First REI Prospect!!!

[Alex Collins]

Good Morning BP Community,

I think I found my first REI property! Lets GOOO! This is simultaneously exciting and nerve-racking. I need your help BP community. This potential buy needs a little work done so I need someone to come out and just do a general assessment of the property. Is it best to have a contractor come out and assess the property or an inspector?

[Nicholas L.]

@Alex Collins

need more info.  you say you "found it" - is it on the market, or off?  are you working with an agent?  do you have lending lined up?  can you afford it?  do you plan to live in it / house hack it, or will it be a rental?  how much is a "little work"?  how much do you have available to spend on renovations?  is it priced at retail despite the issues, or is it priced to move?

an inspector will tell you everything wrong with a property, from the minor to the major. so if the inspection report finds a bunch of electrical issues, yes, you'd need an electrician to tell you whether they are $200 fixes or $2000.  if the roof is halfway through its useful life, then not much to do there.  if it has 1-2 years left, it would be good to know what a new roof costs.  same with HVAC and other big ticket items.

with that said, i don't invest in Indianapolis, but you're likely still in a sellers market, which means that sellers are going to be less inclined to make fixes / give credits for issues.  if there is lots of interest, they can say to you "that's a nice list of 'issues' your inspector found - give me asking price, or find another property. i'm not making any repairs or lowering the price."

hope this helps - provide more details if you can.

[Alex Collins]

It's an off-market deaI. I'd either flip or make it an LTR. I have over 50k for renovations if need be and I have private funding for the purchase. I have 2 good friend RE agents available if need be but I think this might be a "transfer of loan deal" just depends. Thank you for you knowledge and insight. My thoughts were to have an inspector come out rather than a contractor to do the general assessment. Based on your response that's where I'll begin then follow up with a contractor for the ticket price.

@Nicholas L.

[Paul Cijunelis]

Quote from @Alex Collins:

It's an off-market deaI. ... My thoughts were to have an inspector come out rather than a contractor to do the general assessment. ...

Alex is the property in Indy as well? Based on your post (so far), I'd also recommend an inspector. I'd also recommend joining a local Indianapolis based REIA asap. the REIA will provide a group of investors who could get you some contractor recommends if you decide to GC the prop yourself.

You said it "needs a little work done" but budgeted $50k so those two things kind of contradict unless the home is a larger home...just curious, what's "a little work", if you haven't had an inspection yet and don't feel comfortable evaluating the costs on your own?

Also if it is intended to possibly be a rental you should calculate the end result of the acquisition, the debt service, the rehab, etc and pretend to get a loan to refinance. then look at the potential rent to offset that monthly cost and see if it would cash flow. Good luck.

[Alex Collins]

@Paul Cijunelis

Yes, this property is located in indy. A ceiling in one of the bedrooms need repaired as its "sinking" in. Apparently there was a roof leak which has been fixed but the seller didn't want to spend the money to fix the ceiling. All appliances need updating as well as a fresh coat of paint and new flooring. I'm not sure what else to expect. Ideally I don't want to spend more than 15-20k on the rehab to be as profitable as possible. Also the distressed seller is selling for 110k and the prop is valued between 170-200k on multiple sites. However comps are looking like it'll sell for around 180ish.

[Paul Cijunelis]

Alex you really should decide what you want to do up front. Flip or rent. Why? If you flip your flooring upgrades and appliances will probably need to be of higher quality vs a rental. Again, back out the numbers. what's a rental rent for in the area for a similar property? $1300/mo? $1500/mo? Can you rent it and get your PITI covered all in with the rehab and have some cash flow?

[Alex Collins]

@Paul Cijunelis

Rent in these areas go between 1,200-1,400. I just got off the phone with the HOA and they've reached their allowed limit for LTRs so it's looking like a flip deal.

[Zalman Ives]

Quote from @Alex Collins:

Good Morning BP Community,

I think I found my first REI property! Lets GOOO! This is simultaneously exciting and nerve-racking. I need your help BP community. This potential buy needs a little work done so I need someone to come out and just do a general assessment of the property. Is it best to have a contractor come out and assess the property or an inspector?

Hi Alex, great that you're getting into real estate! You can make great profits flipping houses, but you can also lose a ton if you don't do it right.

That said, I encourage you to be in touch with an investor friendly agent in Indy. I found a great one using the BP agent finder tool and another great one through local investor connections. Feel free to dm and I can put you in touch.

Also, please have a licensed and vetted contractor walk the property either before putting an offer or during an inspection period when you can back it and get your deposit back.

Skepticism up front is always better than regret later. Happy to help if you'd like.