All Forum Posts by: Michael Knaus

Maybe I missed something but that's the only way I've done it (about 12 so far). I get the seller to sign an ATR agreement then contact the bank. The sale is between me and the seller and I am the one to negotiate the payoffs directly with the lender. I am an agent but not working in that capacity in these cases. I am the investor/buyer. Never had an issue. The bank (or service co) could care less. They want the money.

I door-knocked  a house that was about to go to tax sale. It looked rough and she owed about $5k in back tax. She said she had no idea was scheduled to be sold but wanted to move anyway. It was only 3 days before the sale. I signed an agreement of sale, had her sign a deed,  paid her taxes to get it taken off the list and gave her $5k to to vacate. It was worth $50K and it surely would have been bid up by other investors and she would have got nothing. I thought it was a real win-win and she cried she was so happy to get something.

At my supplier the OB PEX is black. Is there any marking or print on the tubing? Colored OB PEX should have a gloss coating to it which is the barrier. Standard PEX is like a dull matte finish. Maybe take a piece down to the supplier. Sharkbite connections make it easy to remove/replace a piece. 

I just send a brief letter. Hand write the envelope though as this gets people to open it. Time consuming but you can pay someone to write the recipients name on the envelope if you don't have the time. My sister did mine for $8/hr. You would be surprised how many you can fill out in an hour. Best $8 I ever spent on marketing. I'm  sure her hand was sore!

The same thing I did on the last one.....and every major renovation I've ever flipped. UNDER ESTIMATE THE REPAIRS AND THE TIME IN WHICH IT CAN GET DONE. I will however tell you, I don't really think that it's something I did "wrong". This dilemma is actually something that will keep you in check.

Okay, before you think I'm really bad at estimating know this. I have been involved in construction for 25 years. Real Estate for almost 20 years and I have NEVER had a project come in under budget or faster than expected. None of that matters. I guarantee it will happen on your first deal too. So I tell you this because you will think you failed or in some way missed something. It just happens. Expect it. accept it, and here is the key.........manage it. Here is what I mean.

For the purpose of this conversation I am going to assume the project needs some serious rehab. If it only needs a coat of paint, you can't hardly screw that up. I have wholesaled properties that needed little to no work and those obviously went fine. I am talking about at least $25k in renovation work. Here is an example:

If you purchase a house for $75k and estimate the repairs at $25k with an expected completion date of 4 weeks (I know those flipping shows say it only took them 4 days....I call BS). You will probably come in at $30K in repairs and 5 weeks to completion. That's about 20% OVER what you thought. Now these figures do vary. I have had some deals only go over by 5% all the way to 30%!!! (major miss on something unforeseen). But they ALL go over. Again expect it, accept it and manage it.

Things just can't always be accounted for in this business. There are too many moving parts, things that will surprise you, problems you just didn't see coming, things hidden beneath the surface, contractor delays, weather, etc, etc, etc. 

Now most people may look at this and say....Well why not just add 20% to the budget if you know it's going to happen anyway? This way you will come in at cost. DUH! It doesn't work that way. I do actually add an overage figure to all my budgets and I STILL go over. 

Here is the catch. When you estimate these projects, you can't be too generous with your budget. You have to keep it realistic yet ALMOST unattainable. Here's why....It gives you something to shoot for, a goal, a target. 

Using the above example, let's say you decide to play it safe and just set your budget at $40k instead of $25K. How much do you think you will come in at? You guessed it! $40K. It's a false figure. You will assume you are safe and have plenty to work with. Even if you beat that by $5K you are still at $35K. Don't get all excited thinking you came in under budget on your first flip. You lost money. Go back to the original example. Set your budget at a slightly unattainable $25K. It's going to be tight and you know it. It keeps you honest, keeps you looking for discounts, working your contractors for breaks and forcing you to save, save, save EVERY place you can. You KNOW you have to stay on top of this or you will blow WAY past it. And when you do go over....by the 20%... now putting your repairs at $30K, you are at least $5-10K UNDER what an over-inflated, super safe, false budget does for you.

