House #1: More Details

July 29, 2008 · 0 comments

…continuation of yesterday’s post with more details around the Corn House:

* I had a full inspection of the house on Saturday. Overall, there were no major surprises, which was a good thing. My inspector is tremendously detail-oriented, and found at least a hundred little issues, but most of them I had already known about and budgeted for. His greatest value was to be able to provide information about the “big ticket items,” like the roof (it’s relatively new!), the HVAC system (also pretty new!), the electrical wiring (pretty good wiring job), and the structural integrity of the property (no problems!). He also looked for signs of termites (none!) and mold (plenty of it scattered throughout the basement, but I’m quickly getting over my fear of dealing with mold). So, while the inspection didn’t turn up any serious issues, it was worth every penny; it’s nice not to have to worry about any major surprises during rehab (though I’m sure there will be at least one).

* Between my inspector and the wholesaler that I’m buying the house from, I’m learning a tremendous amount about the rehab process and about construction in general. Gordon (the wholesaler I’m working with on this deal) has devoted a good bit of time to helping me navigate through my first deal. He’s done a lot of flipping the past few years, and has a wealth of knowledge, as well as a great number of contacts (he’s a real estate agent as well). While he certainly has a financial incentive to help me out (he only makes money from me when I make purchases from him), he’s gone above and beyond what I would have expected, and I owe him a lot; he’s made this whole process a lot less stressful, and is always there with great advice when I need it. I have a strong loyalty to anyone who looks out for my best interests; if things go well on my first couple flips with him, I have a feeling it will be a long and prosperous relationship for both of us. Additionally, I spent 4 hours today following the inspector around every inch of the house, asking a million questions (some more than once), and learning more about construction in four hours than I have the rest of my life combined.

* I already met with one of Gordon’s contractors — Ulysses — to get a bid on the rehab job for the Corn House; he came in ridiculously high on his bid (and I played dumb and said I’d think about it). I’ve done my best to stay out of “negotiating mode” on anything real estate related so far (in other words, I’ve tried not to be a hard-ass in my new career); until I understand how things work in this business, I don’t want to be too aggressive.

* In addition to the bid I got from Gordon’s contractor, I’ll be meeting with a few other General Contractors today and tomorrow to get their bids. Once I get a few different bids (including possibly more reasonable one from Ulysses), I’ll check some references, and hopefully have an opportunity to see some work they’ve done; my goal is to find a couple contractors that I can build a long-term relationship with, because when the real estate market picks up again, it won’t be this easy to find guys who will drop everything to take my projects. I figure I have about a year to build some strong contractor relationships.

* Closing for this property is scheduled “on or before” August 18. Hopefully there won’t be any issues prior to closing, though I still have to figure out how I’m going to finance this property. I can’t go through the traditional loan process, and I’ve found that most traditional lenders won’t finance a double closing (they’re concerned about tracking title through multiple transactions), and I’d prefer not to spend $100K in cash on this one (I have another potential property in my sights that might require a lot of cash). I have at least three options for hard money, so I’m going to spend a couple days this week figuring out which one I want to pursue.

And that’s the update on the Corn House…

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