Please help a newbie out!

26 Replies

Hi all,

Like many others I am new to real estate investing and decided I would finally stop thinking about it and actually move forward with trying to purchase, rehab, and sell my first investment property. I feel like I have done a good amount of research into the different aspects of the industry but still have so many questions that I thought some of you could help me with. A little background about me - I currently have a 9-5 and don't plan on quitting any time soon, although I don't really have much of anything in savings besides your typical 401k. I bought my first primary residence home back in 2015, fixed it up a bit but also lived in it for 5 years, then sold it and made roughly $120k due to the increase in the market over that span of time. I used most of that towards a down payment on my second/current primary residence, which now has roughly $200k equity.

I plan to use a hard money loan to finance most of the project (purchase + rehab), but will come up with 25% cash down payment towards the hard money loan as the lender I'm looking into says they will finance a max of 75% on the first project. The 25% cash down payment would come from a home equity loan of roughly $40k that I would take out on my primary residence. Just yesterday I filed for my LLC so I feel like I'm taking a step in the right direction, but wasn't sure if I absolutely NEED to purchase additional insurance on top of whatever protection the LLC provides me. The sales rep for the lender that I'm working with came up with a snapshot of the "flip economics" for the specific property I'm looking into and even with all the costs involved, still seems like it could be a good opportunity. I have attached a picture of the snapshot he provided me.

The property I'm looking into buying is a tax foreclosure being auctioned by the county and has a lot of cleanup involved. I've included a link that shows pictures of the property (if that is okay?): https://www.co.marion.or.us/FI...

My questions:

-I've heard of the "70%" rule - but wasn't sure if that always applies. How much should my max bid be on this property?

-Do the numbers look about right in the "flip economics" screenshot my potential hard money lender sent me? I know it doesn't include the realtor fee which I'm still expecting to be about 5%.

-Is there anything else I should know about my scenario before I attend the auction?

I feel like there's more questions but that I'm just forgetting them right now. Any advice before putting my whole life on the line for this property would be much appreciated! Thank you!

Updated 2 months ago

The hard money lender I'm working with is not local, but one I found online. I was wondering if there is any benefit to working with a closer lender than one that is on the other side of the country, or does demographics not really matter as long as their terms are decent?

Your purchase price, rehab, and known fees should not exceed 50% of the ARV on your first deal. Don't take the un-needed risk. If you go over or your rehab is more, you'll be stuck.

I forgot to ask - it may be hard to tell from the pictures, but if anyone has any experience, by looking at the photos of the property, does $45k seem like a realistic rehab budget? I don't plan on doing any structural changes on my first project, just cleaning up and rehabbing the existing footprint. I realize the cleanup alone of all the garbage/vehicles in the backyard alone will likely be ~$6k (or more). Thanks again!

Keep in mind that most in-person auctions require payment at the end of the auction so ensure you know the rules and come prepared with certified bank checks . . . which may make it difficult to have the funds in hand since a HML will want to have assurance that you have the property locked in before fronting you the money and you getting cashiers checks. Have you discussed this with your HML?

Could not get the link to the property to open to give you any feedback on that aspect of the deal.

Is there a reason you are looking at a 12-month flip?  That seems really worst case and if this is your first deal, that might be a large undertaking in terms of a renovation if you do in fact need that much time.  Are you doing the work yourself?  Remember a flip is different than working on your primary residence . . . you will need to pull permits for many activities and then get the inspections done before proceeding.  With a HML, the goal is to get it fixed and flipped as soon as possible based on the interest you are paying.  DO the math and see what a day of interest will run you and see how quickly days, weeks and months add up and detract from your bottom line.

Hate to sound like an advertisement but consider investing in yourself and joining BP as a Pro member . . . the calculators alone are worth the price of admission.  Our lenders love the reports.

Originally posted by @Andy Sabisch :

Keep in mind that most in-person auctions require payment at the end of the auction so ensure you know the rules and come prepared with certified bank checks . . . which may make it difficult to have the funds in hand since a HML will want to have assurance that you have the property locked in before fronting you the money and you getting cashiers checks. Have you discussed this with your HML?

Could not get the link to the property to open to give you any feedback on that aspect of the deal.

