Buying a foreclosure question

[ghenson82]

I’m looking at a foreclosed duplex to flip, its listed on HAR and Zillow. Its in an area that isn’t terrible, but marble countertops aren’t necessary to get it sold, if you catch my drift. The place does need some drywall work and a few other cosmetics that I can see from the pics online, but there doesn’t appear to be anything else major that I can see.

My questions is- can I have it inspected before I make an offer?

[Sleepy]

That's what your option period is for. Make offer, get it inspected before option period is up and back it if it's too much for you to deal with.

[perow]

Play the extra money and have the plumbing scoped

[GTRH8R]

You can make an offer content contingent to your inspection

[ghenson82]

Play the extra money and have the plumbing scoped

Can you just add that to the inspection or is that a separate contractor?

[wickll]

One thing to make sure to have the inspector look for is aluminum wiring on non-dedicated circuits (electricians feel free to correct me if I say this wrong) We were helping my stepson . Really wanted to buy a particular foreclosure. Inspection revealed aluminum wiring and the house had a fire at some point. Couldn't find out if the fire was due to wiring or other. Although I am not really worried about the safety of properly installed aluminum, insurance can be a problem.

Also be aware that there is no sellers disclosure on a foreclosure. But if you bought and then sold, you would need to disclose aluminum wiring if you new about it.

[Turtlewax]

My advice is if you dont know what your doing.....move on. Flipping houses looks easy on tv.....trust me its not. 1 foundation issue and your out of your profit.....rotten joists.......rotten studs.....trusses......broken plumbing lines......etc.

Im remodelling my 14 year old house. Im a General Contractor with 20 years experience. Even im running into wierd stuff. I didnt build this house though.

If your financing this venture through a bank....what happens if it doesnt sell right away? Can you afford to float that note for a few months....6 months a year?

Do you have subcontractors lined up that are reputable? That will make or break you as well.

As far as your question....you need to make an offer prior to inspection.

Just some things to think about.....theres a lot more but i have to get ready to take the wife to see Toby Keith

Op feel free to pm if you need help down the road.

[Larryf250]

Turtlewax is a smart man. I sell foreclosures nationwide for a servicer and all I can say is do your homework and hire a very good inspector. Paint and carpet are easy. 20 piers on a busted foundation is altogether different. Also, flipping is not easy. If you are doing the work that's one thing but if you have to pay a contractor to do the work his profit on his repairs eat into your profit.

One more thing, if you are not a realtor and will need one there goes another 6% of what you think you will make.

Put it In simple numbers
Purchase price 75,000 + 20,000 in rehab costs. You have an all in of 95,000 if you cant sell it fast $101,000 you are already losing money.

[rferg84]

I've bought several foreclsoures, it's been a different process with each ones. One was based on HUD guidelines which was crazy, took 90 days to close. The. And handling it will have different guidelines. All of them have been as is and wouldn't change anything that came up in inspection.

I remember one wanting a non refundable 10% deposit which I fought but ended up paying. They forced us to use their title company which isn't legal but not worth fighting. It was a dumpster fire but worked out well in my favor.
That same house didn't have any plumbing and the wiring was legitimately spliced heavy gauge extension cords, but we expected that.

We got them all cheap enough I didn't worry about inspection because worse case plumbing and electrical we still came out ahead.

With that being said we own 15 rent houses right now and it wasn't our first rodeo with buying questionable properties.

[RiverRat1]

Turtlewax is a smart man. I sell foreclosures nationwide for a servicer and all I can say is do your homework and hire a very good inspector. Paint and carpet are easy. 20 piers on a busted foundation is altogether different. Also, flipping is not easy. If you are doing the work that's one thing but if you have to pay a contractor to do the work his profit on his repairs eat into your profit.

One more thing, if you are not a realtor and will need one there goes another 6% of what you think you will make.

Put it In simple numbers
Purchase price 75,000 + 20,000 in rehab costs. You have an all in of 95,000 if you cant sell it fast $101,000 you are already losing money.

I always thought to buy and sell cost well over 10% A lot more to it than realtor commissions.

[DarrellS]

One thing to make sure to have the inspector look for is aluminum wiring on non-dedicated circuits (electricians feel free to correct me if I say this wrong) We were helping my stepson . Really wanted to buy a particular foreclosure. Inspection revealed aluminum wiring and the house had a fire at some point. Couldn't find out if the fire was due to wiring or other. Although I am not really worried about the safety of properly installed aluminum, insurance can be a problem.

Also be aware that there is no sellers disclosure on a foreclosure. But if you bought and then sold, you would need to disclose aluminum wiring if you new about it.

Unless it's pretty old (70's) I wouldn't worry about aluminum wiring.

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[rferg84]

And sorry I didn't actually answer the original question. Probably not on the inspection before offer, as mentioned before you could during an option period. The only issue I've had is on some of these deals the banks won't do an option, the only way out is the financing addendum.

[rferg84]

We've bought and sold investment properties but never as a flop per se, always have rented first. I haven't figured out how to make money doing it in our market yet. You will pay SE tax on the proceeds unless you exchange them into another property. By the time the work is done and legal/title is done even without a realtor isn't enough meat on the bones for me. Now I can make 15-25% on my investment all day long renting them.

Buy it, fix it up, rent it out. Sell it for a profit in a few years, buy a quadplex, fix it up, rent it out. Sell it for a profit in a few years, buy an apartment...

That's monopoly in the real world.

[Daddypants]

The very first home I ever bought was on the courthouse steps several years ago so I know both the good and the bad. My buddy and I probably had more balls than brains, but it worked out for us.

If it is a REO duplex that you want to rehab and rent, I would go for it. But if you just want to flip it, it's going to be a little tougher, IMO. Most homebuyers don't want to buy a duplex as their personal home so you are essentially self limiting your market to only people that want a rental and the guys buying rentals usually already have their own crews and don't want to pay your profit margin. They need the property dirt cheap so they can have a good positive cash flow.

There are two phrases to remember when doing this:

You make your money when you buy a house, not when you sell it.

Location, location, location.

Also, lowball the hell out of the mortgage company. The worst thing they can do is say no. Banks hate REOs on the books so you can negotiate with them somewhat.

[ghenson82]

Unless it's pretty old (70's) I wouldn't worry about aluminum wiring.

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