About to look at a property, what should I look for?

Question

Hello BP!

Been doing my research and finally putting the books down to go out and look at a property I have been scoping for the last year and notice a price drop within the last 6 months. The Property is located in North Jersey ( where I live). Its about 20 minutes where I live now and this new location would be 5 minutes from where I work which would be a plus. It is a Multi Family home (Duplex). I want to follow the BRRR strategy. Start off by buying a duplex build out the one side as I live in it and once it is presentable and really nice for a tenant try to find one to live there start paying some of the mortgage and then move into the other unit. Then as time goes on put money into the place build it up like the first unit and do the same thing. With all that said a little about the property and the situation.

The property listed from June ( which I wrote down the information on my watch board I have in my room) I went on Zillow the other day and noticed the drop in the price. It dropped 10k from June to August. Then just recently it dropped another 13k (November). So Since June it has dropped a total of 23k. What would any of you think of this? Little about the house; Looking from the outside of it it is definitely the sh*ttiest looking house on the block lol, but I see a house with the most potential on the block. It just looks like its needs some loving and lot of cosmetic work. I am hoping that is all it needs.

If I offer considering all the checkpoints are clear and I have a good feeling about the foundation and structure and what not, would that be considered as "buying right" as everyone says or buying at an discount. I remember reading in all the real estate books they said you want to go in and buy right. Finding homes that you can find a 20% discount on. Now I know that price drop isn't 20%, but say I offer now lower than what the asking price is than I can be close to that 20%. Am I wrong or right? Just looking for some useful information and a guidance as if I am thinking the right way.

I called up and set up a meet with the seller this week. Are there any critical questions I should have prepared and also what are some things I should be looking at when I am there? Once again guys I am new at this, this is a first property and I am doing it all on my own so its kind of scary, but I am not letting that fear get to me. Just trying to gather as much information As I can going into this and hoping for the best. I have read pretty much all the BP books and listen to all the podcasts daily ha. I love this stuff and really hoping I can get my first deal.

I highly appreciate and give future thanks to anyone giving their time to this post. Thank you so much I will respond if I have any questions.

One last thing, I noticed that it was under contract and then put back on the market as well last month. Is that something that I should be aware of and ask about? would that be a red flag possibly or could it be anything.

Thanks BP!

Paul

Bob B. · Answer

@Paul

@Paul D. You can't take chicken manure and make chicken salad.. You can fix most things but you can't fix location.

A swamp in the back yard is much difference than a lake.

Brian Liscio · Answer

Sounds like an REO that’s why they make the owner responsible.

As far as the creek thing; is probably ask neighbors if it’s know to flood.

If you’re not sure; I would say now is certainly not the time to just buy to buy.

Bob B. · Answer

@Paul D. Are you using an agent? They should be able to provide some help. I'd ask if there have been any inspections and if so what were some of the issues. Some sellers will not be honest but it doesn't hurt to ask. Other than the obvious, heat and air, plumbing, electrical, roof , etc and the rental history. Trees are nice but are expensive to remove. If you are meeting with the seller being honest about your situation and what your plans are can't hurt.

Good luck and keep posting about what happened.

Brian Liscio · Answer

First off never forget that it’s a business and a numbers game.

I’m thinking the 20% read about is the difference between retail and wholesale; I always use 30%. Think of it as a buffer if things go bad you can bail out without getting burned.

Before any sit down meeting always do your homework.

Ask yourself: what will it rent for? Do I know all the fees for this property? I.e. closing fees, holding fees, repair cost, flood insurance

What happened to the last contract?

Did they not have the funds for closing? Or did it have an oil tank?

Prices are high! Make sure your numbers makes sense to you.

Hope my 2 cents helps...

Paul D. · Answer

Update on this listing:

So I went today to meet with the Realtor to show the house. The inside of is is pretty much trashed (as expected). Hole in the walls, cracked wall, heavy odor in the carpet of pet urine, and etc. It needs extreme amount of work. The cosmetics is what isn't holding me back from the place. What held me back and has me thinking to just let it be and keep looking around are two things.

-On the listing and the description it says "Buyer is responsible for all Twn/State CO/Smoke Cert Reqmnt." I am not sure if this is a red flag or extra steps for me to take.

-Also when I was in one of the units I looked out of the back windows to take a look at the backyard. I saw that there was water in the back yard from a near by creek. Vision like a swampy look in the grass that is basically what it looked like. That is a huge red flag for me I am assuming and pretty sure that that will be future issues.

Getting into this real estate investing game I do understand it takes a lot of repairing and what not and putting money into it and thats pretty much why I picked out this house. But I just get a bad feeling about the water in the backyard. I am a very ambitious and eager person and I don't want that to cloud my judgement.

Am I being too cautious or is it a possible dump that can be possibly polished up. Now I know its hard for everyone to really understand because I am not disclosing all the details as of the roof windows and what not, but just to give everyone an idea it needs a lot of work. Everything basically. What type of mindset do you keep in a situation like this.

Thanks!

@Bob B. @Brian Liscio

Paul D. · Answer

Hey Bob

Thank you for the comment on my post. Yes I am, we talked briefly on the phone he said he will look up a little bit more of the history of the house and what happened with the past inspections and what not so ill know much more coming soon. Thats all great stuff to know I will be writing it down and remember that when I go meet and look at the property.

Thanks again

Paul D. · Answer

Brian Thank you so much for this information. I really really appreciate you gave me some great pointers Iwasnt thinking about such as the oil take. Thats great. I actually just learned that there is a section 8 tenant in one of the units already. Im still going to go look at it. I know thats not the best setup, but from doing my reading the section 8 can have its advantage and disadvantages. Advantages such as a guaranteed check every month from the government. Just have to go see what the scenario is with them I suppose correct me if I am wrong. Doesn't hurt to go still check it out right? Thanks so much again I will keep in touch once I learn anything else for sure.

About to look at a property, what should I look for?

About to look at a property, what should I look for?

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