newbie from Philadelphia, Pa.

25 Replies

I currently just went in business with two friends to flip homes. We working with our savings but not a whole lot, we need some insights and great deals to obtain our first property in Philadelphia. Auction is our next step but we're afraid the big dogs will buy all the properties we can afford. 

If you are inexperienced and you don't have substantial capital reserves, in my opinion you should not start out by going to auctions.  That's a fast way to turn your hard-earned savings into a hard-to-get-rid-of mess!  If you have two other partners and you are all new to real estate, make sure your expectations and responsibilities are VERY clearly defined (and documented).

You should start out by going to real estate meetups and network with other investors.  Find some to partner with, or just tag along on their projects.  Listen to all of the BP podcasts.  Get prequalified for mortgages.  Talk with contractors.  Get to know your target market.

There is something to be said for jumping right in and getting started... but it will be a very expensive education.

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Originally posted by @Fandor Malebranche Jr :

I'm planning on going to a investor  networking event tomorrow. We wanted to go to the auction to get a cheap fixer upper just to give it a shot. 

Thanks for your advice.

 I've never been to an auction but, first you'll need to sign up for the class the city puts on to be able to bid and that's booked months in advance last I looked. You also need cash to buy. 

As an FYI, I'm in the middle of my first Philadelphia flip. I have a background in construction, have owned rentals and done a few flips in the past, have a great partner that is also very cost-conscious, and we're using mostly subs and day labor to keep costs down, which is very management intensive. We're on track to clear $15k-$20k after all costs (except taxes on profit at year end) IF there are no more surprises. We bought a $60k house and needed over $15k cash to purchase between 20% down, a years worth of taxes paid up front, property insurance paid up front for the year, appraisal, transfer tax at 2%, etc. That's at least $15k before we even owned the place. Add in another ~$40k for materials/labor for the rehab as well as holding costs, and you're looking at a very, very cash intensive business.

Being new to the business, you're likely to: severely underestimate the acquisition and rehab costs, not budget (or at least budget enough) for unknowns, skimp or go overboard on finishes for your market, overestimate ARV, holding time, construction time, get taken for a ride by a contractor, and on and on.

I admire people that jump in feet first, however, there's a lot to know that you probably don't. I'm not telling you all of this to discourage you, I'm telling you to give you a heads up as to what you need to know to be successful. 

@Ethan Giller  makes some great points and it's smart that you're going to a meeting. If you guys want to check out a flip in progress and ask some questions, let me know. Other than that, welcome to BP and, if you look, all the answers are here, you just have to be willing to listen to what people say because most of the answers aren't easy or fun. It takes a fair amount of studying of values, costs, what's selling in your market, and what upgrades are expected for your market to be successful. TV shows and gurus don't teach that. 

Hi! Don't be afraid of the big dogs - they'll bid on what they want and pay what they want, but there are usually some properties without as much competition.  Your biggest fear should probably be knowing what you're getting.  There are usually other liens associated with the properties, aside from the taxes or mortgage.  I bought a tax sale property (I haven't bought a mortgage sheriff sale) and it was VERY difficult to get title insurance.  It took a lot of time to clear up an inheritance issue, it took even longer to get the Sheriff's Deed, and of course it took a little more money than expected.  However, I did get a title search before buying so that I'd be aware of the potential issues.  Since I knew about the inheritance and lack of proper notice on behalf of the city, I found out what needed to be done in advance.

Take the time to get a title search done for the properties you'd like.  Also, find out if they're vacant - check it out yourself and talk to the neighbors.  You need to know about the taxes, water & gas bills, violations, and more.  It would be well worth waiting until after you've done a title search before bidding! 

@Fandor Malebranche Jr  welcome to Bp!

   That's some great advice that @Ethan Giller  and @Troy S. Are offering you and there is plenty more of it on this site if you just ask.

Is going to an Auction your "next" step or only step? Try to take some time to educate yourself on your local market, maybe go out with an agent and take a look at some houses on MLS so you can see what your potential competition looks like. @jscotts book on flipping houses could be a huge time and money saver for you going foward. Best of luck to you in all your real estate ventures!

Originally posted by @Troy S.:
Originally posted by @Fandor Malebranche Jr:

I'm planning on going to a investor  networking event tomorrow. We wanted to go to the auction to get a cheap fixer upper just to give it a shot. 

Thanks for your advice.

 I've never been to an auction but, first you'll need to sign up for the class the city puts on to be able to bid and that's booked months in advance last I looked. You also need cash to buy. 

...

I also have not attended a Philadelphia sheriff sale. But I find it hard to believe that the Philadelphia sheriff sale training must first be attended before being allowed to bid; Troy could you provide / cite a source for that?

