All Forum Posts by: Andy Sabisch

OK, this is a first for us.  Looking at a duplex . . . . the numbers look good, condition of one side looks good, exterior looks good . . . . . but . . . .

Walked into the other unit and not even in the kitchen we look in an open closet and see a large Tupperware tub filled with water and about two dozen bluegills.  The tenant was there for the walk through and said it was for when they go fishing for catfish.  OK, strange but we kept on walking into the apartment.  The dining room and living room were filled floor to ceiling with glass cages containing more than 20 large snakes, a few monitor lizards and something else that we could not identify.  There was an adult pitbull in a cage which the owner said was her "emotional support animal".  Thinking things could not get much worse, we went into the basement and found that there were a number of cages filled with mice and rats that they used to feed the snakes upstairs . . . and it smelled like urine from the rats / mice.

So here is the question.  The PCDS stated the tenants had a 1 year lease and had been there since January.  If we want to look into purchasing the property, can we put in the contract that the property needs to be turned over at closing vacant?  Is there any option to address this condition which we would not want to inherit on purchase.  Our insurance company does not accept pitbulls but we have the claimed "emotional support animal" issue to deal with.

Thanks for any insight or ideas on this situation which is pretty unique in my mind

As Henry said, the vast majority of wholesalers over inflate the ARV and under price the repair costs. They often lock up a property sight unseen and the fact the electrical is old, the plumbing is shot or the HVAC needs to be replaced are not factored into their repair costs. With all the gurus out there selling programs to make quick money wholesaling, it is all about moving a lot of paper and spending time to really assess a deal and see what the ARV and repairs are is not something the vast majority will 1) want to do or 2) be able to do.

The goal is to lock up a property and then assign it to someone to flip or hold and pickup $5K to $20K in the process.

I have seen two things happen 1) someone pays for the assign and finds out the numbers they were given were off and the deal no longer works or 2) the wholesalers is not able to sell the assign and they use a weasel clause to get out of the contract leaving the property owner with the property again and a few weeks of lost time,  This then makes it harder for those that want to buy it and rehab the property.

Bottom line is you need to know the area so you can tell if the ARV is legit and then get into the property to inspect it to determine what the repairs should be and base your decision on YOUR numbers not theirs.

Are there legit wholesalers?  Absolutely but they tend to have a pool of buyers ready and rarely post deals on Facebook looking for buyers.

Have to start by asking what your experience level is . . have you ever done a deal in real estate or will this be your first foray into the area?  All of the "mentorship" programs you refer to are designed to first of all make money for the guru selling you the program.  Is there useful information in the programs?  Yes but the formula is all pretty much the same.  Bigger Pockets offers a wealth of material both in the forms of books and audio programs that can get you the foundation.  Join as a Pro member to access that material and you will have a great resource at a fraction of the cost not to mention the forums here to help you assess deals if you want.  If you want someone to hold your hand and then have to follow every step of the way, the mentorship programs will be a start but without a deal to process, it is just information . . . .

Personally I would recommend getting immersed in the material you have access to here and understand the tools you will need before paying upwards of $10,000 and still not have a deal to work on.  In many cases, your first property (flip or wholesale) will net you what the course woudl have cost but you will have spent the acquisition cost getting the program.  I have talked to a number of people that bought the mentorship program and then had no money to do a deal and were stuck paying off a program that they received no benefit from..

So again, what experience do you have and do you have financial reserves / credit to do a deal if one comes across your desk?  Also what area are you looking at flipping in and do you have the skills to do a cosmetic flip yourself or have access to trades people to do the work? 

BP members are here to help . . . don't undervalue that resource

As a rental, doing anything with the basement other than possibly having it available for storage woudl be money you will not get back (use the BP calculator for rentals).  With the ceiling height it will not become livable space and as you said, adding an egress will be costly - again, look at the return.  We have one rental with the same setup and the tenants appreciate the ability to store things down there (assuming it remains dry) but woudl not want to use it for anything else.  Where you can get top rental income is with living space and quality of finishes (not over done but nice).  

Putting your money smartly into exterior curb appeal and interior living space finishes will net you the greatest return on investment . . . the basement would not even make my list

Depending on your locality you might need to get a CO and if so, the low ceiling height would never pass inspection by most municipalities.

