Hello fellow BP members....
In driving around this weekend I found a multi-family property which is being rehabbed. I called the number listed on the lawn sign and met with the investor. He guided me through the property which is 80% and still needs the kitchen, front deck and some other items.
I would like to make an offer on this before he lists it with his agent. However, without the project being completed, what would the appropriate "next steps" be? I plan to contact him and see if he has a list of materials (cabinets, appliances, counter tops, etc..) he plans to use for the remainder of the project. In doing so, it would allow me to gauge what to estimate in my offer.
Tips and comments appreciated....
PS...are there any clauses I can add to my contract to "CMA" such as making sure he pays his contractors so they do place a mechanics lien on property?
@Alex - I don't mind buying projects which are incomplete. However, it's a red flag. You have to make sure you understand all the issues related to why it's not incomplete. Mitigate all the risks you can that you're not taking on a sinking ship -- property with issues or owner's issues that carry on with the sale.
I try to leverage the seller's plans, talk to their contractors, etc. but I lean towards brining in my team and plans to finish it off. The old contractors are often bitter and may want to make up for whatever went wrong before you got there.
Clear title including signed mechanics liens would help. Buy title insurance.
Go back to the investor and stop him from listing. See what you can figure out. I've done one of these where the investor seller-financed the property while I finished it up. You might be able to find a win-wn out of this.
Why is he selling? Did he get permits for the remodel? Was the work inspected? You don't want to take over his problems, only to discover that all the work he said he did turns out to be shoddy and has to be redone, erasing all your profits.
Signed lien waivers from all contractors and subs is a must. I can see how this could be either a smokin' deal, or a huge bust. Better to lose what would have been a good deal, than to rush into it and be stuck with The Money Pit. Good luck!
He will finish the project but has posted "for sale" sign out front. His real estate agent said she will not list the property until it is complete and he has the CO. She is targeting to list it around 425K where he threw out a number of 350K. He figured he would put a sign outside in case someone was interested and avoid paying commission.
So to clarify, he will finish the project (permits filed/CO) within a month. I would like to make an offer on it before it gets on the MLS which there lies my questions.
Ahh, thanks for the clarification. I didn't understand that from the initial post.
His agent wants to list at 425, and he said 350? Those numbers are vastly different, and flippers don't get into the business to give away the house or walk away from the profits. Listing at 425 and paying a 6% commission is still way more than 350. Something doesn't add up. Can you give more details please?
Still go with the advice about the lien waivers and proper permits.
So he's willing to take an 18% haircut to avoid paying a 5 or 6% realtor commission? Seems a little fishy. You know the old adage--if it seems too good to be true it probably is (...course, that could be why I don't have more deals going than I do). You might ask for personal or professional references to get a better feel for the guy.
Looks like Mindy and I just posted the same concern at the same time. Don't let ambition blind you to the warning signs here, Alex. Good luck!
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