he said that he was fixing it up [again] to sell it:
Meet Kevin buys them off of the MLS and pays people to fix them. Kevin's main job is as a realtor\YouTube\selling courses\I really don't know, but he would have orders of magnitude more cashflow than Homemade Home, who fixes up houses, and makes and sells furniture.
Huh. This video from his original channel has over one million views!
555,000 views:
Here he shows how to make a nice kitchen island:
This ten-minute video shows all of the work that he did renovating a house that he bought for $12,000. It currently has 8,835,555 views!
Before you think this is a legitimate man not trying to get rich off of getting people to pay to learn how to make money, don't forget his
$5 book!
Imagine if you will, I waste $5, and find a house like the blue one with bars, but it has some problem. The owner cannot sell it, but needs the money. I make an arrangement with them, fix the problem, pay $500 up front, and $300 a month for 5 years. I replace all of the flooring, repaint every wall, and replace the roof, and rent it out for $500 a month. I do not have any idea how much all of that would cost, but someone said that it usually cost him $15 per square foot, that house is 520 square feet, so maybe possibly $7,800.
I do not know if anyone would pay me a $5,000 finder's fee, but that would be vastly easier. Then I would have $5,000 for a better deal.
I keep finding videos from one channel that says they have a free software for finding wholesale deals and if you use it to find them a deal they will pay you $10,000. There are two problems: 1. The free program costs $1,000 to use. 2. Who the heck says "A software?!" Clearly he is not a computer guy!
It seemed like each video has at most one piece of useful information. In one video he says that before you try to use the MLS to find a deal you need to figure out home values in the area. He tried to make it sound complicated, but he was selling a $1,000 program. He said:
- Look up sold homes within 500 square feet that sold in the past 3, 6, or 12 months, as far back as you need to go to get adequate data.
- Calculate the average sold price.
- Calculate average square footage.
- Calculate sold price per foot.
- Calculate average sold price per foot.
- Use all of this to estimate the After Repair Value for a house in that ZIP with a given square footage.
- Calculate this information for houses currently for sale in the ZIP and sort by price per square foot.
- Forget all of this and pay $1,000 for a free program that you cannot use until you pay $1,000.
- In another video he says to note when the home was built and for homes currently for sale, for how many days it has been on the market.
- Estimate $25 per square foot to renovate [that was supposedly particular to this house, he showed a repair calculator in his app].
- Estimate closing costs at 9%, carrying costs at 6%, and profit at 20%.
- Subtract all of those to get your asking price, which in this case were around 38% of estimated renovated value. He said in another video that flippers usually offer 70% of the asking price.
- Call the selling agent and make your offer. They may present your offer instead of a higher one because they would receive a significantly higher commission.
- If they refuse, call back weekly.
Also, he makes it sound like the wholesaling industry is a multilevel marketing scheme. In one video he says that if you are broke to use all of your free resources, but once you make a deal, invest that money back in your business, which includes getting mentors.
That is fun because the premise of the video was getting into real estate even if you are homeless. Presumably a homeless person would not be the only one that feels that it is necessary to spend the money not being hungry and homeless.
However, what really interested me is that he indicated that you need to pay for a mentor, which is why I say that it is an MLM scheme. He says that he still pays for a mentor.
Who is his mentor? Does he make videos?
Do you remember Ty López talking about getting mentors in his lame first video?
He needed to pay them?
He said that when you found the market value for a neighborhood to narrow it down until you had fewer than ten houses, but I forgot and found fourteen that sold in our ZIP for $125,000 or less. I should narrow it down further, but I will give a summary: The average home had 1,117 square feet, was on 30,554 square feet, and sold for $91,825.86 $83.16 per square foot. Two around 1,400 square feet were bought for around $79 per square foot, renovated and put on the market, but then taken off in March or April.
Some need work or had unfinished renovations. The price per square foot varied between $49.60 and $106.63. If you toss out the highest and lowest they vary between $60.68 and $102.85.
Maybe $60 per square foot for a house in poor shape and $100 for a renovated one?
That would suggest the small blue house is worth $31,200 needing repairs and $52,000 renovated.
Yeah, they are asking $79,000.
I excluded the weird A-frame house because it has a $2 monthly HOA fee. With 912 square feet, it theoretically isn't worth more than $91,200, but they are asking $119,000.
They can ask a million...