All Forum Posts by: Jennifer Petrillo

We use @Anthony Lee, found him here on BP.

From his profile:

My Industry specialties include: RE Investors, Flippers, Contractors/Builders, Realtors (E&O), Property Managers (E&O), Multiple Property Portfolios, Commercial Properties, Personal & Commercial Umbrella & Excess, Lenders and Flood Insurance (Both through the National Flood Insurance Program & Private Alternatives)

I just paid $950 to clear an acre of woods and underbrush--small trees, solid sticker bushes throughout, trimming of low branches--and we are in a high cost of living area where the contractors live better than we do. Get three quotes always and pick the middle one. PM should have known better and gotten a solid quote and presented it to you for approval. Don't feel sorry for her, you don't owe her a job. 

Redfin is decent for comps, go all the way to the bottom of the page of a similar recently sold house in your market and it lists other similar recently sold houses so you can compare square feet, condition of the house, lot size, school district, etc.

I go into it with a rough estimate on repair costs and an idea of the ARV. Then you decide how much you want to pay at auction and stick to it. Some people use the 70% rule: Take 70% of ARV, then subtract rehab costs, you should pay no more than that for the house (so if the house is worth 100K ARV, 70% of that is 70K, then subtract your rehab costs--let's say 20K, then you should offer no more than 50K for the house, leaving you with a 30K profit). There are also "absolute" auctions, which are auctions without a reserve price and it sells for whatever it sells for. Reserve prices do no necessarily inhibit a profit, just depends on how high they are. In my area, the banks are getting tighter with how much profit margin they will leave leftover for investors.

I won't buy stuff that has people living in it, although I have bought stuff that had squirrels and mice living in it. Drive by the house, peek in the windows, I have seen many auction properties listed as occupied when it is obvious on visiting them that no one has lived there for a long time. Banks don't know what they are listing, they are wrong about property size, # of bedrooms or bathrooms, occupied status. They literally are in another state and don't know and don't care about the asset. We snapped up a small Cape Cod last year for 140K, the listing did not mention that it was on four acres of farmland with pastures and a barn, we rehabbed and resold it for 395K, made 75K on the deal. If they had put the property size in the listing, and if the appraiser had had a clue, it would have sold much faster and for a much higher price. But...their mistake, our gain!

I always sign the contract "contingent on financing" so I have an out. It is understood you are buying "as is" but you can always contact the local listing broker to see the house before you bid. At this point I just do a driveby, I am more concerned about location, neighborhood, size of house and property than how distressed it is. You make your money when you buy, so you want to buy low enough to have enough margin to cover rehab plus your profit at the end.

Things like oil tanks they generally know about and must disclose. If it has not been reported to the state yet (if there is not an open case # on it), you can have them removed for about $1200. If there is a spill, or an open case #, it will cost more. We had to remove one once and do extra soil testing and I think we spent about 7K total on that. Sometimes you will have a septic report too, sometimes not. We just assume the septic is bad and add 35K extra into our rehab estimate (though the last septic we put in cost 50K--complicated pump up system with mounded leech field due to high water table on site--so the difference came out of our pocket).

Closing is 30-60 days, sorry to be vague on that, but I've only done auction twice, usually buy distressed foreclosures off the MLS, which can close in 30 days as well, all depends on the seller and the title work.

We bought our first flip house at a live auction from Williams & Williams, I was the only person there but bidding against 4 other online buyers, the auctioneer took bids in an earpiece then announced them and looked at me to indicate it was my turn to bid. I bid about 5K higher than I had planned to but really wanted the house and was OK going over my ceiling bid by that much. I brought a cashier's check (I think for 5K) for the down payment and signed all documents right there. Don't remember how long it took to close, most of it was done electronically and perhaps with a notary. We also bought once off Hubzu, bid online, the local listing broker showed me the house and I signed all docs with him. Auctions typically say "cash only" but what they really mean is "no conventional mortgages" (you would not be able to get a conventional mortgage on a flip house anyway). I just tell them we use a hard money loan, no one has ever complained about that, they just want someone to pay for the house. Once we have a property under contract, I present the deal to my HML and the title company does their thing and we close. I have won bids on Auction.com but backed out for various reasons. I have also bid many times on Auction.com and not won, I think their reserves are unreasonably high, I see the same properties sitting on that site for months and months. The auction process goes from unknown and terrifying to unimpressive and unremarkable very quickly once you get through your first one!

Closing was four months, but that is because it was a foreclosure and things tend to move more slowly (depending on what bank owns it and how much they care about liquidating that asset). I think all the rehab that was done took a couple of months, but of course this varies depending on what needs to be done! And I also did some things on my own after the rehab, like having the wood floors refinished (out of my own pocket of course). The answers to your questions are different for every property.

I did a 203K on the first foreclosure I purchased in 2014, which I then lived in for about two years. I used my own GC that I knew from working on my previous home. The lender sends an inspector to decide what work needs to be done, the GC does the work, the inspector comes back to make sure the work was done properly, then releases payment to the GC. I think we had about three inspections altogether as the work was being completed. Only thing is, some contractors do not want to wait to get paid, they want down payment upfront plus may not want to wait for inspector to release draw to them during the job. The GC has to understand the process and be OK with it.

Why New Jersey?

Leave the pool as is and sell the property with three options: 1. you will fill in pool before closing, 2. you will leave pool as is, 3. you will rehab pool prior to closing. Many buyers might ask you to just fill it in, but some might want it and either have you rehab it or leave it for them to do. Googlemap the neighborhood and see how many pools there are in that area, probably pretty common in your demographic area (4BR in Morris County). Sometimes I am surprised by how many houses have pools, I think pools are contagious, one household gets one then before you know it it's the norm in that neighborhood, especially if there are a lot of young families in the area. Sometimes we leave odd features intact if we can't figure out what to do with them, then ask the buyers if they want them or not. We almost tore down a small barn once and the people bought the house because of the barn!