All Forum Posts by: Jennifer Petrillo

Buyer responsibility. All kitchen appliances included of course.

If you saw it with an agent, that agent will now expect to be involved in the deal. I always see REOs with the listing agent only. Realtors in NJ can serve as dual agents, representing both buyer and seller. I think the agents appreciate this b/c then they are not sharing the commission. The only time I had to get a local agent was once when the listing agent was a couple of hours away and I was having trouble getting them to come out and open the house for me.

Since REOs are typically sold 'as is,' it is doubtful the bank would accept an inspection contingency on the contract, I have never asked for this but have been comfortable with the scope of work needed after walking through with an inspector or my GC. If you want to walk away after an inspection, you would likely lose your earnest money.

Don't forget to add HOA fees to your PITI calculation. Yes, NJ market is priced high to begin with, if you can find something that gives you that much space between your costs and what you can rent it for, could be a good deal. Someone always needs to rent a condo. How are you financing? Mortgages on rental properties have higher interest rates than mortgages on owner occupied properties.

Watch out for realtors! The more you pay, the more they make!!

Offering highest and best does not mean you have to offer over asking price, you should offer what you want to, and you should base this on, among other things, your ARV (after repair value), your exit strategy (flip, buy & hold, etc), how much you can afford (most important!) and your local market (comps).

I have bought 3 REOs in Hunterdon County, all for at or less than asking price. Depends partly on how long the property has been sitting around and how much the bank wants to get rid of it. I like REOs b/c they give me instant equity but @Christopher Phillips is correct, the banks have gotten greedy and don't want to leave much of a spread for investors anymore. They see how much flipping is going on and figure they'll try to get as near to ARV as possible and not leave a margin for anyone else to make some money off the property. Of course, you are the one taking all the risk and buying an 'as is' property that could have mold, bad septic, needs new well dug, needs roof, etc. And a realtor is NOT the person to tell you how much work the house needs, a contractor or inspector is. You first need to see whether you can get access to the property and walk through with a good contractor or inspector, have them itemize all the work the place needs, follow them around, ask questions and take good notes. Realtors don't know building code. It is worth the $500 or so to figure out if the property is worth buying and rehabbing (and what price you should be offering for it). It is worth even more if you find out the property is NOT worth purchasing. Some of the best money I ever spent was to find out a property I was considering had no septic system and basement walls that were collapsing inward from water pressure in the ground outside. Phew--you can bet I was happy to walk away from that one! Inspection fee well spent! And don't trust what the realtor says the property will be worth all fixed up, remember, their job is to get you to buy the property, not to make a good financial decision. They pocket their piece, walk away, and you're left with a turkey that you can't get rid of or can't afford to fix up. OK, enough about realtors, just don't trust one to tell you what you should offer on the house. Use the 70% rule: ARV X 70% - repair costs = "what you should offer" (or offer lower if you can get away with it). Try to get local comps so you know what you can resell or rent the place out for.

Other than that, the foreclosure process is like any other home purchase (at least it has been in my experience) but it takes 3 to 4 months to close (not the traditional 60 days). I bought one REO with a 203K rehab loan (rehab costs are part of the loan and you request a "draw" as the work is completed--this was a live in flip). Another was bought with a traditional 30 year mortgage and I am living in it now and plan to stay here. Third, currently rehabbing to flip, was bought with private money. You need some cash in the game in any case--down payment and some to put in escrow for rehab costs, depending on your loan terms. We had to de-winterize all three properties ourselves, the banks would not do it. On the second one, the electric cable had ripped off the front of the house in a storm and was lying across the front yard, we got the bank to reattach it for inspection. All three were bought with condition of septic unknown, which could have turned into an expensive nightmare. The third one had burst pipes and mold in the basement. So, an REO can be a real gamble. Or, an REO can be a fantastic way to get a good property at a discount price and earn instant equity!

PM me some details and we can talk more about your deal...

