Phoenix, AZ · Member since 2020 · 42 posts · 7 votes
Hello everyone, I have a two part question.
1. If you buy a house sight unseen from a wholesaler are you then getting a full inspection or do you just go in and start fixing what you or your contractor think it needs?
2. When you’re about to start a rehab generally speaking what’s the first thing you usually do? Is it best to take care of big ticket items first for example a roof or does it even matter where you start?
I know both question depend on a lot of different factors, so thank you in advance for taking the time to help out !
Lender · Greenwood Village, CO · Member since 2016 · 40 posts · 20 votes
5y
Andres,
You nailed it. Both questions are pretty open ended. The best I can do for you is to offer up what hopefully amounts to a useful nugget or two of information to build upon in your business.
First off, (and I hope it goes without saying) purchasing a property site unseen is risky. Books could be written - probably are written about the myriad of things that could go wrong with that. We've seen it done. It can work, but I think it should be avoided if at all possible. If not possible, make sure someone you trust in the deal is giving you a reasonable idea of what the condition and scope of repairs are. I'll leave it at that.
That aside, I think the real question is "do I need an inspection"? The answer depends on a few variables. Are we talking about an experienced investor and experienced contractor that have done a decent volume of remodels in the past? If so, the real benefit of an inspection would be to document the scope of work and perhaps use it as a tool to renegotiate the price with the seller. When working with a wholesaler, a formal inspection probably won't carry much more weight than your or your contractor's own opinion on the current condition and required work.
Order of work for a rehab can vary from project to project. For items that require permitting, such as new roof, new plumbing, new electrical panel, etc., line up your trades to get you bids and start the permitting process as early on as possible to ensure you don't have any unnecessary delays. Big ticket' or small items should be prioritized in a manner that works with contractor/trade availability and the natural progression of the project. There are, of course, some sequential components to every project. For example, framing new rooms is always done before plumbing, mechanical and electrical work if and when each applies to the room(s) you are creating. Drywall work generally follows that, then texture, then paint, and so on. In general though, you do what you can as soon as you can. Time is of the essence - especially if your project is financed. The interest and carrying costs can really eat into your profits if you're not effectively planning out your project and managing the workflow efficiently.
Not sure I'd buy from a wholesaler. I would never buy a house sight unseen. If you want to do an offer contingent on you viewing it, yes.
As for renos, it depends on what is needed. Repair things that are a problem (eg leaky roof) first. If in the course of doing those, there are other things that it makes sense to do, combine them (eg if you have to replace flooring in the bathroom, does the toilet need a new gasket or to be replaced).
Lender · Greenwood Village, CO · Member since 2016 · 40 posts · 20 votes
5y
Andres,
You nailed it. Both questions are pretty open ended. The best I can do for you is to offer up what hopefully amounts to a useful nugget or two of information to build upon in your business.
First off, (and I hope it goes without saying) purchasing a property site unseen is risky. Books could be written - probably are written about the myriad of things that could go wrong with that. We've seen it done. It can work, but I think it should be avoided if at all possible. If not possible, make sure someone you trust in the deal is giving you a reasonable idea of what the condition and scope of repairs are. I'll leave it at that.
That aside, I think the real question is "do I need an inspection"? The answer depends on a few variables. Are we talking about an experienced investor and experienced contractor that have done a decent volume of remodels in the past? If so, the real benefit of an inspection would be to document the scope of work and perhaps use it as a tool to renegotiate the price with the seller. When working with a wholesaler, a formal inspection probably won't carry much more weight than your or your contractor's own opinion on the current condition and required work.
