All Forum Posts by: Jennifer Petrillo

As to your question about why this property is still on the market, it is because where you see potential, everyone else sees a nightmare. An end buyer would never buy this, needs too much work and is so ugly that most people cannot imagine what it could look like all fixed up. Other investors maybe don't have the time, capital or interest for this one right now, everyone plays the game differently, so don't assume that just because it has sat on the market, it does not hold any value for you as a potential purchase. Offer 50K for this house. You will have an idea of what to offer next depending on the seller's response to your offer. You never know, it's been on the market for a while, maybe they just want to get rid of it at this point. 

You should know, though, that it needs a heck of a lot more than just cosmetic work--your shower is leaking inside the wall (hence, the telltale plastic bag taped inside the shower because the moist wall is making the tile fall off), needs to be gutted, new shower tree built. This is easy to learn to do yourself with Pex. Kitchen needs to be gutted--toss all those old cabinets, remove tiled walls, also demolish old fireplace, it is quaint but unnecessary, you need that space to wrap the countertop around to that wall and move the range to that wall as well to give the sink more space. Buy self-assembly IKEA cabinets, they are easy, clean and modern looking and super cheap. Buy cheap white appliances on clearance. Laminate countertop. Refinish oak strip floors throughout, will probably need a dark stain to cover up damaged wood. Possible other water leaks from the pictures, hard to tell (and hopefully they are old stains, not active leaks). Siding looks decent except for odd bulge near roofline on right side of house. Cannot see condition of roof from pics. Can you add living space to attic? Storage shelves or closet to basement? Figure out where you can add value to the house, small things that don't cost much can make the property more attractive to buyers. Does it have a driveway? On street parking sucks, you always have to move your car for the snowplows. 

Exit strategy: It can be hard to sell 2 BRs in some markets since people want room for their kids. But might have young working folk without kids who want to buy their first home. Looks like a decent working class neighborhood with some commercial businesses thrown in (I actually like that Verizon is across the street, fewer people, less noise, less traffic on weekends). Check Craigslist for rental comps and Redfin for sale comps. Make sure you are looking at 2BRs. This property actually looks more like a rental to me, are you prepared to become a landlord? Or could you sell it to another investor who already is a landlord in that neighborhood? If you buy for 50K and put 50K into it, make sure that a 2BR in that neighborhood rents for 1000K (the 1% rule) or greater. Or will sell for 150K+ (you'd make about 30K profit in that case).

Walk through with an inspector or, better yet, a good GC who can help you figure out what needs to be done then give you an estimate for the work. We see our properties with our GC, not an inspector; between the 3 of us, there is nothing that gets missed, we get a full written estimate of all the work, then we can decide what we will do ourselves, what we will sub out to someone else, what we will leave for our GC to do and what he cannot do himself and we need someone else for. Have materials purchased and scope of work and timeframe ready to go by closing date--time is money in flipping, you want to keep your rehab time as tight as possible and some things take a surprising amount of time, such as ordering cabinets, getting permits and inspections for certain things. Certificate of Occupancy is something you will be reponsible for on any property you purchase, it is not a big deal, usually a one page form.

When you sell, use Realmart Realty, an online MLS listing broker; for $300 you fill out the paperwork the same way a realtor would, but set your own sales commission (2.5-3%). Realmart puts your listing with your pictures on the MLS, agents bring their buyers to you and you save thousands of dollars on sales commission (because you are not paying a seller's agent)--money in your pocket! You can purchase signage from them and there are many other add ons but I have never spent more than the entry level $300 package. We used fivrr to design our company logo and then bought our own real estate for sale sign on Vistaprint.

Good luck and let us know your plans!

If you plan on using hard money, they will want to see W2 income and cash available for down payment/closing/points, etc. Start to research costs in your area--what do houses sell for? What is the cheapest you can buy them for? Start to familiarize yourself with rehab costs. Look for a good GC who can give you estimates on work. We buy undervalued properties at auction and off Hubzu, Xome, Auction.com, etc--more profit potential there. 

Read the book on estimating rehab costs. Take school system into consideration--what are you buying the property for? As a buy and hold rental and expecting to house a family in it? Or to sell to someone with/without kids? Who is the end user of this property and what will they be looking for? Are major systems in place or in need of upgrade? That can get expensive, way beyond just a cosmetic fix up. You will never catch all the small things, every property will surprise you at some point, that is the fun/challenging creative part!

I chose a painting contractor for my latest flip whose sign was in front of a number of the houses in the town in which the property is located. I figured if every other homeowner in town is using this guy, that's enough reference for me. They were great, maybe a little pricy but I was concerned more with speed and skill than cost on this job.

You could pay for a title search, I have done this at times when I cannot get accurate information from the county or online records. Sometimes these houses sit for years on the books of some bank that doesn't even know the value of the asset they hold (in fact, they've never even seen the house, just bought a package of liens that the house was part of), they get sold multiple times to other banks, it can be a very twisted trail...eventually the bank holding the property will decide to liquidate it and it will go to county auction or end up as an REO property, often by that time the property has sat empty for years and deteriorated, which can work in your favor since you can make lowball offers on these distressed properties that no one else wants. But I agree with you, tracking down current ownership can be really frustrating....

How do you plan to finance these properties? You mentioned buying with cash, then you mention a mortgage. Have you found distressed properties in your area for 75-95? How are you estimating rehab costs?

Read The Tax and Legal Playbook by Mark Kohler and Tax-Free Wealth by Tom Wheelwright, both excellent explanations of business structures, taxes, wealth mgmt., etc. 

Start by listening to the Podcasts and reading everything you can on BP related to flipping. Also browse your local market online and by driving around to learn about neighborhoods, home values, etc.

We once had a house stager come in for a consultation before we did any work on a place because we were not sure about some of our design decisions. She actually saved us a ton of money by recommending against some things we were going to do that she said buyers in our market would not care about, she also made some great recommendations that I think helped the house ultimately sell faster. Totally worth the $250 we spent on a couple of hours with her. Helped us pick colors, styles, etc. Didn't even bother staging the house when we were done, it was under contract in 5 days!

We buy distressed properties that have a greater profit margin and that fewer investors are interested in because of the work involved. Find them on the MLS and at auction. If you have a good contractor, maybe he could visit some with you to give you an idea of rehab costs. A 24K rehab on a house that would sell for 300K sounds a little low, you want to make sure you figure out all your costs before jumping in.