So coming full circle. It's not really what went "wrong" just something that WILL happen that I thought you should know.  Just my two cents. I have done many flips. I still learn something on EVERY deal and I definitely don't have all the answers. That's what keeps this business exciting! I wish you the best of luck!

There is no one magic key. Pre foreclosures are still the property of the owner up until the deed is transferred to either the bank or a third party bidder. Entering the property is trespassing for sure. The bank (or it's servicing co) only has the right to enter because of a clause in the mortgage allowing them to do so because of the defaulting loan. Many of these servicing companies use the same basic keys when they do a lock change because it's just easier than having 1000 different keys. Some investors get their hands on these keys. This does not make it legal to enter. 

There is no redemption for tax sale in PA that I am aware of. Perhaps certain counties vary? The owner has 30 days to file an objection. Then it goes before a judge. If the sale was not done legitimately, the sale will be overturned. 

The reason for the title co issue has more to do with how the property is transferred (tax claim deed). 

Not all Sheriff Sales are insurable either. Best to have an abstract of title done prior to bidding. Keep in mind title insurance companies differ in what they can and will cover. if one doesn't cover it, perhaps another will.

First obviously enough coverage if there is a catastrophic loss like a fire for example. Does it cover replacement of the structure or simply what's owed (assuming there is a mortgage in which case the lender is paid and you are left with a smoldering pile of rubble)? Loss of rent coverage if there is lets say a major leak and one of your units is down for a month or two. Vandalism coverage. What happens if a tenant destroys the place (not wear damage or neglect). Or if it's vacant and someone breaks in. 

Just ask for all the available coverage's on the policy and what thee additional premiums would be if elected. Then decide what your budget is. You may not want full coverage if it's too much. Also shop around. It's crazy how much difference there is between companies and what they cover. Some commercial policies may not even offer some of the extras I just mentioned. Ask and be informed.

@Jay Hinrichs your advice is spot on. I hear stories about the wholesaling that others are doing across the country and I used to think maybe I am doing something wrong because I just can't support those kinds of numbers or volume. Then I realized it absolutely is directly related to where you live and your own market conditions. 

As far as state law goes, I only know my state of PA. It is not illegal to flip contracts but as a PA Realtor the lines get fuzzy. It seems to be frowned upon in some circles. Although not illegal, if your peers and contemporaries think it's shady, it really is a case of their perception versus reality. I try to balance that with scoring good deals. My reputation is more important to me than making a quick buck. I suppose the argument could be made that as a professional I am held to a higher standard of ethics and should not take advantage of someone that does not have access to the same resources. Therefore, I fully disclose that I am a Realtor and that I will be buying your house for cash,  as-is, as fast you you want it and I WILL be selling it for a profit with sometimes doing little or no work to the property. That does scare away some sellers and that's fine. The ones that agree understand and don't care. They want the cash now. Besides, i am contacted by them as a seller and I am a buyer in their eyes. I don't cross lines and act as if I will be listing it or in any way acting as a middleman. 

In PA it gets tricky because the state has a 2% transfer tax and they do consider an assignment of contract as an equitable transfer making it subject to the tax. Most times I actually do a simultaneous closing since I'm paying the tax anyway. I do this if I have a buyer in hand already. If not I actually list the property and sell it traditionally. Either on the MLS or FSBO. I know this got off topic a bit, sorry to ramble folks....

Demographics are important but there is a lot more to consider. Look for areas with solid employers, colleges, hospitals, etc. These are areas people want to buy and sell in. I would also talk to someone at the local Board Of Realtors. They have data on what the inventory situation looks like in that area. Active and sold listings, average days on market, price/cost per sq.ft, total sales, new listings, average sale price and on and on. It's a ton of info. My local Board actually publishes this info in a newspaper flyer every month. They even compare it to the prior 2 years. It's a great snap shot of what's going on.