OK, I just posted a new member intro so please bear with me as I'm still trying to learn the ropes.
I found a multi family (3 family) in North Jersey. Asking price is $50K. Just hit the MLS this week. Rental comps show that total rent roll can be $3200 (2bd/1ba, 2bd/1ba, and 1bd/1ba). House needs TONS of renovations, but assuming it's everything internal and nothing structural (other than siding), let's just say all in it'll be $80K. My rough mental math says this is a killer deal. House comps in the area of similar size go for around $150-170K. I would definitely hold onto this as a buy-and-hold , as I'd be clearing the 2% rule (which is bananas in Jersey).
OK so since I found it on the MLS, I clicked the little button that says "contact realtor" about this listing. In the little comment box I said "I'd like to do an all-cash offer contingent upon inspection, please contact me at xxx-xxx-xxxx". No reply. My question is, now what?
Should I go to a hard money lender (since I definitely don't have $50K, nor the money for the renovations) and show him the deal? Do I contact any random real estate agent who services the area and ask for them to show me the house? Do I contact this person on the listing again?
@Parag Shah Welcome to BP. I'm practically in your backyard BTW! You may want to connect with @Darren Sager who is an agent in NJ who caters to investors. His expertise quite frankly dwarfs that of all other real estate agents I've met. And if you're just getting started, his expertise will pay immediate dividends. Good luck.
Thanks Jonathan! I just reached out to Darren, who was also recommended to me on another thread - guess he must be the guy to know around here!
Appreciate the help!
Whatever you will do as far as an agent is pointless until and unless you line up your financing, get pre approved and know you have a commitment from a lender or somehow really be able to put the cash together.
Then unless you actually do a walk through and are able to get repair quotes or estimates from real local contractors I would not trust any assumed estimate you have made in your head. Also the ARV, comps have to be real.
I know of person in real life who did something like you are presenting here. He figured he could buy a house for $125K and needed $30K in repairs . The comps were around $325K
Looked like a killer deal so he went out and found a HML for the total $155K he thought he would need, in fact he got a loan for $200K at 10% interest. No money down, how wonderful he thought.
I am going to make a killing on this deal without using any of my money. The rehab added to his purchase price including interest, insurance, escrow and loan origination fees ended costing him $325K. He took 2 years to finish the project and ended up selling the house for $325K alright. What can you imagine went wrong?
GIlbert - thanks for sharing that story, you're absolutely right in that I need good estimates from local contractors and I plan on doing a walkthrough with a GC and going over every square inch to get a sense of what it's going to cost.
1. How can you arrange financing and get pre-approved in order to get an appointment for the realtor (so that he knows you're not wasting his time) if you actually need to see the house and walk through it with a GC in order to go to a HML and show them how much money you'll need? Isn't this a chicken or the egg conundrum?
2. I saw, using the HML directory provided through BiggerPockets, that there is one in Jersey that doesn't charge points (which I understand to mean % of total purchase price or ARV) and can be as low as 10%. If I get tenants into the property after 6 months, my interest costs would be 10%*6months*total loan, my escrow would be ? (how do you estimate this?), my insurance would be policy $*6months, and origination fees would be ? (how do you estimate this?). I can't imagine this running into the hundreds of thousands of dollars, correct?
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