Hey BP, so I'm looking for my first investment property in the Lehigh valley area of Pa and came across what seems to be a good deal on Craigslist. Property is not on MLS and privately being sold. Met the owner and seems like a pretty good dude. It's a 2 unit asking only 99k Upstairs apartment is 1br rented out to long term tenant for 550/monthly and downstairs is 2br with new tenant who just signed lease for 750/month. Taxes are low 2200/year and the building seems in pretty good shape. I'd only be responsible for water sewer and trash. I haven't run the numbers yet but I'm thinking it should cash flow decent. My only concern is he doesn't have an agent and all the documents he draws up himself. I'm inexperienced and would feel more comfortable having my agent deal with the closing but I know I have to pay him. Anyone have experience or advice for me?

Do what you feel comfortable with but you will at a minimum want an attorney. Attorney's in my experience (and really their paralegals) have been the best helpers in terms of answering questions and getting everything straightened out for sale. The seller will also be more motivated if you don't involve realtors.

But if you're doing private sale make sure you do a title search. You will have to if you do conventional financing.

3 months ago I would have shied away from a real estate deal with no realtor involved. Since then, we bought 3 properties (two of them duplexes) from private sellers and wholesalers, and did not involve an attroney or a realtor. 

An offer to purchase is somewhat easy to navigate and write up on your own. But you will have to remember about contingencies - on the results of the inspection/appraisal if you are doing those, on financing, if you are getting a mortgage, etc.

You definitely want a titling company to search the title and anything outstanding against the property, and issue you a title insurance policy and a gap insurance policy, as well as do your closing.

Also, depending on if you will buy cash or get a mortgage, the lender will/may require an inspection and an appraisal. You also may want an inspection/appraisal on your own to make sure there is nothing wrong with the property. And an appraisal that comes in below asking can also help negotiate your price down a bit. 

Also, having pre-existing tenants may be a good or a bad thing, especially the one that recently signed the lease. The way the current owners screen their tenants may be different from what you would do, so you might inherit a tenant you would not have chosen.

If your numbers work with hiring a realtor and that's your first investment, then hire one.

Just make sure to work with a good one and negotiate the fee. The wrong choice could kill the deal, waste your money and your time.

I have brought my own deals to realtors for me to buy and paid a 2.5% fee ...if this can help for running your numbers.

Thanks everyone who responded ! This is why I love this site! A lot of things to think about but my instinct feels right for this one and I’ve looked at a lot of properties. I have a realtor who helped me purchase my personal residence and we’ve become friends so I feel kinda bad going behind his back. He’s very knowledgeable and is also an avid investor in the area so I think I’ll cut him in on the deal if the numbers make sense. I’ll keep you posted on how it all plays out ! Thanks again!

@Nick Loukas well done identifying the deal! Depends on your financing options (definitely run the deal through the BP Calculator) but it seems like it could be a good option for you. I'd agree with the posts above that getting a title company involved and insist on title insurance prior to closing. This could save you losing the property at a later date. I'd also recommend a lawyer look over the docs, will cost $1000 but will be worth it in the long run to make sure you aren't getting hosed.

If you go to closing I'd recommend posting a follow up thread once you have things up and running. Do you plan to manage yourself or get a property manager? I would be interested in hearing your experience with this.

Just call a local re attorney Bro . In Pa you don’t need anything other than an attorney and it’s a simple agreement and some documents . I paid 550$ bucks for the attorney last time I bought a house but that was a cash buy . I don’t think 100k for a house that gets 1300 in rent is that great of a deal though . I suspect you’ll be lucky to make 100$ a door when it’s said and done . The house maybe worth that but it’s Probably A marginal deal from an investing standpoint

@Dennis M. thanks for the insight. I ran the numbers on the BP calculator and at 100k I’d cash flow about 315 per month...so agreed not a homerun but def a base hit and something to gain experience with my first deal. I’m trying to get this at around 88-92k which would make it better obviously.

@Christian Beyer thanks man I appreciate the comment. I will def do a follow up to this deal if I follow through and let everyone know how it turns out. Do we both need an attorney or is this something that the seller and buyer split the cost of?

@Kat Rathell thanks so much for the response. Can you elaborate on the title insurance gap coverage please.

Originally posted by @Nick Loukas :

@Kat Rathell thanks so much for the response. Can you elaborate on the title insurance gap coverage please.

Now, full disclosure is that this definitely applies in Wisconsin, I am not sure if the other states function the same way, I assume they do, but you just never know :).

The role of the title company is to make sure the title to the property is free and clear, as in that there are no mortgages, liens, loans, taxes and fees against it. 

So, they research all of that, and when they find something against it, they compile a list. Say, your seller has a $40K mortgage against the house, $10K home equity loan, $3K in unpaid taxes, $2K in unpaid water and electric bills and $1K in fees to the local municipality for not cutting the grass for 2 years. This would mean a total of $56K you would be on the hook for if you just bought the house without knowing this (if it’s even possible to buy a house without a titling company, honestly, I do not know).

A title company will discover this information, and at the closing table they will subtract the $56K from the proceeds the seller will receive, put this money in an escrow account and order payoffs for all of the seller’s debts against the property. You will pay the agreed upon $99K. The seller will then get 99K-$56K=$43K. The 56K will go to cover the debts of the seller.

The closing company will then issue you a title insurance that protects against somebody unknown having an interest in your property, anything they could have missed. Say, another home equity loan they did not find for $20K. If after you take possession of the property somebody comes after you for the money owed against the property, the title insurance will cover the debt. 

There appears to be a ‘gap’ between when a property is purchased and when the sale is recorded. Now, I am a little fuzzy on this, but it appears that theoretically it is possible possible for a lien or another sale to occur during this ‘gap’ time frame. This is what gap insurance protects you against.

I assume some people may decide to do all the research and payoffs and hope they did not miss anything without a title company, but I do not know if it is even possible to do on your own. But - regardless - for the few hundred dollars it costs I’d take my peace of mind (I think our closings cost under $300, and our title insurance in the neighborhood of $400-500 for a ~$30K property - a % of the sale price). Also, the seller usually pays the closing and title insurance fees, at least here in WI. There are some fees the buyer pays, but they are minor in comparison. 

Hope this helps! 

@Kat Rathell ok great. Thanks so much for all of this information I bought my own residence over a year ago and I think you explained this with more clarity than my realtor and the title company I used combined lol. I really appreciate it and will definitely ask about gap coverage when I speak to the title company!

@Nick Loukas

Get your own lawyer. Your interests and the interests of the seller are not aligned and sharing legal resources will create a conflict of interest. Not hard- just make sure you search around and read reviews about services.

Quick update never went through with this deal. Months later found a sfh in south Bethlehem with an attached garage that I partioned to 3 car garage !!! Long story short this is my first deal and I’m cashflowing $575 a month now with full vacancy of house and the other garages!