Is there a reason you are looking at a 12-month flip?  That seems really worst case and if this is your first deal, that might be a large undertaking in terms of a renovation if you do in fact need that much time.  Are you doing the work yourself?  Remember a flip is different than working on your primary residence . . . you will need to pull permits for many activities and then get the inspections done before proceeding.  With a HML, the goal is to get it fixed and flipped as soon as possible based on the interest you are paying.  DO the math and see what a day of interest will run you and see how quickly days, weeks and months add up and detract from your bottom line.

Hate to sound like an advertisement but consider investing in yourself and joining BP as a Pro member . . . the calculators alone are worth the price of admission.  Our lenders love the reports.


I have discussed a little bit with the HML but they haven't gone into too much detail as of yet about the nitty gritty of it all, so I will be sure to get clarification on that. The county says they can work with the winning bidder in terms of putting a % down and then allowing a certain amount of time for the remaining money to be paid.

I noticed the 12-month timeline as well - I believe they structured it that way just for worst case scenario purposes, although I would hope to have it done much sooner, maybe 5 months? But it looks like it would already account for 12 months, so any time sooner would end up being considered extra savings in my opinion. I would not be doing the work myself - I can do small stuff like replacing certain things, but the major stuff I will be leaving to the professionals.

Below are pictures of the property - it is a 3bd/1ba, 1040 sqft

@Theresa Harris

It does look scary. But I thought it could be satisfying transforming something that trashed. House was built in the 70s, Opening bid is $113,595 I believe. Zillow has the value around $270,000, which I think I could sell for more if it was rehabbed. If I could get it around the opening bid I thought it could be a good opportunity.

Originally posted by @Ronald Starusnak :

Your purchase price, rehab, and known fees should not exceed 50% of the ARV on your first deal. Don't take the un-needed risk. If you go over or your rehab is more, you'll be stuck.

Am I doing the math correctly House price $100,000.  Fix up and fees $50,000  


sell house $324,000 figuring selling fees of approx 8%


profit $150,000 ?

Originally posted by @Joseph Jordan :

@Theresa Harris

It does look scary. But I thought it could be satisfying transforming something that trashed. House was built in the 70s, Opening bid is $113,595 I believe. Zillow has the value around $270,000, which I think I could sell for more if it was rehabbed. If I could get it around the opening bid I thought it could be a good opportunity.

 Does Zillow take into consideration present condition?

Or is there estimate based upon a livable house at the same level as surrounding houses?

@Michael Plante

From what I understand it comes up with their valuation based on similarly built homes and comps in the area so it's not considering it's current condition. I just imagined I could get a little more if it were fully rehabbed vs the other non-rehabbed homes in the same area. The neighborhood itself is pretty decent even though this specific house is in pretty gross condition.

Read the original post again

My thoughts 

Maybe just take all of the money for purchase and fix up out of your home with the 200k equity.  Lot lower costs. Also won’t be stressed having a hard money loan hanging over your head. 

Total guess it will go for quite a bit more than $113,000

From what I can see 45k is way more than what will be needed to fix up l.  Keep in mind I can’t see foundation, wall issues roof etc    

Looks like a lot of room for profit if the fix up cost is accurate and it sells close to the 113 

Originally posted by @Joseph Jordan :

@Theresa Harris

It does look scary. But I thought it could be satisfying transforming something that trashed. House was built in the 70s, Opening bid is $113,595 I believe. Zillow has the value around $270,000, which I think I could sell for more if it was rehabbed. If I could get it around the opening bid I thought it could be a good opportunity.

 No doubt it could be an amazing transformation, but it comes down to the numbers.

Auctions are deceiving . . . . rarely do they go for the opening bid and in fact there is likely a reserve which has not been disclosed.  We have bid on properties where the final bid was a good deal over the opening amount and did not get the property as it did not meet the reserve which does not have to disclosed.  Due to the need to have cash at most day-of-sale auctions, we have avoided them after attending a few to see how they play out. 

Not trying to talk you out of a deal but for your first flip, you are taking on one heck of a project.  The vehicles can net you a few dollars from a scrap yard but the rest will be an expensive clean out.  Remember paint and other items cant go into a dumpster and in many cases, they won't take tires and a few other things.  And as was stated earlier, you have the condition of the house that is hidden with the trash that may throw a monkey wrench in the works. You need to have at least a 15% reserve for unexpected surprises on this deal.