Order of work for a rehab can vary from project to project. For items that require permitting, such as new roof, new plumbing, new electrical panel, etc., line up your trades to get you bids and start the permitting process as early on as possible to ensure you don't have any unnecessary delays. Big ticket' or small items should be prioritized in a manner that works with contractor/trade availability and the natural progression of the project. There are, of course, some sequential components to every project. For example, framing new rooms is always done before plumbing, mechanical and electrical work if and when each applies to the room(s) you are creating. Drywall work generally follows that, then texture, then paint, and so on. In general though, you do what you can as soon as you can. Time is of the essence - especially if your project is financed. The interest and carrying costs can really eat into your profits if you're not effectively planning out your project and managing the workflow efficiently.
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
5y
I'm not sure exactly what you mean by "sight unseen." If you buy it sight unseen, that means any inspection you get is just to figure out what's wrong with the property. You own it and will have to either fix that problem or sell the house with that problem. I would always recommend against buying a property sight unseen. On very rare occasions, we have gotten a property under contract sight unseen, but we have always done a walkthrough before closing.
Phoenix, AZ · Member since 2020 · 42 posts · 7 votes
5y
@Jason Richards thank your for the advice! The thing is a lot of the deals I see posted by wholesalers get snatched up crazy fast and are not accepting offers with an inspection contingency. As you said I can imagine the problems one might face when going this route, and I’d like to avoid them as much as possible
Phoenix, AZ · Member since 2020 · 42 posts · 7 votes
5y
@Michael Plante appreciate the advice , educating myself daily. Battling a constant battle between trying to know every price of information before I start and just jumping in to the fire and learning as I go.
Phoenix, AZ · Member since 2020 · 42 posts · 7 votes
5y
@Andrew Syrios yes, the inspection I’m describing would be solely to know what’s wrong with it and not as a contingency to an offer. The reason I ask is because many wholesale deals I see are snatched up very quickly and any offers with inspection contingencies are overlooked .
Phoenix, AZ · Member since 2020 · 42 posts · 7 votes
5y
@Theresa Harris thank you! Did not know an offer contingent of viewing was even a thing. Makes sense though. I’ve been marketing to distressed homeowners trying to find my own deals but closing deals is not my strong suit. Thought I might try to avoid that problem by buying from a wholesaler
Phoenix, AZ · Member since 2020 · 42 posts · 7 votes
5y
@Matthew Paul agree! I’ve been cold calling and sending direct mail, but I thought maybe going the wholesale route might not be bad idea since it’s eliminating the problem of getting a deal under contract. Which I think is the hardest part as of right now
@Theresa Harris thank you! Did not know an offer contingent of viewing was even a thing. Makes sense though. I’ve been marketing to distressed homeowners trying to find my own deals but closing deals is not my strong suit. Thought I might try to avoid that problem by buying from a wholesaler
It is. You can put whatever conditions you want, but it may limit your success if there are multiple offers.
Hi Andres, I would do a little more research into flipping (like you are doing now) before starting to. Sounds like you are still learning the ropes, which is great because its a lot better that doing nothing about it. If you haven't already done so, I would consider buying and holding first just to get your feet wet in real estate. Just my humble opinion.
I started buying and holding properties for rent 3 yrs ago. I do it part time, since I have a W2 that pays me well, I haven't concentrate in doing it FT. Although my portfolio is nothing to brag about (4 rentals) they have all been purchased "site unseen" because they have all been purchased outside of my own state. I rely on my own research of the property, working with a good realtor that can go there assess the property (take video and pictures), then if numbers work out for me send a contract contingent to a home inspection / due diligence. If it goes through a hire a reputable home inspection company that will better assess the property. If something big is discovered during the inspection, yiu can renegotiate the price or make a decision to buy it or not. Keep in mind this is done during your due diligence time, so if anything happens you can still back out of the deal and worst case scenario you lose the inspection fee.
This so far has worked for me. Not saying it will ALWAYS work either. I think it comes down to research, ensuring home inspection and due diligence time is included in your contract
Phoenix, AZ · Member since 2020 · 42 posts · 7 votes
5y
@Freddy Perez congrats on the rentals that’s awesome ! I own a primary residence that I will be turning in to a rental once I buy another primary using a fha loan. My long term goal is to buy and hold but right now I’m focusing on flipping/wholesaling to build capital/emergency fund. What state are you buying in and what brought you to that market if I may ask?
