I put my first solid property under contract this week! I had a triplex under contract earlier this month but the seller/agent smelled my inexperience and tried to sell me a dud. Thank god for the option period! The inspection uncovered potentially catastrophic issues. Found me a smaller SFH project and the experience gained from the first near-miss was invaluable. Thanks to all who have provided guidance and advice. Much appreciated. Now it's on to the rehab estimate analysis!!
What were the potentially catastrophic inspection findings on the triplex? Just curious.
@Juan Mendoza ....Seller told me it needed to be leveled and painted. He told me it had a new roof and was recently vacant. Inspection found old cast iron plumbing leaks, major water damage from a previously leaky roof, multiple electrical and gas code violations and termite damage. The inspection also educated me on things like water heater codes (exhaust was out of code tolerance and there was major floor rot due to a leaky tank) as well as signs of water damage I wasn't familiar with.
Congratulations Rick! Knowing when to walk away is one of the most important skills to learn. It hurts losing that option and inspection money buy you dont want to dig yourself a hole especially when starting out. I got complacinet in my purchases and stopped scoping properties I deemed to be low risk (PVC piping, no large trees and little slab movement) and got stung when I bought a duplex that had a rotten cast iron pipe under the property which had then been replaced with PVC outside the property. So to my initial glance it was PVC when I seen the PVC inspection pipe. Ended up costing me $20k to tunnel the pipe out and replace it all. Lesson learnt is I simply wont buy a property without running a camera regardless of how low risk I deem it to be. So you dodged a bullet with the cast iron on the last property.
@Rick Levada Yes, that was a good decision. I just finished a property that had similar issues... never again.
@Rick Levada AWESOME work, brother. Exciting for sure! Best of luck!
Congratulations on getting that first one under your belt. Please keep us updated on your progress.
great to hear, and keep us updated on your progress.
Congrats! Anything can be fixed at the right number.
Good stuff brother i currently have a notepad of over 200 hundred properties of absentee owners hopefully i can get one under contract soon.
@Juan Mendoza , @Justin Merod , @Steven Gillmer , @Travis Buck , @Justin M. , @Ian Walsh , @Scott Marshall So...supposed to close today. Wondering if anyone has experienced something similar: project being funded with hard money. Set up the process and had all numbers set. I was really close with my projected numbers (purchase price 85K with 5K for cosmetic touch up and ARV of 127K). The appraiser said if the flooring was updated, HVAC updated and appliances were replaced it would appraise for 150K. The hard money lender then said they will require those updates to fund. Now I have to come to closing with 9K more than planned to make the deal work. The numbers still work for the project and I should be able to get all of that back when I refinance out.
Has anyone else been forced to do maintenance that could have been deferred in order to fund. Still moving forward but didn't like the terms. I have to put 12K of my own cash into an escrow and request draws when the work is complete...and pay draw fees!!
@Rick Levada , I have seen that often enough with traditional financing so it doesn't surprise me. That is generally going to be lender specific (or even program specific).
Any updates? Did you close?
@Brian Carignan I did close!! It's been a whirlwind few weeks but the rehab is ongoing and busting budget as expected! Here are a few speed bumps encountered:
1. The house appraised where I thought it would but the appraiser said with additional upgrades the appraisal would be about 15K higher. The hard money lender wanted the recommended upgrades done and forced me to front most of the cash in escrow. This more than doubled the required money at closing...which they informed me of the day before closing!
2. The hard money lended isn't flexible with the money in escrow. There is a DIY addition on the house that was way out of whack. The repair cost 6500 which wasn't included in the original repair estimates. I also decided to replace the HVAC as the unit was very old and would likely fail in the near future...not to mention it had multiple code violations in it's installation. I asked for a draw to pay the foundation and said I would complete other repairs with cash on hand. They are still "deciding" if they are going to allow me to reallocate these funds for these purposes.
3. So many trips to Home Depot add up!! Sheet rock here, studs there, need some extra tools....the list goes on but every day seems to be 300-500 bucks. Thought I could save by doing some of this stuff myself but those savings seem to be minimal given the time I am spending doing them.
All in all the numbers are still working and I feel good about some extra up front costs that will hopefully provide peace of mind for the next 10 years or so. I've made some great connections with a handyman and other professionals that will make it much easier on the next one. I will share some photos in the near future. Thanks for checking in!!
@Rick Levada Good to read you closed and are moving forward. Do keep us updated as it is a great example of the 'what if's', expectations and dealing with hard money lenders. I don't use them I'm not to familiar with their 'techniques'. Do you think they want you to fail on some level (thus being a little difficult with these upgrades) so they can take over/maximize profit? Good share, ty.
Congratulations @Rick Levada ! We are newbies ourselves, although we focus on buy and hold for now. Keep us updated on your progress!