If this is a real sleeper in terms of value, you can count on other flippers eyeing it up.  That will drive the auction price up.  You need to know your number and never cross that number.  We have walked away from some great properties that got stupid with the bidding and when our number was reached we were out period - never say "A little more and I can make it up".  Remember, you make your money when you buy the property - not when you sell it".  If you want to go the auction route (and they do work - we just got one and close on 8/3), attend a few in person and then look at the online options like Auction.com or Hubzu.com or HUdson&Marshall among others.  Get a feel for how they work and what they require to bid and what happens when you win

As far as the estimated cost to rehab, $45 for what you show in the pictures seems on the low side especially if you are having a lot of it done and paying for it.  The kitchen is a replace, the fireplace needs attention, the roof looks good from what we can see and the windows boarded up raises questions . . . you do not know if there are any floor issues with the trash on it.  Can be a good deal of expense waiting for you.

You asked about Zillow estimates . . . . they are often wrong and not always in the good direction.  Touch base

with a local Realtor and see if they can get you a better ARV . . . i rarely use Zillow other than to see if the property is worth looking at . . . then I get a real number with a basis behind it. The house to the right of the one in the photo does not look all that good - what is the rest of the street looking like . . . can you share the address so we can see what it looks like?

Wish you the best but this might be a watch and learn so you are ready for the next one

I buy these types of houses.  Are you doing the rehab yourself or hiring it out?  If yourself, the $45k may be ok, but if you are hiring it out, you could be underwater fast, even if the major systems are basically in just need of repair but there and sort of ok..

Ignore the trash and vehicles, they take time, but not a big deal.  Hire a clean out company and come back in a week.  If you can get title to the vehicles you may even be able to sell them for scrap.

Things to look at--roof has growth on it.  It may need to be replaced.  Also photos of the bathroom shows buckets, trash can and a pot.  People who live like the photos show do not leave a pot on the toilet without a reason.  Either the toilet needs a pot of water to flush it, or there is a roof leak, which could be drywall replacement in the ceiling and mold to deal with.  The trash can with the plastic liner in the tub--why?  Roof leak or to wash something or store water?  There is no showerhead. Good news--there is tp, so the toilet likely works!   Kitchen sink looks like they have a work around for the faucet.  But dirt on dishes to the left of the sink shows they did not use water recently.  There could be water supply issues to the house or just water fixture issues.  Anyway, I would say you should plan on some plumbing issues.  And there possibly is a need for a new roof.

Is it on septic?  IF so, that can be $20k easy, and it could be bad with the weight of all the cars driving on the leach lines.  If on sewer, maybe $1k to $2k for a new line to the sewer, not bad.  If you are on septic there, look closely for issues in the yard.

The photo shows that the garage door is not all the way closed and it is crocked.  That may indicate that the foundation or the garage slab moved.  Whether that is enough movement to be a problem is just a guess with the photos given.  You may be able to tell more by looking at the house/garage from the street and also looking at the roof lines.

Kitchen photo shows junk where the frig should be.  Does the electrical work for the frige area?  Most people, even if they do not cook, do put beverages in the frig. And its not likely they took the frig as the area has stuff in it.  Also the range appears to be ancient.  I would assume it is not working.  Also note the electrical outlets were painted over in green paint in the kitchen.  So that leads to an electrical issue concern.  To look at that issue further, you can see the fluorescent light bulb box/package in the kitchen and in several rooms you can see the light fixtures attached to the ceiling with dangling cords.  Leads me to believe that they may be using these lights with a generator.  Is that because they did not pay the electrical bill or because the house has an electrical issue?  Were the wires 'recycled' from the walls?  It could be $6k+ to rewire a house, plus fixing the drywall and painting.

You definitely need new paint inside and out.  The front of the house is not even the same color as the back.  You need new flooring and at least some windows, landscaping.  I looked for HVAC and would not bet that you have any system for even heat.  There was one vent over a door, but I did not see much else, or a hot water heater, nothing for those systems, so do not count on them being present.

Also, often with tax auctions they do not give insurable title for the property. Check on that. They often do not clear utility bills--water, sewer, gas, electrical, so if those attach to the house in that area, check out how much they are to clear. Also, they may not clear a HOA or POA bill if it is in a planned community.

With just the information given I would not expect $45k to cover the possibilities, you have most major systems as possibly in failure or not present.  The only way I would go for this property at that price is if I talked to many neighbors and asked them what they know.  And do not go on just one neighbor--they may be bidding or have a relative interested or not want an investor to buy it, so ask them all.  See what you can find out from them.  They may know a lot.  When was it last lived in?  etc.

This one has so many possible issues---caution!

oops, forgot to mention you will have some fence repairs once you can actually get to it!