Yes, looking at the 10-year average shows that prices have not reached their previous peak in New Jersey, but in my opinion they are unlikely to. If you look at the median home price for New Jersey now, you see that it is way overpriced compared to the national median home price. New Jersey also has a 14% higher cost of living than the rest of the country. More people move out of New Jersey every year than move into New Jersey, it has been this way for a number of years. And some of our major industries, like Pharma, have been shrinking drastically. On the other hand, Amazon just opened three major warehouses in New Jersey, but these will mainly employ blue collar workers, not the corporate types who have money to blow on overpriced housing. New Jersey prices are moving more slowly than the rest of the country because everything here was and is extremely overpriced to begin with, there is not much more room for prices to move up. Except perhaps in more Urban areas, which have been growing and improving, since younger home buyers don't necessarily want to commute far to work and want the amenities that come with the more Urban areas, rather than being far out in the remote, rural areas.

Find a partner to go in on a cash buy with you or look at HML or crowdfunded loans or try small banks and credit unions. If it's a good purchase, there is someone who will want to loan you money for it, you just have to get creative! Best of luck!

Wrong! The more you KEEP, the more you made!! Paying taxes in a higher bracket should not be anyone's motivation for making more money--keeping more of it by socking it away into various vehicles and lowering your taxable income is the trick! Tax planning is an important part of exit strategy...unless you really like sharing with Uncle Sam :)

Daniel--amazing job, the house is gorgeous, you created something really special, can't wait to see your next one!!

Do you have to replace the kitchen or can you paint or resurface the cabinets?

And if you can't get contractors to come take a look, how can you get them to do the work at all? Are they saying they are simply too busy to take the job in the first place?

Find the deal first, the money will come, there are many places to look: hard money, crowdsourced RE funding, your local bank, etc. Pros: they have plenty of money to lend. Cons: it's expensive money! This adds to your monthly carrying costs, so make sure you have a good exit strategy. Also, they will want to see you contribute some of your own funds, too, so make sure you have a good amount saved up before you go to someone else for their money. The amount you should have in your funds depends on the type of deal you are pursuing.

Start with the Podcasts--start with #1 and work your way through them, lots of detail and inspiration!

Lopat is nice, especially around Belvidere road near the town pool. Older, sturdy well built houses (modest in size but probably ripe for modernizing) and some not-grotesque developments. Not sure about property taxes there. Pohatcong property taxes are insane b/c they have no ratables.

We have decided to concentrate on the school systems of North Hunterdon HS and Hunterdon Central HS, people are willing to pay the higher prices and property taxes for those school systems. And you're lucky--Pburg has a fancy new high school and is even managing to send some kids to top colleges lately, so "up and coming." You might do well with buy and hold in Pburg since there are likely more renters there than homeowners.

I find in Hunterdon County that the only way to get a decent profit spread is with pretty distressed properties, people know what their properties are worth and do not price things on the low end, especially in this seller's market. So I stick with foreclosures and auction properties and hope the banks are underestimating what they can get for them (even the banks now understand exactly how many dollars a flipper can expect to make off a rehabbed property and they are not exactly giving away profits.

Regarding the hard money/crowdfunded lenders: they want you to escrow some of your rehab costs with them as a sort of guarantee that you are going to use the money for rehabbing (instead of not fixing up the house at all, which I guess has happened in the past). So, the loans you get from them are partly purchase price of the property and partly some of your rehab costs, which results in a higher down payment. You are also then paying interest on some of the money that YOU gave THEM to hold in escrow for your rehab. Yes, sounds crazy, but that's how they do it. I had 48K saved up for my latest deal, then the lender wanted 40K for down payment plus 18K to escrow for my contractor! I had to renegotiate the loan at a higher interest rate at that point b/c I wasn't going to let myself have zero cash cushion. As an aside: my septic guy flips one or two houses a year, but real small low-end ones that he buys for 50-60K cash, that way he is borrowing no money (makes less on each deal, too, but it is just a side thing for him so he's not looking for huge profits; for him it is more important to be able to do a deal without borrowing money and paying interest). I am hoping that I can build up enough of a cash reserve that I can some day buy without borrowing.

You could start out by talking to some lenders about what sort of loan you could get so you would know what price range you can buy in, expected closing costs, etc.