Hi everyone,
I am new to real estate investing. I decided to purchase my first house for a flip a few months ago. I purchased the house, built in 1950, for $49,000 with funds from my newly formed Self directed IRA set up for real estate Investing. The funds came from my regular IRA that were rolled over into my Self Directed IRA. The first thing I did after putting the house under contract was to get the house inspected. Well the inspection came back not revealing any major problems, just run of the mill things like sealing some openings to prevent rodents from coming inside the structure, removing loose dead wiring, broken windows etc. So based on the Inspection report not revealing anything major, I decided to proceed on with the purchase. After purchasing the property, I put in roughly $30,000 of rehab to get the house in condition to flip. The ARV on the property was $145,000. The renovations went well with a few surprises but nothing major. So after the renovations were completed I decided to put the property on the market for $135,000. Of course , I had already ran the numbers and knew what all my cost were such as agent fees, closing costs, holding costs and estimated rehab cost. There were no finance charges due to the funds coming from my self directed IRA. I had an $85,000 budget for purchase and rehab. After the rehab was completed which took about 4 months, I put the property on the market for $135,000 as I stated above. With in one week, I got an offer for list price of $135,000 accompanied with a pof letter for $145,000. I immediately accepted the offer and waited for the buyer's inspection report. In about a week, I got an email from my agent advising me of the inspection. The Inspector came out and initially the inspection was proceeding well until he went under the house. To make a long story short, the final inspection, according to this inspector, revealed some major problems with the footings, floor joist, ac duct work, water heater, and he wanted me to replace a 4" cast iron sewer pipe out to the main(because he suspected it could go bad in the future) and no insulation under the flooring in the crawl space. From there he wrote down everything he could conceivably find wrong in the house such as a water faucet loose on a new stainless steel sink in the kitchen. Remember I had the house inspected after putting the house under contract and the initial inspection did not reveal any of the problems under the house this Inspector found. I accompanied the first Inspector under the house but did not accompany the last Inspector under the house. After the buyer's Inspector left, the Pest control Inspector showed up and would not pass the house due to evidence of terminates. The pest control Inspector left a report with my contractor stating that they could repair the problems they found and could treat the house for termites. At the bottom of the report there was a detailed cost for treating the house and also repairing parts of the structure of the house. The house Inspector and the Pest control Inspector initially appeared to be from two different companies since they had two different names. But when I looked over the house Inspector's report, I noticed the House Inspector's report had the cost for the Pest Control Inspector's visit at the bottom of his Invoice. So I called the company and found out they were actually from the same company and the person that answered the phone proceeded to tell me how they could recommend someone to repair the problems revealed on the house Inspector's report. Now I am not a legal person or anything but doesn't there seem to be some type of conflict of interest here? The same people that performed the inspection directing me to someone that could repair the problems that they revealed on the house inspection report. Needlessly to say, after the buyer, read the inspection report from them, she terminated the contract. My question is this, should I have the house inspected again by a third Inspector to see which two match? Also if the buyer's Inspector is correct, should I put out the additional expense to have these items repaired, or should I just rent the house out at this point before I get too deep into this and not be able to recover? As I stated above I am a newbie and I don't know what to do at this stage. Can someone please help me try and make a good rational decision as to what to do at this point? I would appreciate any good advice.
Thank You,
Bobby Hughes (newbie)
