All Forum Posts by: Jennifer Petrillo

Why don't you want to use the equity in your current home? I would speak to your mortgage company and see if they have any thoughts--we just did a cash out refi on our primary home to buy a vacation rental investment property. Yes, our monthly payments went up, but they will be covered by the vacation rental income from the new property.

We get it under contract at a price that is based on how much work we think it needs, then walk through with our GC for a detailed scope of work and true pricing (which we are usually pretty close to). Our lender also sends their own inspector, so we do not hire a separate inspector, just go by what their inspector and our GC say.

Agree with @James C., you bid what you want to, not what the realtor suggests. What if they worded it this way: "I would like to make more money on this deal so you should put in a higher offer so I can get a better commission." Let them go flip houses and take all the risk themselves if they want to make more money. If your offer is not insultingly lowball, it's too high. Likewise, when you sell a home, use an online MLS listing broker, not a seller's agent. You will save thousands in commission, you did all the work, why share a huge chunk of your profit with someone who just unlocks the door and shows people around? In a seller's market, the buyer's agents will bring the buyers to you. We sell our properties this way through Realmart Realty, for $300 we get a perfect MLS listing, pictures and all, paperwork done for us, etc.

Someone is paying the property taxes, you have to figure out who that person/entity is. Go to County Tax Dept (sometimes records are online but sometimes they are not updated) and find out who to contact regarding ownership. Also, make note of what the different taxes on the structure and on the land are (these should be separate numbers), you should pay for the value of the land only if the structure is so damaged that it must be demolished. It sounds like you are basically buying the lot. So look at what the tax assessment on the lot only is and offer that much. 

Hi John, best of luck in your new venture, sounds like you have done a lot of homework. If you find good deals, the money will follow. This year we used Rehab Financial Group (outside of Philly) and Ground Floor Finance (in Atlanta) for the two flips we did. They structure their loans quite differently so you can think about which works best for your financial situation at the time. RFG requires interest only payments during the course of the loan whereas GFF required no payments during the loan but a lot more upfront. There are closing costs, points, etc with both and interest rates 12-14% for newbies. Both will do their own inspections and appraisals (that you will pay for) before they lend. I agree with @Jim Murray above, choose ONE strategy to follow for now, the lender will want to know what your exit strategy is before helping you purchase the property.

Nope, you can walk away for any reason. Put "contingent on inspection" in the contract and you can turn around and say 'sorry, needs too much work' and get your earnest money back. Of course, with as is properties, you wouldn't be able to bargain the price down after seeing it, you are expected to have an idea of what it is worth to you (and ARV) before you even get it under contract.

Yes, that was just the bank buying it back for itself "Christiana Trust" holds a lot of bank owned properties. Note tax assessed value is 69K--not 109K!!! I could see maybe buying it at 90K and fixing it up for myself to live in or to rent out, but not reselling it for 109K with no work in it. 

Yes, that place is not worth 109! I liked my original suggestion of 50K LOL. Josh, call the original listing agent today and find out what the heck is going on. Looks like someone snapped it up to try and wholesale it for a quick buck but I don't think they know what they are doing. Property needs too much work to pay 109 for it, the after repair value is not high enough to make you a decent profit.

Price drop to 77,9 on 10/17 must have triggered some offers...property now listed as sold on 11/30 for 90,300.

You do not need to find your own agent. Most agents know little about real estate investing, they are only salespeople and will tell you whatever they can in order to make a buck. Agents I have used have told me the wrong school system, incorrectly calculated down payments and closing costs by thousands of dollars, told me a house sold then called me back to say 'oops, I called the wrong client!' I have yet to be impressed by a realtor. Call the listing agent directly, this person will know more about the property than some random realtor that you call. And you won't have to wait for the back and forth between them, you can get your answers directly. Ask:

why is owner selling?

does agent know of any major problems that must legally be disclosed? (you will see a disclosure form if you make an offer, but people can lie on these)

was there a previous inspection on the property? (maddeningly, you will not be allowed to see this, but this information might give you a clue as to why someone backed out of the deal--is there something major and expensive lurking behind the scenes?)

why did previous contract fall through?

why property on market so long? (in their opinion)

Do not tell them too much about yourself, other than that you are an investor. You have to come across as confident, as if you've done this before. You want to have the upper hand, not sound like they are doing you a favor by talking to you. You can tell them you are an investor looking for a property in that neighborhood.

Personally, I love to see a property that has sat on the market for two years, it means I can probably buy it for a song and have enormous profit potential. I also already know what is likely wrong with it--burst pipes and water damage being typical since banks are neglectful and don't winterize until there is damage. I know what I am getting into and what it will cost to fix. It also means less (no) competition because other buyers have been scared away and that the seller just wants to dump it at that point.

Do you know a GC? How much work can you do by yourself? Do you have the time? Do you know an inspector? (this will cost $400-500). You won't know the details of your costs until you have an inspection done and get a rehab estimate from a GC.

Financing: some hard money lenders require more down but then no payments during the loan period. Others require less down but then you have to make payments during the loan. Figure out which works best for you. If you have more money to put down up front, maybe this is better for you, requires less cash flow during the loan. If you don't have a lot to put down, go for that kind of loan, but then you have to make sure you can make the monthly payments. The hard money lender will send out their own appraiser and inspector, so they have an understanding of the scope of work. You will submit to them your rehab estimate and this will be bundled into your loan. As work is completed, you will request that the inspector come out to approve it and then get a draw from the escrowed rehab funds that are attached to your loan. You will pay the inspector each time s/he comes out and you will also pay a wire transfer fee to get the funds (unless you want to wait for a paper check). This means that your contractors will wait a week or so to get paid after their work is completed. Make sure they are OK with this. You may also need to put out money to buy materials, for example painters will likely want you to provide the paint. A five gallon bucket of Behr Marquee (what we use) costs about $200. You may need five 5 gallon buckets to paint this whole place, not counting primer and ceiling paint. Do you have $1000 upfront to go buy the paint? Because you will have to wait until the painting is done and the inspector has seen it in order to get reimbursed for this.

Your next step is to call the listing agent and go see the house. Bring a GC with you or maybe a friend/family member who knows something about rehabs. Don't be afraid of the work, look for the potential, imagine the place all fixed up and imagine what has to be done to get it there.

IKEA: there is a difference between cheap and inexpensive and IKEA is the latter. You have to keep your end user in mind--whoever buys or rents a 2BR house near the train station in Rahway is not expecting a high end kitchen and will likely be in their 20s. Younger people like cleaner, modern looking cabinets, they do not want the French Country look that they grew up with, nor should they expect it in a property like this. Ikea is inexpensive because you self-assemble, but looks so much better than Home Depot or Lowe's builder's grade crap. It has a modern, European vibe to it. If you knock out that fireplace, you have room to put a decent size kitchen in there. And they have been rated a Consumer Reports Best Buy in the past--3/4" plywood boxes, hardwood doors, great hinges--they are not "cheap." I am five feet tall with limited construction experience but handy enough with a level, drill and Allen wrench that I assembled an entire kitchen myself, including hanging the upper cabinets. Ten years later, still looks/works great. 

Call the listing agent and go see the place before it is gone! Take a ton of notes and pictures to refer to later.