Hi every one here on the greatest website on earth.
I am planing to buy my first property in Newark NJ, it's an REO and i am planing to do the BRRRR strategy on it, and I'm a little bit confused so i would like to know what are the steps that i have to do what is first and what is next.
I know that i have to take a property inspection, and i am planning to take a contractor to give me a estimate on the rehab.
So whats next? when did i have to call the town or county or state inspector Before i am starting to work on it or before i am planing to put in tenants?
When am i doing the ccc inspection?
What if it has asbestos or lead paint? When did i have to check this thing's out
And what are the steps that i missed with a total rehab property what are the pitfalls?
Thank you very much for helping me out I appreciate it very much
Did you already purchase the property?
Not yet. but wanna make a step by step plan before im buying
Appreciate your help
A fantastic strategy if your numbers are good. The first is to buy the property...during this process you will/should have a home inspection. This should uncover any issues re: lead paint, asbestos.
After that you need to make sure that your rehab numbers do not exceed the ARV (after repair value).
I have read a basic formula ...and evaluate to see if you are happy with the numbers but...
1) Buy at 40%-60% of the planned ARV.
2) Rehab should cost you between 10-30% of the ARV.
3) All money in to the deal should not be more than 70-80% of the ARV.
Then you get the renters in...if using a conventional loan, go through a 6-12 month seasoning period. After this you can take the property to the bank and say "Hey look how good this property looks, it rents for $_____ per month (for a year)", the bank will appraise it, then you can take the mortgage and pay yourself back.
ARV is $100k.
You buy for $60k.
Spend $10k on the rehab.
Property appraises for $100k. Boom - you're on target to get a mortgage and LTV of approx. 75%.
This means you can potentially pull $75k from the deal and leave 25% equity in the property and benefit from the cash flow/appreciation.
Thanks for your advise Jonny Morris
I am i have already run the numbers its listed for 110k i estimate to rehab it for 80k 100k and the ARV 300k 320k.
So what i am confused is what are the step by step things that i have to do after buying, for example hire contractor talk to the town or state for the permits and inspection in Newark nj there's something that's called the ccc when I have to take care of this
appreciate your help
do you have an attorney or realtor? usually they will guide you.
if you have a contract signed and are in attorney review, you should have all the contingencies outlined.
you should do an oil tank sweep. that costs under $300. if there is an underground oil tank that was not properly decommissioned with permits, RUN AWAY!!
If there are no underground oil tanks, you want to schedule an inspector. not a contractor but a house inspector. once you get more experience, you can bypass the inspector and go with trusted contractors but for the first few houses, i strongly recommend not skipping the inspector.
you will have to schedule a CC and fire inspection if you decide to proceed. in Newark even if you fail the CC inspection, you can close with a conditional CC. That means you are responsible for all the items that failed.
if it is a 3 family or above, you should check the status of the Green Card (Certificate of inspection) with the state.
with Newark you have to be very careful with the area. The numbers will look attractive but a lot of times in that city it is attractive for a reason. PM me if you want to further discuss.
Before you keep going with the property make sure to do the inspection. Right now one of the property that I’m renovating in Newark is costing me a lot of money for buying it without inspection. (But still a good deal)
We are converting the house from 1 family to 2 families and the process with the city was easy. When it comes to permits you can have the contractor get all paperwork for you. If you need any reference of a contractor, architect in Newark just let me know.
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