Question on buying my rented house at auction
Investor · Worcester, MA · Member since 2017 · 66 posts · 36 votes
I wrote a post https://www.biggerpockets.com/forums/67/topics/469...
Not sure what the rules are but I assume posting the same topic in multiple forums is prohibited, so I'm just posting a link here and asking you guys to take a look and comment for me? Trying to decide if I should buy the auction.
@Elaine Fawcett I just read your other post and I would urge you in the strongest way to not buy it at auction. You don't really say how much experience you have with real estate but I'm going to go out on a limb and say not much. Given that you absolutely don't want to start learning on a house like you describe.
Your estimates for plumbing and electrical are probably off by at least a factor of 5. Most experienced investors will stay away from houses with foundation issues and questionable access you discuss.
After I read your post I almost wondered if it was made up because there was so much wrong with the house...
Having said that, I would go to the auction if I were you and see if the bank takes it back or an investor. If it's an investor talk to them and try to get some cash for keys. Use that money to house hack your way into a less challenging investment property.
Jeff, GREAT advice thanks!!!! Funny, that's the same conclusion I came to last night. :) The thing that scared me away from considering it is that the auction listing says buyer is responsible for paying the taxes, which the bank has paid up to date... and there's no way of knowing how much that is but given the number of notices I've gotten in the landlords name, I'm going to go out and say about 4 years worth. That alone will add $15k to my up front costs. I have a few tricks up my sleeve, though... and am pretty sure that the bank will be buying this at the auction, and not a 3rd party. You're right, the only experience I've had was with rentals and although there was minimal work to be done on my triplex, it was a LONG way from being a rehab.
unless its cash, you aren't getting a loan. You said you had a rehab loan lined up but "rehab loan" usually means a 203K loan. Unless you mean some other hard money type of loan, you aren't getting a loan. No one is going to give you cash to buy a property at auction without already having collateral as security unless you are sleeping with them or you have a rich uncle willing to just write a check for you. It doesn't work like that. A contract has to have offer, acceptance AND consideration (Among other things). You have offer and acceptance but not the consideration piece until you have possession. You can't have possession until you pay for it and you can't pay for it until you get the loan and you can't get the loan until you give them the property as collateral.
Unless i'm missing something, which is quite possible.
I have a few tricks I'm about to play, so yes, I haven't said it all. There are just a few things I can't make public. The loan will be after auction. Forgetting the financing, which I'm certain about, I'm really just looking for guidance on whether a newb to flipping should get into something with this much work. I'm not dumb, I've been around real estate for a while (never rehabbing like this), I'm an accountant and very good with money... and with networking. I've got a spreadsheet all worked up (with high numbers, because I'm cautious like that) That being said, I'm confident but not stupid. And I'm vacillating on doing this deal or letting it go and just going to what I know, which is multi family investing. I do want to do a rehab, but maybe this isn't the way to get my feet wet.
I have a few tricks I'm about to play, so yes, I haven't said it all. There are just a few things I can't make public. The loan will be after auction. Forgetting the financing, which I'm certain about, I'm really just looking for guidance on whether a newb to flipping should get into something with this much work. I'm not dumb, I've been around real estate for a while (never rehabbing like this), I'm an accountant and very good with money... and with networking. I've got a spreadsheet all worked up (with high numbers, because I'm cautious like that) That being said, I'm confident but not stupid. And I'm vacillating on doing this deal or letting it go and just going to what I know, which is multi family investing. I do want to do a rehab, but maybe this isn't the way to get my feet wet.
I know a lot of accountants that can't use a tooth brush, let alone a paint brush. I'm sure that's not the case here but my point is, crunching the numbers is only one component of your journey. You already listed a dozen reasons why NOT to buy the property with its current condition but assuming that once you pull the trigger and buy it, you have to take off your accountant hat and then put on your contractor hat. Are you a contractor and an accountant? Does that peeled and loose tile mean there is mold behind the drywall? Does that mold behind the drywall mean there is a leak in the pipes? Does that leak in the pipes mean you have to tear it out all the way to the city connection because it's not to code any longer?
I know the reality shows make it so glamorous to do a rehab/flip. The numbers always work on TV.
I get your point, it's well taken, thank you. LOL, I wouldn't know about TV, I haven't had a television (or rather, cable) in 10 years. :) Best decision I ever made. Well, maybe not the best, but close... In any case, I'm not a contractor, no. Full time jobs I've held: I've been a landscaper, house painter, and road construction worker... so I guess that certifies me to take care of the outside. I've also hung sheetrock, installed cabinets, and tiled a bathroom... you know, the basic lipstick stuff. Honestly, when it comes to electrical or plumbing, I know what the tools LOOK like ;) I'd have to hire out for that. I've already had a plumber and electrician come and look, but as I mentioned, it was a cursory look. They walked around and gave me their feeling. I know that doesn't count for much, if anything... not saying it does.
Update: Had an inspector come over today to give me some advice. He's writing up the report now. He's also contacting a pest expert to identify the weird insects that are in the basement.