Buying from Wholesaler - Advice on steps to follow

[Amit Patel]

Buying my first place from a Wholesaler. Agreed on price , now not sure of next steps. 3-family in NJ.

* I have contractor ready and he said he will pull all permits,etc. doing a phased contract where we make payments based on milestones
* I am looking into getting insurance to be safe for property for theft,etc. but its in a decent area so not as worried
* All cash deal and we have cash on hand so not worried about that.

* He is giving me a contract and wants a cashiers check of 5K with contract signing. Is this normal ? Normally I just give regular bank checks for deposit.

* What kind of Due Diligence should I be getting ?
I Have a certified house inspector coming for foundation, etc. Will he do mold test and basic termite inspection as well ?

Anything else I am missing ?

[Ibrahim Hughes]

Hi Amit. Good to see that you're moving forward. To answer your questions:

Regarding insurance and securing property: Insurance is your safety net but should NOT be the only aspect of your safety plan. Trust me, I've rehabbed in nice areas. You can still be a victim. What you don't secure you don't own so make sure the place is locked down TIGHT and that NO tools are left overnight. At least not any expensive ones. And your contract should read that the Contractor is responsible for theft of his tools and other personal possessions. Not you. If you need a good insurance guy give me a call and I'll give you my guy. He's EXCELLENT in pricing and service.

Money to your contractor up front is NOT normal UNLESS he's your regular Contractor and you trust him. When you use hard money your lender will not forward the contractor any advanced monies and the Contractor knows this. He has to complete Phase 1, have it inspected by the HML and THEN he gets paid/reimbursed. So really the same rules should apply with your own money.

I know we spoke and I referred you to my guy, Carlos. If it's Carlos then you're fine (although I will still want to call him tomorrow to make sure he knows that he's working off of my reputation therefore act accordingly). But I won't vouch for anyone else. And there are ALOT of ripoffs out there who take deposits then go and complete other jobs while putting you on the backburner. Now the Contractor will likely say he needs the cash for materials. If that's the case I like to meet him/her at home depot/lowes myself and buy the materials. His guys get paid at the end of the week or phase after I inspect the work.

Your initial due diligence where you crunch the numbers for potential profit should have been done already.

The only other areas to be careful in are open permits and the green card (required for 3 units and up in NJ). You may also need architectural plans if you're rehabbing in Newark (depending on hos extensive of a rehab you're doing). I'm assuming the house is vacant?

You will want to check with building to make sure there are no open permits that you will be responsible for.

And you will want to check with the Dept. of Community Affairs (DCA) in Trenton to make sure there are no violations due that must be paid before you get your green card. Their number is 609-633-6232. Any judgments they have against the property and owner SHOULD show up on title. However I still like to check by calling 609-984-7706.

If you're dealing with a 'Professional Wholesaler' then title should come up fine. However if your wholesaler is new you need to make sure that he's under contract with the correct owners and that there will be no surprises when title comes back. In fact when I wholesale I like to order title myself BEFORE I call rehabbers just to make sure I have everything worked out ahead of time.

I think that covers it. Call or email me tomorrow if you need to.