All Forum Posts by: Andy Sabisch

There are a number of examples you can find online but most inspectors today use software that walks them through what to look for, what to take pictures of and builds a 60+ page report minutes after completing the inspection.  I am sure there are exceptions but most of the reports we see all say "Recommend that you contact a licensed electrician / plumber / HVAC / roofer for further inspection" and if you read the fine print, they typically say that they are not responsible for any missed issues.  When we buy a property, we never use an inspector which we see as a generalist but rather contact our trades for a check of issues we are concerned about - roof, HVAC, electrical panel.  They know if we buy the property, they will get the work so they are typically able to give us a check and provide something in writing which carries more weight with the seller than a home inspection report does.

If you want to see the wording in a typical report, do a search for Home Inspection Software and look at a few of the sample reports they provide.

This is just one opinion based on past experience so I welcome hearing what others have found.

Looking at the Zillow listing and the estimated value, hopefully you are getting it for south of $50K. Are you using a GC for all of the work? It is under 1,000 ft2 which helps hold costs down but you are saying the ARV will be $150K when none of the properties around it are valued at that . . . don't want to be the most expensive house in the neighborhood. Looking at the ones that are above $125K, they are larger and have 2 baths . . . that makes a difference when selling. Even if you can carve out a half bath, it adds sellability (we have gone that route and saw the difference)

Some of your estimates are high and others low.  $4k for an A/C unit . . . what is there now?  A full system will be more or is it just the outside unit you are pricing?  Kitchen cabinets and counters for $500 . . . even a basic kitchen will be $4000+. Demo and dumpster seems high.  The interior looks a lot rougher than the ones on Zillow which are probably dated and there looks to be some hidden damage that can shock the budget.  If you have done flips, do you have a tradesman that can look at it and give you an estimate for his area of expertise and point out what you might be missing? 

Remember you make you money when you buy so if you want to go with this project, make sure you factor in worst case . . . reno takes longer than you expect and the sale will take longer than you expect so the holding costs can take a bite out of profits especially if you are using a HML.

I think I answered this question but definitely NOT the third option. Never take someone else's word for what the ARV and reno costs will be especially if they are trying to sell you the property... guaranteed you will be underwater by the end of the deal.

Pulling comps that you know are valid are essential. Either using online sources or have an agent that can pull them for you. This is one reason we buy locally as we know the area. In urban areas a few blocks can make a huge difference in ARV so remote buying tends to worry me. There are pay apps to get comps . . . you call on how much they are worth and how many projects you are doing to justify the cost.

I think we all have spreadsheets or tools that can help us determine if a deal is worth investigating. Once you have done some and have trades you know what they will charge, you can get a ball park number fairly quickly. One thing this also does for us is to vet wholesalers . . . if both the ARV and reno numbers are out of whack, I tend to discount deals that they send in the future and there are a lot of wholesalers that should never have gotten into doing it.

Hope this helps.

Have you done local flips before? We have run into investors that started remote and regretted it as the challenges that come up locally are magnified remotely. There are some solid suggestions above but as Brandon said, having a dependable GC is a key factor. Did you select the remote location based on how cheap the property was or are you familiar with the area? We have been in areas where a few blocks changes a good deal into one that is for sale for a reason. Urban areas can change quickly so make sure where you bought has resale value or at least plan on a second exit strategy (rent, etc.) if you cant sell and are left holding it especially if you have a HML. Carrying costs can quickly make a deal a nightmare.

Appreciate the feedback . . . . 6 months will be over soon enough and I guess we need to revisit the terms of the lease moving forward.

Two things to remember when you go with a wholesaler . . . the ARV is often inflated and the repair costs are usually low so what looks like a good deal is often far from it when you get into it. We have seen a number of wholesale properties that went for far more than they should of and then are sitting on the back end because the sales price is too high and has to in order to break even. As they say, you make your money on the buy and over estimating the sales price especially looking months down the road where anything can upset the market to spending more than you expected will kill flips. One bad one can wipe out 5 good ones so be sure of your numbers and never rely on what a wholesaler is telling you (they want you to buy it not make money). We have found one decent wholesaler after meeting with more than a dozen and it was clear that the rest knew very little about comps and repair costs. There are people making money doing flips out of town but we do not have traveling crews of a network of GCs around the country so we try to stay where we can keep an eye on things. Knowing the area, having local contractors you can call to get good numbers and making sure the buy is right are key.

So here's a question.  Rent on our units is due on the 1st, late on the 3rd and at either day 10 or 15, eviction proceedings are started.  Also after the 2nd late in a lease period, rent goes up $25 a month for the rest of the lease.

Have one tenant that is always late and usually later than the 15th in her case.  By law we have to give her 10 days once she receives notice to cure it before we can go to the magistrate. 

So we get the rent and late fee on the 23rd to the 25th.  And getting it that late you know the next month repeats the story. 

Any thoughts on how to handle the last 6 months of her lease as renewal is out of the question.  Thanks

That's a loaded question.  Are you doing the work yourself or contracting it all out? Will you be the GC or need to hire one?  Have you done similar projects or is this your first? Do you have contractors ready or will you need to find them from ground zero?  All of these have costs associated with them and affect holding costs which play into cost per ft2.  Also different areas can vary widely in costs.

If you can narrow things down a bit it would help with a more detailed response.

As others have said, make sure you do a full background check and even that will not ensure you are 100% protected (we can tell you first hand about that).  One thing we have started doing is to call the current / previous landlord and see how things were left.  That can often be more telling than a background check which many not have input from the previous places they lived.  

The one challenge for us has been tenants who have never rented before (starting out) . . . be interested if others have found a solution to this as we have had 3 evictions in the past 3 years with first time renters who seem to think rent is the last thing you pay each month (and actually told the magistrate that).  One actually told the judge that we had more money than they did so it wasn't fair to evict them . . . gotta love them at time.

This is a post that applies to any tenant . . . just because they meet eligibility, make sure the fit works both ways.  We have tenants that looked good on the application and background check that when they showed up with pet in tow (no pets allowed), 10 relatives and vehicle filled with trash and cigarettes in everyone's pockets that we knew this would be a problem lease.  No discrimination but when we talked, both sides realized that the rental was not for them.