Welcome to the landlord club . . . . best of luck

Quote from @Account Closed:

Also a follow up question. When getting together a plan to flip the house, things like floor plan, layout, cabinets, paint colors, design plans etc. Who would I use for that? Would that be the contractor or a mix of people? I want to make sure have a clear plan for the house before I begin work.

And to answer the second question, that also should have been part of your estimate to support an offer price.  Once you have done a few you can do that yourself but use resources such as Home Depot or Lowe's or some other store that provides free design assistance.  You can always shop for better prices but you will have a design and a cost to factor into your offer.  

Stick with the formula of PP + Repairs should be no more than 70% of ARV.  The BP calculators will help you get in the ballpark.

There is a cost associated with a GC but it comes back to what your (and your partner's) experience is on remodeling / flipping.  Are you both ready to invest the time needed to find, screen and oversee sub-contractors doing the work?  Are you doing any of the work yourself?  Finding quality sub's today is a chore - plenty out there, just not a lot of good ones that work without constant oversight and then you will wind up fighting to get work redone.  A GC can see issues as they occur - unless you are confident that you can, you might have to pay another contractor to redo work already paid for , , , we have had that happen going the self-GC route.

All of the costs associated with a flip should have been factored in along with a contingency (10% to 15% minimum) when you came up with the offer price.  Being at the point of closing and not having the GC / no GC question answered and if no GC who you will use as subs puts you at a disadvantage out of the blocks.

Remember the old saying . . . You make your money when you buy not when you sell.  If you pay too much because the cost of a GC was not factored into the offer price, you can't hope to make that up on the back end when you sell as that is never guaranteed.  Lay out the numbers both ways and see what makes sense and what you can support.  Since you are already at the committed point and closing, it may be that this is a learning experience with less profit than you expected but use it as that and apply it to future projects.

Be happy to take a look at it . . . do you have it in a form you can share

The suggestions to let the DOM reset and relist works in most cases but keep in mind that as interest rates go up the buyer pool starts to shrink.  We are still in a hot market in most areas but as we start seeing interest rate hikes. who could afford a house at a price suddenly can't and even 50 basis points will eliminate buyers.  

Remember in flipping you make your profit when you buy not when you sell.  You control how much you put in the property but if you overpaid as you said you did, you are behind from the start.  The best answer woudl have been to shop for deals on the items you put in.  Atlanta has surplus builders material stores (I have used them before) so that could have given you higher end finishes at bargain prices.

As others have said, expecting more because you put more in is a fallacy.  Price it right and it will sell.  We just finished a flip, put it on the market slightly under ARV and received multiple offers that ended up netting us $25K more in the first 2 days.  People can compare quickly using Realtor, Zillow or Redfin and you know that 95% are doing just that especially in your price range.  Never want to have the nicest house in the neighborhood and expect people to pay for that.  In fact the appraiser that did the one we are closing on next week said it was good we had not gone with granite or appliances as they add nothing really to the appraisal and people often want to go with their own.  

Do a search on Facebook and you should find a local group dedicated to wholesaling properties . . . . post what you are looking for and get on their lists.

Here is one that came up in a quick search: https://www.facebook.com/group...

Check out the local REIG and see who is doing wholesaing and get on their lists as well.

Just remember that you need to verify numbers (ARV, repair costs etc.) since the wholesalers often are light on repairs and heavy on the ARV to make the deal look better.

If you have any questions on a deal, post them here ad we will be happy to help . .  the BP family is a great resource to have

Quote from @Susan Maneck:

@Andy Sabisch

You prefer investing in Pittsburg to Mississippi? 

No in Pittsburgh but Pennsylvania.  We are in Mississippi for work but this will not be our final destination.  We are involved in the market here and just finished a flip that closes in a few weeks.  The Jackson area is a strange market . . . a few blocks and you go from 200K to 20K and take your life in your hands.  There are plenty of properties to buy & hold if you want to deal with a market that is predominantly Section 8.  Good cash flow but we have stayed away from being landlord in these areas.  There are deals to flip but the margins are razor thin and making a mistake in the purchase will kill you.  As they say, you make your money when you buy not when you sell and Jackson is that model to a T.