Investor · Eugene, OR · Member since 2018 · 46 posts · 35 votes
5y
I have put offers in site-unseen, but I always have a contingency period where I can have an inspector check it out. I make sure to tell them the inspection is for my own purposes and I would not ask for repairs. I then use the inspection to make a list of items needed for repairs other than cosmetic.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
5y
@Andres Cardenas
There's no "slope of work." It's called a scope of work. Andy, you're not ready for this, and FOMO (the fear of missing out) is driving you. That's bad.
Phoenix, AZ · Member since 2020 · 42 posts · 7 votes
5y
@Jim K. That was a typo obviously, I’m aware of what sow is. Though I appreciate your comment, you’re 100% wrong buddy. Financial freedom and generational wealth drives me. Thanks jimmy.
@Jim K. That was a typo obviously, I’m aware of what sow is. Though I appreciate your comment, you’re 100% wrong buddy. Financial freedom and generational wealth drives me. Thanks jimmy.
Andres: it was not my intention to insult you. I realize now that calling you "Andy" offended you. That was an oversight. Being called "Jimmy" does not offend me -- I've been called that all my life in America. I would really be happy to be wrong here, and I wish you the best of luck and every success. But I don't think you're ready for a full renovation and I do suspect that you're taking on this big a project because you're worried about missing out if you don't. I would wait if I were you, go after something that doesn't require a lot of rehab to begin with. Major renovation is something that's best worked up to in residential real estate. I know the market is pushing you to buy a total dump and do your best. I've seen it happen to others. I've walked in on "potential first deals" from young investors that didn't even have a roof, just a con-artist owner trying to sell a young man on a pipe dream.
Please take a look at my profile, and give me the benefit of a doubt for a minute. Again, I was not trying to put you down or insinuate anything by calling you "Andy."
Phoenix, AZ · Member since 2020 · 42 posts · 7 votes
5y
@Jim K. Just to be clear though I’m not currently trying to buy a property sight unseen , just something I was curious on and wanted others opinion.
Although I am actively reaching out to absentee owners to see if I can put something under contract and wholesale it or maybe partner with an experienced flipper .
Rental Property Investor · Wooster, OH · Member since 2014 · 72 posts · 41 votes
5y
@Andres Cardenas Hey Andres, so first off buying sight unseen in any situation is going to be risky. Typically if you are buying from a wholesaler you need to have done your due diligence and inspection up front before signing the assignment agreement.
It's a good idea to walk the property yourself or have your contractor walk it and give you a repair estimate if you are unfamiliar with rehab costs. Again, I'd recommend doing that before signing the purchase agreement because a lot of times wholesalers will charge a non refundable EMD at signing.
As far as order of rehab it really depends on the scope of work to be completed. If the roof is leaking you definitely want to dry the house in first. If the roof needs replaced but isn't leaking and causing interior damage then it's not necessary to don't first.
Generally you want to take care of things inside the walls first (plumbing, wiring, ductwork, insulation) then drywall/paint, then cabinets/vanities, then flooring and trim.
Obviously there can be other things that may need done but thats a quick general rundown to give you an idea.
Real Estate Agent · Chantilly, VA · Member since 2016 · 245 posts · 61 votes
5y
If you buy it sight unseen, budget what it would take to the tear the house or gut the house, because it is scary what could you find in a home that you haven't seen.
Phoenix, AZ · Member since 2020 · 42 posts · 7 votes
5y
@Josiah Barkman I’m screen shotting this, thank you! With time being a big factor I would try to get multiple ticket items done simultaneously. Are there any that you’ve found that don’t work good together? For example you obviously wouldn’t want the flooring being done while the painters are painting the inside. Any thoughts ?