All Forum Posts by: Paul Chae

Not that this helps you much in your quest to buy an investment property, BUT I would run away.  First, if the "seller" is the agent, and he is the owner (or under contract to become the owner) of the duplex attached to the unit you are considering, there is NO WAY he would want to sell the half he is offering to you as an assignment, unless he is making a profit.  Personally, I would ALWAYS seek to own both halves of a duplex to make my life easier, and thus avoid dealing with (frequently inexperienced, non-professional) strangers that owned the other half of my building. Ask yourself - how much could he make in profit selling you this duplex for $45,000? 10%? 20%? 50%? That means YOU could be overpaying by that amount.  Stay away from self-dealing agents like this, and consider his motives for cashing out.  There is a rule in cards that if you don't know who the patsy is after 20 minutes in the game, the patsy is YOU. 

Lots of red flags here. Maybe even all the red flags. The property is already inspected and appraised and all you have to do is sign the papers and wire the money? NO! That sounds exactly like a scam. 

You need to get your own inspection, your own appraisal, your own contractors to give you rehab estimates, and line up your own PM in case this guy is full of sh_t. 

From what you said it sounds like "your" agent is also the selling agent/wholesaler? If that's the case, he is not your agent. The way a typical transaction works is the listing agent works for the seller and the buyer has a local agent representing them (unlikely with this price point and with it being a wholesale deal, but in a normal above-board transaction I mean). There's a good reason that's the way it is done: because "buyers are liars and sellers are worse". Keep that top of mind.

Get down there yourself and set eyeballs on it personally before signing anything or paying any money or taking any further action. Do your own due diligence. Verify this person you're dealing with, the selling agent/wholesaler/purchaser of the other half is who they say they are. Verify everything they say with a third party that has no interest in the deal. Remember this persons interest is to sell you the property/assign you the contract. I would even start by looking up their license number on the state website to search for complaints with the real estate commission. Verify every single thing they've told you because if they represent the seller, are assigning you the contract, etc. then they have a conflict of interest and are not looking out for your best interest. For example I'd be very surprised if all it needs is 10-12k worth of work so that would sound alarm bells for me right there. You mentioned a kitchen and bath remodel at minimum and both of those things could easily cost more than that amount by themselves, especially considering you'll be using a contractor you don't have any history with.   

At the very least, call a few local agents and see if they can tell you about the property/street/block and pull some comps to provide a comparative market analysis (CMA, shows what the fair market value is based on comparable recently sold properties), even if you have to pay them for their time. It might not be possible to find many comps on a property like this due to its condition and price point, but I'm sure those will be valuable conversations.

Perhaps most importantly, talk to some local PM's who have no interest in the deal and get their thoughts on how this property will perform over time. See if they would be willing to manage it for you (it can be very hard to even find a PM willing to manage properties in certain areas). 

You need to be digging into everything you can find out about the property. $45k in Trenton is a challenging asset class to be getting involved with. Reverse engineer this deal for a second: the wholesaler is assigning the contract to you at $45k. You know they're making a cut, what do you think their assignment fee is? 5-10-15-20k? So you're talking about a property, in Trenton NJ, worth maybe $20-40k. Proceed with extreme caution. 

@Hoyoon Charge

Congrats on your step towards your first deal

1. Lender

Are you planning to buy it cash and then looking for a LTV of 75% to refi it? Then you should not have any problems as long as you know that with the rehab work you added value which assures you get back your initial investment.

2. Contractor

This is always a tough one for the first timer or the savy investor.

Expecting to get a quote that you are looking for by just showing the pictures to the contractor is not going to work .

Even if someone agrees once they start work they will bring up or scare you with other things inside the house and the common excuse will be that they never saw the house.

Getting a referral is also challenging.

Btw - are you going to walk thru the house before you buy it , as it felt like you were not. That is something you must do for your first deal ... That's is to at least check out the house.

Thanks

Kunal M.

1. Yes I do. But I am just a bit concerned that the lenders may take into account my job and income status. If I understand it correctly, I should look for the lender before buying, ideally?

2. Yes I will definitely go check out the house. Since I haven't worked with any, maybe I should see if I could have 2 or 3 different contractors visit the place with me and the agent.

Thank you for the great advice Kunal!

If it was my first time doing anything, I would double and triple check every aspect of this.

I'd need to see the property and get a feel for the area AM and PM. I'd want to see the work and realistically check to see what needs to be done. The big ticket items are plumbing, electrical, bathrooms/kitchens, utilities (e.g. heating/AC), roofing, siding, and sometimes wall repair/replacement in bigger properties. If you've got a few of those...that can easily equate to 10k or 20k by itself.

I am also looking at a property for my first BRRRR; I live about 20 minutes from the place and I plan to be there quite a bit. My money (and only my money) is on the line; I want to check progress, be on the ground for problems, keep tabs on the GC and any workers, and also show everyone involved that I'm the guy writing the check, and I'm taking it seriously. An out of state (out of their mind and view) investor? Some liberties would be taken.

I would try and make friends with a handy person or someone in the trades to come out and see this property with you. Pay them for their time to walk through and make estimates of the work needing to be done.

One thing I've learned with my duplex is that it either needs on the ground management for most of the beginning, or it needs someone managing it for you. If you don't plan on doing either, you're already in trouble.

Hi @Paul Chae to give us a sense of what's at stake, can you tell us (1) what the purchase price is, and (2) how you're paying for it?  It seems like you're paying all cash - is that correct?  Do you have your own team in place - agent, attorney, property manager?

First, I would go see the property as soon as possible.  Pics can be misleading and you'll get a better feel in person.  Are you familiar with the area, the job market, demographics, average rentals and home values?  I wouldn't rely on the agent, do your own homework.  

If the property checks out, I'm sure you can use the forums to find a good contractor in the area.  What town is it in?  I have a rental down in Barnegat so maybe I can give you a little information if it is close by.

Congrats what area of south Jersey? How did you come up with repair amount without looking at it? 

Hello! 

1. I would never trust someone else's numbers. You HAVE to do you own, at the end of the day you are the one left holding the property.

2. Get a copy of any reports he has (inspection, appraisal, ect..)

3. There is a way to get a loan directly after buying the property (assuming a bank will loan on it, depending on condition.) I wish I remembered what the programs were called, I've heard them on the podcast, but can definitely be done withint the frist 30 or 45 days of ownership

4. My personal opinion, is trying to get contractors when you are already owning the property, it's probably too late. I would spend the time getting them NOW or finding a Realtor who is going to help you in the future and lean on their network. Or a property manager, since you plan on renting it.

Now - you will have to tell me what your level of experience is, but it seems like this one might be over your head. Managing a rehab from NYC to S Jersey is tough, and you need a team in place to assist you. Who is going to supervise the work on a day to day basis? I would never rely purely on a wholesalers numbers but do your own. And I would spend time learning a little more about the area, process, market down there.

Hope this helps - feel free to ask any questions or clarify anything if I got it wrong :)

Robert Webb