@Joseph Jordan

It’s always a little difficult to estimate rehab cost from pictures. There may be some big ticket items that need upgrades in there that you can’t see until you open up the walls. From the pictures I personally would set aside at least 75K for this project.

Jordan,

You had a question on if you needed Insurance or was the LLC enough. My answer on that would be yes you need insurance. The LLC can protect your other assets if the veil of the LLC is not pierced. If that veil is pierced all your assets would be at risk. Your Attorney can give you more info about that.

On the project you described, you are likely to need several policies:

1. Renovation Builders Risk:   It insures the current structure (usually at the Actual Cash Value (ACV) which is the rebuilfing cost less the depreciation.  It also insures the materials as they are incorporated into the building as you renovate it.  The policy should also have limits for Materials in transit and at the job site.

2. Liability: You will need liability for the Premises. If someone gets injured there, you may be sued. If you are not using a General Contractor (GC) for the project you would also need cover for the Operations being done there. There are ways of making the GC and their contractors name you on the policy but you may still want coverage in the LLC's name also. Some companies will issue the Liabiltiy as part of the Renovation Builders Risk and others will issue sepparate policies.

3. Workers Compensation: Depending on who is paying the subs and your state Workers Comp. laws you may need to have a policy under the LLC

4. Vacant Dwelling coverage:  If you are not starting the Renovation right away or when it is completed and on the market, you may need coverage.   The Renovation Builders Risk will often end once a certificate of occupancy (CO) is obtained (or within some time period, ie. 30 dys, after the CO.  In that case, you would need property and Liability coverage.  

Hope this info helps

@Joseph Jordan I have seen a few posts here that have talked about some BIG problems you could run into. I would say first, you need to know your ARV. No one can tell you your max offer. You have to know ARV. If I were in this situation, I would make sure and have the contractor situation lined out. Where I'm at we are 6-8 months before a contractor can do even basic work. That will add up to be big holding costs with your hard money loan. I would also see what I could find out from building inspection (probably not much given condition) and if the property is located close to you, visit it. Obviously don't do anything illegal but take a look around. Good luck!

Corey makes some good points. The ARV is essential as without an accurate ARV you are hoping the end result is what you expect. While the link you provided does not open it looks like you are looking at a property in Marion County, Oregon based on the URL. Again, do NOT use the Zestimate as your ARV as it can be off significantly in either direction. Redfin shows the value to be around what Zillow shows so the ARV may be close which means there will be other people looking at the property since it is a hot market.

The HML interest and points will eat into your profits quickly. Assuming $50K on renovations (assuming nothing major comes up in the process) and paying for much of the work to be done, the calculations from your HML are optimistic in terms of profit. Use one of the calculators out there (like here on BP) to validate the numbers . . . HMLs are usually good to sound deals off of as they look at worst case but with what you shared, not positive about the numbers. Just a rough look at the numbers I would draw a hard line in the $145K range based on 1) unknowns of what you might come across, 2) what the city of Salem might require from you (permits, outstanding amounts, etc.), 3) the high monthly carrying costs and 4) not having a solid ARV.

Looking at the auction rules, a few items to keep in mind:

1) A 25% non-refundable down payment is required for all cash sales and land sale contracts and must
be received within one hour of the end of the sale. The down payment shall be made with legal U.S.
currency; cashier check; certified check; money order; or personal check providing a cashiers check is
furnished to replace the personal check within 24 hours after the end of the sale

2) ALL PROPERTIES ARE BEING SOLD “AS IS,” WITHOUT WARRANTY AS TO THE CONDITION OF THE
TITLE AND WILL BE CONVEYED BY QUITCLAIM DEED

These may pose an issue to you and hold additional costs / expenses especially the title issues.  For example, a bank owned property through Hubzu provides you with a clear title on closing . . . piece of mind that there is not something waiting in teh wings.

There is money to be made but is this the one you want to go after?  As the old Kung Fu show used to say "Choose wisely Grasshopper" :) 

Originally posted by @Andy Sabisch :

Auctions are deceiving . . . . rarely do they go for the opening bid and in fact there is likely a reserve which has not been disclosed.  We have bid on properties where the final bid was a good deal over the opening amount and did not get the property as it did not meet the reserve which does not have to disclosed.  Due to the need to have cash at most day-of-sale auctions, we have avoided them after attending a few to see how they play out. 