Here is a link to video of the training:

http://www.officeofphiladelphiasheriff.com/en/real...

Originally posted by @Steve Babiak :
Originally posted by @Troy S.:
Originally posted by @Fandor Malebranche Jr:

I'm planning on going to a investor  networking event tomorrow. We wanted to go to the auction to get a cheap fixer upper just to give it a shot. 

Thanks for your advice.

 I've never been to an auction but, first you'll need to sign up for the class the city puts on to be able to bid and that's booked months in advance last I looked. You also need cash to buy. 

...

I also have not attended a Philadelphia sheriff sale. But I find it hard to believe that the Philadelphia sheriff sale training must first be attended before being allowed to bid; Troy could you provide / cite a source for that?

Here is a link to video of the training:

http://www.officeofphiladelphiasheriff.com/en/real...

 You're absolutely right Steve, for some reason I was thinking it was some sort of requirement. Thanks for clarifying. 

@Carlos M.  - thanks for confirming what I strongly suspected. After all there are plenty of attorneys there bidding (AOW), and I'm pretty sure they would never tolerate being told they must attend some petty training in order to bid, after they had already completed college and law school. 

@Fandor Malebranche Jr  Welcome to BP. It's not necessarily for everyone, and you may or may not qualify, but hard money is another option. It's definitely expensive, but it'll do a few things for you. It'll force you to find better deals, because of the added cost, and it'll force you to have some level of added due diligence (professional appraisal / inspection) and they have skin in the game, so they're likely to sort of walk you through the process, if that makes any sense. This all coming from a newbie who's just barely on the brink of his first (buy fix refi and hold) deal, so take everything I've said with a grain of salt. But it's another tool in your tool chest.

Good luck, and if there's anything I can help with, don't hesitate to ask.

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@Steve Babiak you're welcome ... haha  right that would be hilarious if the city did try to get attorneys to take a training course to bid ... speaking of AOWs they're a big reason why I don't attend the foreclosure sale ... it's usually slim pickings because of the AOWs bidding on everything and if they don't bid usally the deep pocket investors are next in line to buy up any decent properties leftover.

@Carlos M.  - so you bought a tax foreclosure at the Philadelphia sheriff sale. That means redemption rights were a possibility. How did you handle that? On the one I bought in the suburbs that had redemption rights, I let sleeping dogs lie; if I had not, they would have redeemed (they had the money to do so but for some reason chose to not pay the taxes).

@Steve Babiak right I purchased from the tax foreclosure and the right of redemption (ROR) was a possibility .... The first property was intended to be a rental. Luckily enough when I purchased the property  it already had tenants from the previous owner, so I just held on to it. The ROR time period expires after 1 year fortunately enough for me the previous owner never made the attempt. As for the other property I actually ran into the owner as I was checking out the property. The owner explained to me why the property was on the auction block and from that conversation it was clear that the owner had little to no shot of redeeming the property, I still held it for 12 months then got rid of it. But most of time in Philly owners rarely exercise the ROR option  .... Not familiar with the Suburb sales but that was a smart play - good work by you. Makes me wonder why let they property go to auction to begin with if they had every intention to redeem.

Hey @Fandor Malebranche Jr  welcome to the site! Definitely start jumping into the community here! Be sure to read through The Ultimate Beginner's Guide to Real Estate Investing to help you get started.

Also - be sure to check out the post "House Flipping: The Best of BiggerPockets." It's a collection of the best flipping info from the site.

Finally -be sure to setup some keyword alerts - especially for "Philadelphia" so you can jump into local conversations.

See you around the forums!

Originally posted by @Carlos M.:

... The ROR time period expires after 1 year ...

 That is not quite correct. The redemption period is nine months from the date of the sheriff deed getting recorded. In practice, it takes a couple of months to record the sheriff deed, so 12 months is usually enough time. But there was one in the suburbs where the defaulted owner challenged the sheriff sale within the 30 day period after the sale, and no sheriff deed was recorded until that case for the challenge ran its course (took over a year IIRC). Then the redemption period began. 

@Fandor Malebranche Jr

Welcome to the community! BP has a tremendous amount of information to help you, but it is only available if you seek it out. Be sure to be as active and engaging as possible. Read blogs, post questions, and the podcasts are gold! The best free education you can get.

My business Vision Home Acquisitions LLC is currently looking to purchase any type homes in Philadelphia. Shell properties homes that need complete renovation or any condition that needs work. We are team of contractors working for a better cause. We are looking to house Homeless,veterans,orphans etc. We are looking to start one project at a time. If you have a home for sale or know of any agents that have fixer uppers for sale please contact me asap. Up to 10,000.

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