How distressed is too distressed??

Question

I found a deal and the REO agent wants to get the contract going now.  The property, once repaired is worth 200k. I can get it under contract for less than quarter of that. the problem is that im out of the area and not sure how to go about doing repair estimates, along with the fact that I dont have a cash buyer on hand.

CK Hwang · Answer

Markeilsha, good on you, I think you're doing the right thing getting the inspection done.

Markeilsha R. · Answer

@Alex Craig  thanks for the advice. I live about 3hrs from the site so visiting at that rate wouldn't cost too much if I has to manage a flip.  I was under the impression that to wholesell I wouldn't actually have to rehab the property, rather, I would just show the buyer that the property had the value once it is rehabbed. Sometimes the discussion gets me a little mixed around between the two.

@CK Hwang & @Josh Sexton I will have the home under contract by tomorrow. The REO agent is sending the docs. I think I will go ahead and order an inspection. I was thinking I could get it under contract and turn it back around buy selling to a "we buy ugly houses" type of investor since I'm out of town, but if I do end up having to rehab it myself I want to know the damage.  Thanks for all the advice guys!!

CK Hwang · Answer

Personally, I would fork money over for the home inspector for an objective view of what needs to be done to the house to get it up to code and build the cost into your wholesale fees. I can't speak for other investors, but i would have no issue if you wanted to include the costs of an inspection report when wholesaling a house to me because it would have been something i would have paid for anyway.

From working with wholesalers, I find that supplying an inspection report is one of those small little things you can do for not a lot of money to build up a good reputation among buyers as a wholesaler that knows their stuff and no BSing me when it comes to repair costs. Little things like this shows me the wholesaler is committed and not trying to hide anything, and I really appreciate that.

Also, I've found that trying to find contractors on craigslist is the absolute worst way to find contractors. They are on craigslist for a reason. Good ones generally don't need to advertise on craigslist.

I guess the bigger question is whether you have the property under contract? if you don't, then yes, the inspection fee is at risk. If possible, I would try and secure the property either through a purchase option or have it under contract before trying to wholesale it.

Josh Sexton · Answer

You can learn a lot by studying the market and the property online but nothing beats having boots on the ground.  At the very least, hire an inspector to take a look at the property for you to make sure it is structurally sound.  A lot of stuff can be fixed without too much hassle but you need a good foundation

You can have contractors place bids on the work but you'll want to make sure they have a solid working history so you aren't taken advantage of.

Alex Craig · Answer

I have seen a lot of people lose a ton of money trying to fix up homes from out of state.  I would advise flying into the market and interviewing each contractor in person at the property.  Then I would spend time in the market during the renovation too.  I renovate homes 149 miles west of me and even though I have a great team on the ground, I am in that market every 10 days.  No one will watch your bottom line closer then you will.

Markeilsha R. · Answer

@CK Hwang

Thanks! All I know do far is that it need repairs prior to anyone moving in. I was thinking of soliciting contractor estimates for the property on craigslist. I was hoping to get that free. Do you think the home inspector something I can wait on and have the buyer take care of? I'm trying to get this deal done with the least (or no) expense possible.

How distressed is too distressed??

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