Not trying to talk you out of a deal but for your first flip, you are taking on one heck of a project.  The vehicles can net you a few dollars from a scrap yard but the rest will be an expensive clean out.  Remember paint and other items cant go into a dumpster and in many cases, they won't take tires and a few other things.  And as was stated earlier, you have the condition of the house that is hidden with the trash that may throw a monkey wrench in the works. You need to have at least a 15% reserve for unexpected surprises on this deal.

If this is a real sleeper in terms of value, you can count on other flippers eyeing it up.  That will drive the auction price up.  You need to know your number and never cross that number.  We have walked away from some great properties that got stupid with the bidding and when our number was reached we were out period - never say "A little more and I can make it up".  Remember, you make your money when you buy the property - not when you sell it".  If you want to go the auction route (and they do work - we just got one and close on 8/3), attend a few in person and then look at the online options like Auction.com or Hubzu.com or HUdson&Marshall among others.  Get a feel for how they work and what they require to bid and what happens when you win

As far as the estimated cost to rehab, $45 for what you show in the pictures seems on the low side especially if you are having a lot of it done and paying for it.  The kitchen is a replace, the fireplace needs attention, the roof looks good from what we can see and the windows boarded up raises questions . . . you do not know if there are any floor issues with the trash on it.  Can be a good deal of expense waiting for you.

You asked about Zillow estimates . . . . they are often wrong and not always in the good direction.  Touch base

with a local Realtor and see if they can get you a better ARV . . . i rarely use Zillow other than to see if the property is worth looking at . . . then I get a real number with a basis behind it. The house to the right of the one in the photo does not look all that good - what is the rest of the street looking like . . . can you share the address so we can see what it looks like?

Wish you the best but this might be a watch and learn so you are ready for the next one

Very solid advice, thank you - I appreciate the honesty! I also wasn't aware of hubzu or hudson and marshall. I did show up to one auction.com auction, but it was just me and the auctioneer so he gave me a couple tips, and then I left. I agree it seems like a pretty hefty first project. After reading all the advice on this post, I think I'll be taking a more cautious approach. I hope to still attend the auction, just to see what happens - who knows.

Originally posted by @Lynnette E. :

I buy these types of houses.  Are you doing the rehab yourself or hiring it out?  If yourself, the $45k may be ok, but if you are hiring it out, you could be underwater fast, even if the major systems are basically in just need of repair but there and sort of ok..

Ignore the trash and vehicles, they take time, but not a big deal.  Hire a clean out company and come back in a week.  If you can get title to the vehicles you may even be able to sell them for scrap.

Things to look at--roof has growth on it.  It may need to be replaced.  Also photos of the bathroom shows buckets, trash can and a pot.  People who live like the photos show do not leave a pot on the toilet without a reason.  Either the toilet needs a pot of water to flush it, or there is a roof leak, which could be drywall replacement in the ceiling and mold to deal with.  The trash can with the plastic liner in the tub--why?  Roof leak or to wash something or store water?  There is no showerhead. Good news--there is tp, so the toilet likely works!   Kitchen sink looks like they have a work around for the faucet.  But dirt on dishes to the left of the sink shows they did not use water recently.  There could be water supply issues to the house or just water fixture issues.  Anyway, I would say you should plan on some plumbing issues.  And there possibly is a need for a new roof.

Is it on septic?  IF so, that can be $20k easy, and it could be bad with the weight of all the cars driving on the leach lines.  If on sewer, maybe $1k to $2k for a new line to the sewer, not bad.  If you are on septic there, look closely for issues in the yard.

The photo shows that the garage door is not all the way closed and it is crocked.  That may indicate that the foundation or the garage slab moved.  Whether that is enough movement to be a problem is just a guess with the photos given.  You may be able to tell more by looking at the house/garage from the street and also looking at the roof lines.

Kitchen photo shows junk where the frig should be.  Does the electrical work for the frige area?  Most people, even if they do not cook, do put beverages in the frig. And its not likely they took the frig as the area has stuff in it.  Also the range appears to be ancient.  I would assume it is not working.  Also note the electrical outlets were painted over in green paint in the kitchen.  So that leads to an electrical issue concern.  To look at that issue further, you can see the fluorescent light bulb box/package in the kitchen and in several rooms you can see the light fixtures attached to the ceiling with dangling cords.  Leads me to believe that they may be using these lights with a generator.  Is that because they did not pay the electrical bill or because the house has an electrical issue?  Were the wires 'recycled' from the walls?  It could be $6k+ to rewire a house, plus fixing the drywall and painting.

