All Forum Posts by: Joseph Jordan

I buy these types of houses.  Are you doing the rehab yourself or hiring it out?  If yourself, the $45k may be ok, but if you are hiring it out, you could be underwater fast, even if the major systems are basically in just need of repair but there and sort of ok..

Ignore the trash and vehicles, they take time, but not a big deal.  Hire a clean out company and come back in a week.  If you can get title to the vehicles you may even be able to sell them for scrap.

Things to look at--roof has growth on it.  It may need to be replaced.  Also photos of the bathroom shows buckets, trash can and a pot.  People who live like the photos show do not leave a pot on the toilet without a reason.  Either the toilet needs a pot of water to flush it, or there is a roof leak, which could be drywall replacement in the ceiling and mold to deal with.  The trash can with the plastic liner in the tub--why?  Roof leak or to wash something or store water?  There is no showerhead. Good news--there is tp, so the toilet likely works!   Kitchen sink looks like they have a work around for the faucet.  But dirt on dishes to the left of the sink shows they did not use water recently.  There could be water supply issues to the house or just water fixture issues.  Anyway, I would say you should plan on some plumbing issues.  And there possibly is a need for a new roof.

Is it on septic?  IF so, that can be $20k easy, and it could be bad with the weight of all the cars driving on the leach lines.  If on sewer, maybe $1k to $2k for a new line to the sewer, not bad.  If you are on septic there, look closely for issues in the yard.

The photo shows that the garage door is not all the way closed and it is crocked.  That may indicate that the foundation or the garage slab moved.  Whether that is enough movement to be a problem is just a guess with the photos given.  You may be able to tell more by looking at the house/garage from the street and also looking at the roof lines.

Kitchen photo shows junk where the frig should be.  Does the electrical work for the frige area?  Most people, even if they do not cook, do put beverages in the frig. And its not likely they took the frig as the area has stuff in it.  Also the range appears to be ancient.  I would assume it is not working.  Also note the electrical outlets were painted over in green paint in the kitchen.  So that leads to an electrical issue concern.  To look at that issue further, you can see the fluorescent light bulb box/package in the kitchen and in several rooms you can see the light fixtures attached to the ceiling with dangling cords.  Leads me to believe that they may be using these lights with a generator.  Is that because they did not pay the electrical bill or because the house has an electrical issue?  Were the wires 'recycled' from the walls?  It could be $6k+ to rewire a house, plus fixing the drywall and painting.

You definitely need new paint inside and out.  The front of the house is not even the same color as the back.  You need new flooring and at least some windows, landscaping.  I looked for HVAC and would not bet that you have any system for even heat.  There was one vent over a door, but I did not see much else, or a hot water heater, nothing for those systems, so do not count on them being present.

Also, often with tax auctions they do not give insurable title for the property. Check on that. They often do not clear utility bills--water, sewer, gas, electrical, so if those attach to the house in that area, check out how much they are to clear. Also, they may not clear a HOA or POA bill if it is in a planned community.

With just the information given I would not expect $45k to cover the possibilities, you have most major systems as possibly in failure or not present.  The only way I would go for this property at that price is if I talked to many neighbors and asked them what they know.  And do not go on just one neighbor--they may be bidding or have a relative interested or not want an investor to buy it, so ask them all.  See what you can find out from them.  They may know a lot.  When was it last lived in?  etc.

This one has so many possible issues---caution!

Auctions are deceiving . . . . rarely do they go for the opening bid and in fact there is likely a reserve which has not been disclosed.  We have bid on properties where the final bid was a good deal over the opening amount and did not get the property as it did not meet the reserve which does not have to disclosed.  Due to the need to have cash at most day-of-sale auctions, we have avoided them after attending a few to see how they play out. 

Not trying to talk you out of a deal but for your first flip, you are taking on one heck of a project.  The vehicles can net you a few dollars from a scrap yard but the rest will be an expensive clean out.  Remember paint and other items cant go into a dumpster and in many cases, they won't take tires and a few other things.  And as was stated earlier, you have the condition of the house that is hidden with the trash that may throw a monkey wrench in the works. You need to have at least a 15% reserve for unexpected surprises on this deal.

If this is a real sleeper in terms of value, you can count on other flippers eyeing it up.  That will drive the auction price up.  You need to know your number and never cross that number.  We have walked away from some great properties that got stupid with the bidding and when our number was reached we were out period - never say "A little more and I can make it up".  Remember, you make your money when you buy the property - not when you sell it".  If you want to go the auction route (and they do work - we just got one and close on 8/3), attend a few in person and then look at the online options like Auction.com or Hubzu.com or HUdson&Marshall among others.  Get a feel for how they work and what they require to bid and what happens when you win

As far as the estimated cost to rehab, $45 for what you show in the pictures seems on the low side especially if you are having a lot of it done and paying for it.  The kitchen is a replace, the fireplace needs attention, the roof looks good from what we can see and the windows boarded up raises questions . . . you do not know if there are any floor issues with the trash on it.  Can be a good deal of expense waiting for you.

You asked about Zillow estimates . . . . they are often wrong and not always in the good direction.  Touch base

with a local Realtor and see if they can get you a better ARV . . . i rarely use Zillow other than to see if the property is worth looking at . . . then I get a real number with a basis behind it. The house to the right of the one in the photo does not look all that good - what is the rest of the street looking like . . . can you share the address so we can see what it looks like?

Wish you the best but this might be a watch and learn so you are ready for the next one

Keep in mind that most in-person auctions require payment at the end of the auction so ensure you know the rules and come prepared with certified bank checks . . . which may make it difficult to have the funds in hand since a HML will want to have assurance that you have the property locked in before fronting you the money and you getting cashiers checks. Have you discussed this with your HML?

Could not get the link to the property to open to give you any feedback on that aspect of the deal.

Is there a reason you are looking at a 12-month flip?  That seems really worst case and if this is your first deal, that might be a large undertaking in terms of a renovation if you do in fact need that much time.  Are you doing the work yourself?  Remember a flip is different than working on your primary residence . . . you will need to pull permits for many activities and then get the inspections done before proceeding.  With a HML, the goal is to get it fixed and flipped as soon as possible based on the interest you are paying.  DO the math and see what a day of interest will run you and see how quickly days, weeks and months add up and detract from your bottom line.

Hate to sound like an advertisement but consider investing in yourself and joining BP as a Pro member . . . the calculators alone are worth the price of admission.  Our lenders love the reports.

Your purchase price, rehab, and known fees should not exceed 50% of the ARV on your first deal. Don't take the un-needed risk. If you go over or your rehab is more, you'll be stuck.