All Forum Posts by: Joseph Jordan

As a buyer, you don't pay commission, the seller does. When the seller listed the house, he agreed to a certain commission, commonly 6%, though this varies around the country. If the listing agent sells the house he gets the whole commission. If another agent sells the house he and the listing agent split the commission, usually equally. At closing, the commission is subtracted from the money the seller receives. 

There are Facebook groups that focus on your area and connect wholesalers with buyers so do a search and see if there is on your area.  Joining a REIG is another great source of leads as there are always people offering properties to other investors.  Plus you get to find out who to use and who to avoid in the contractor arena. 

Glad to see you 1) took action and 2) had a limit and stuck with it.  We have gone to auctions where bidding got crazy and I know the buyer was inexperienced and was going to be underwater.  Twice we have seen the property go back up for sale partially rehabbed and sold for less than what it did at auction.

Stick with it and you will find that diamond in the rough.

Hi Joseph,

First of all congrats on taking action. You're ahead of most people already. As far as finding off-market or distressed properties, here's a few options:

websites: hudhomestore.gov, auction.com, craigslist

join a local REIA and network. There will inevitably be some wholesalers who will be happy to put you on their buyers list.

driving for dollars - there are a couple apps out there that will pull up owner info on any property you drive by. You can send them a letter or postcard right from the app. Then keep mailing them until they respond or sell to someone else.

Hope this helps.

Corey makes some good points. The ARV is essential as without an accurate ARV you are hoping the end result is what you expect. While the link you provided does not open it looks like you are looking at a property in Marion County, Oregon based on the URL. Again, do NOT use the Zestimate as your ARV as it can be off significantly in either direction. Redfin shows the value to be around what Zillow shows so the ARV may be close which means there will be other people looking at the property since it is a hot market.

The HML interest and points will eat into your profits quickly. Assuming $50K on renovations (assuming nothing major comes up in the process) and paying for much of the work to be done, the calculations from your HML are optimistic in terms of profit. Use one of the calculators out there (like here on BP) to validate the numbers . . . HMLs are usually good to sound deals off of as they look at worst case but with what you shared, not positive about the numbers. Just a rough look at the numbers I would draw a hard line in the $145K range based on 1) unknowns of what you might come across, 2) what the city of Salem might require from you (permits, outstanding amounts, etc.), 3) the high monthly carrying costs and 4) not having a solid ARV.

Looking at the auction rules, a few items to keep in mind:

1) A 25% non-refundable down payment is required for all cash sales and land sale contracts and must
be received within one hour of the end of the sale. The down payment shall be made with legal U.S.
currency; cashier check; certified check; money order; or personal check providing a cashiers check is
furnished to replace the personal check within 24 hours after the end of the sale

2) ALL PROPERTIES ARE BEING SOLD “AS IS,” WITHOUT WARRANTY AS TO THE CONDITION OF THE
TITLE AND WILL BE CONVEYED BY QUITCLAIM DEED

These may pose an issue to you and hold additional costs / expenses especially the title issues.  For example, a bank owned property through Hubzu provides you with a clear title on closing . . . piece of mind that there is not something waiting in teh wings.

There is money to be made but is this the one you want to go after?  As the old Kung Fu show used to say "Choose wisely Grasshopper" :) 

@Joseph Jordan I have seen a few posts here that have talked about some BIG problems you could run into. I would say first, you need to know your ARV. No one can tell you your max offer. You have to know ARV. If I were in this situation, I would make sure and have the contractor situation lined out. Where I'm at we are 6-8 months before a contractor can do even basic work. That will add up to be big holding costs with your hard money loan. I would also see what I could find out from building inspection (probably not much given condition) and if the property is located close to you, visit it. Obviously don't do anything illegal but take a look around. Good luck!

Jordan,

You had a question on if you needed Insurance or was the LLC enough. My answer on that would be yes you need insurance. The LLC can protect your other assets if the veil of the LLC is not pierced. If that veil is pierced all your assets would be at risk. Your Attorney can give you more info about that.

On the project you described, you are likely to need several policies:

1. Renovation Builders Risk:   It insures the current structure (usually at the Actual Cash Value (ACV) which is the rebuilfing cost less the depreciation.  It also insures the materials as they are incorporated into the building as you renovate it.  The policy should also have limits for Materials in transit and at the job site.

2. Liability: You will need liability for the Premises. If someone gets injured there, you may be sued. If you are not using a General Contractor (GC) for the project you would also need cover for the Operations being done there. There are ways of making the GC and their contractors name you on the policy but you may still want coverage in the LLC's name also. Some companies will issue the Liabiltiy as part of the Renovation Builders Risk and others will issue sepparate policies.

3. Workers Compensation: Depending on who is paying the subs and your state Workers Comp. laws you may need to have a policy under the LLC

4. Vacant Dwelling coverage:  If you are not starting the Renovation right away or when it is completed and on the market, you may need coverage.   The Renovation Builders Risk will often end once a certificate of occupancy (CO) is obtained (or within some time period, ie. 30 dys, after the CO.  In that case, you would need property and Liability coverage.  

Hope this info helps

@Joseph Jordan

It’s always a little difficult to estimate rehab cost from pictures. There may be some big ticket items that need upgrades in there that you can’t see until you open up the walls. From the pictures I personally would set aside at least 75K for this project.