You definitely need new paint inside and out.  The front of the house is not even the same color as the back.  You need new flooring and at least some windows, landscaping.  I looked for HVAC and would not bet that you have any system for even heat.  There was one vent over a door, but I did not see much else, or a hot water heater, nothing for those systems, so do not count on them being present.

Also, often with tax auctions they do not give insurable title for the property. Check on that. They often do not clear utility bills--water, sewer, gas, electrical, so if those attach to the house in that area, check out how much they are to clear. Also, they may not clear a HOA or POA bill if it is in a planned community.

With just the information given I would not expect $45k to cover the possibilities, you have most major systems as possibly in failure or not present.  The only way I would go for this property at that price is if I talked to many neighbors and asked them what they know.  And do not go on just one neighbor--they may be bidding or have a relative interested or not want an investor to buy it, so ask them all.  See what you can find out from them.  They may know a lot.  When was it last lived in?  etc.

This one has so many possible issues---caution!

I can't say thank you enough for all the valuable info in this post! You obviously really examined each photo and gave really detailed advice. I would be willing to do some work myself, but the major stuff I would have done professionally. I can replace toilets and light fixtures, sinks, faucets, etc., but not any complicated electrical or plumbing, and my drywall skills aren't great either.

The buckets and barrel in the bath tub really confused me as well - I have no idea what was going on in there. You mentioned a lot of things in the pictures that I didn't even think about but make sense, especially all the florescent light fixtures hanging around possibly being connected to a generator. I did drive by and the foundation around the garage "seems" to be level from what I could see, so I'm hoping it is just a crooked garage door, but who knows. I will be sure to check on the title and any outstanding utilities as well. I'm now thinking the rehab budget could easily be double the originally thought amount.

Originally posted by @Chanelle Clark :

@Joseph Jordan

It’s always a little difficult to estimate rehab cost from pictures. There may be some big ticket items that need upgrades in there that you can’t see until you open up the walls. From the pictures I personally would set aside at least 75K for this project.

Thank you - I think you are right. I started writing down everything that would likely need attention and a rough guestimate of the prices including a contingency, and I'm already closer to $80k.

Originally posted by @John Mocker :

Jordan,

You had a question on if you needed Insurance or was the LLC enough. My answer on that would be yes you need insurance. The LLC can protect your other assets if the veil of the LLC is not pierced. If that veil is pierced all your assets would be at risk. Your Attorney can give you more info about that.

On the project you described, you are likely to need several policies:

1. Renovation Builders Risk:   It insures the current structure (usually at the Actual Cash Value (ACV) which is the rebuilfing cost less the depreciation.  It also insures the materials as they are incorporated into the building as you renovate it.  The policy should also have limits for Materials in transit and at the job site.

2. Liability: You will need liability for the Premises. If someone gets injured there, you may be sued. If you are not using a General Contractor (GC) for the project you would also need cover for the Operations being done there. There are ways of making the GC and their contractors name you on the policy but you may still want coverage in the LLC's name also. Some companies will issue the Liabiltiy as part of the Renovation Builders Risk and others will issue sepparate policies.

3. Workers Compensation: Depending on who is paying the subs and your state Workers Comp. laws you may need to have a policy under the LLC

4. Vacant Dwelling coverage:  If you are not starting the Renovation right away or when it is completed and on the market, you may need coverage.   The Renovation Builders Risk will often end once a certificate of occupancy (CO) is obtained (or within some time period, ie. 30 dys, after the CO.  In that case, you would need property and Liability coverage.  

Hope this info helps

That does help, thank you! It sounds like I need to find myself an attorney who can walk me through the process.

Originally posted by @Corey Frank :

@Joseph Jordan I have seen a few posts here that have talked about some BIG problems you could run into. I would say first, you need to know your ARV. No one can tell you your max offer. You have to know ARV. If I were in this situation, I would make sure and have the contractor situation lined out. Where I'm at we are 6-8 months before a contractor can do even basic work. That will add up to be big holding costs with your hard money loan. I would also see what I could find out from building inspection (probably not much given condition) and if the property is located close to you, visit it. Obviously don't do anything illegal but take a look around. Good luck!

That's a good point, thank you! I didn't think about the GC's being booked out for a while. I will look into that asap. I will also be getting in touch with my realtor to get a more realistic ARV figure from her.