West Jersey Real Estate Investors Association

Ever wondered what happens when you buy a property? I bet you’ve been curious to know what are the small and big things that you might have to do in order to become an investor in a property. Well, your curiosity is about to get satisfied!

We at WestJerseyREIA.Com have something pretty exciting planned out for you! Ulka Rodgers, one of our founders is going to share their experience in a rehab investment. This blow-by-blow journal will help you understand the kinds of challenges we face and the risks involved.

Very recently, we came across a very investment-worthy REO (bank-owned) property that we are now in the process of purchasing. And we thought that it would be great if you were a part of this interesting process.

How are we going to do that?

Well, we’ve planned a series of blog posts that will not only take you through the process of purchasing a REO property, but it will also give you a peek into the behind-the-scenes activity that goes on before, during and after we purchase the property!

So join us on our adventure, and be a part of this exciting journey!

Our story begins, naturally, with a ugly, and very investment-worthy home – a 4 Bedroom, 2 1/2 Bathroom Colonial that is located in a very nice street. And because it is a bank owned property, the listing price was low. All of this made this home a very interesting deal to snap up!

The best part – we already had 2 investors ready to participate!

Naturally, before we decided anything, we went in and looked at the home. The first thing we checked for is to see if anything was broken and needed fixing. And, this home did require a few things that needed to be fixed, such as:

1. The hardwood floors needed to be finished
2. The wallpaper needs to be removed and the walls need to be re-painted
3. The kitchen needed some updating
4. The laundry room needed a bit more work
   1. The cabinets were ripped apart, so those needed to be put back
   2. The sheetrock needed to be replaced completely
   3. We saw some water stains upstairs, so we figured there might be a leak in the roof – so we need to check it out and fix it
   4. Some of the old carpeting needed to be replaced

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All this home needed, was a bit of a rehab, and then it would be just fine. So we decided to take a look at the financials.

We saw the listing price of the home, and decided that a bit of bargaining was in order. So we made our offer (a price that was lower than the listing price), and they countered (with a price a bit more than what we had offered).

We accepted their offer, contingent on doing:

1. A septic test, and,
2. A well water test

A week goes by, and the results of the tests were in: there were some minor problems with the septic tank. We had our guy look it over and got a cost estimate from him.

We gave the bank the estimate for the repairs and asked for credit – of course, the bank would do no repairs, so we offered that we would do the repairs ourselves and the price of the property would be reduced by the amount that we were going to spend on those repairs.

When we asked the listing realtor to forward this proposal to the bank, she was skeptical about whether the bank would accept. She said that the property was for sale ‘as-is’, In another deal, a different bank had refused.  But we urged her to present our offer to the bank anyway.

In our experience, it just doesn’t hurt to ask.  There have been situations where we did get what we asked for. And so the bank’s realtor forwarded our request to the bank.

Meanwhile, all of this was taking far too long for one of the investors. He backed out.

How do you think it’s all going to turn out? Stay tuned for the next blog-isode of our story that’ll be posted on this site soon!

All of us were left wondering about the bank for some time. While we waited, the bank did some fact finding for itself! (We kind of thought that it would.)

The bank requested quotations from independent contractors and estimated the cost of the repairs, and compared them with the costs that we had presented. We believe that the bank did this because the costs that we had put forward were more than $1000.

A couple of weeks went by, and finally the bank got back to us with the news we’d been waiting to hear! They agreed with our request, and we were going ahead with the purchase!

Now the final price that we have to pay is a bit less than what we had thought it would be. Also, we are paying cash, we aren’t taking up a mortgage. So, the bank made us an offer and told us that if we use their title company  then the bank would also pay for the Title Insurance. (That’s another $1000 saved! Woo Hoo!)

So, here’s how the picture is looking so far:

Estimated Cost of Repairs and Rehab for home: $15000 to $20000

Closing Costs: $2000 to $3000

So now, we wait for the paperwork and the formalities take place (and we know that sometimes these things take their own sweet time)… once the closing and the deed formalities are done, and the home is finally ours, the real fun will begin!

Can’t wait! Can you?

Keep watching this space for more updates about what happens next!

This post is going to begin with good news: we closed the deal! We are now the owners of the house that we’ve been waiting for! Yay!

I must say though, that it wasn’t easy getting to this part. You must’ve read through the earlier 2 posts about how we decided on buying this house and make an offer to the seller, and how we made an interesting deal with the seller of the property.

Well, after all that, the seller agreed with our offer, and we waited for all the closing formalities to begin. But we were in for a bit of wait because the seller could not deliver the title of the house to us in time. The wait went on for almost three weeks till they finally delivered the title. I hear this is a common occurrence these days – the banks are back-logged with checking and double checking their paperwork to avoid lawsuits of kind in the news recently.

The closing itself was scheduled at my REMAX office. We were paying cash and using the title company of the seller while the seller was paying the title insurance. We wired the money to the title company (they said something about some scams going on with certified checks) – and that was it!

We all met at the REMAX office, and we were out of there in 5 minutes flat!

Phew! I think that went pretty well.

Now begins the part where we get started with the rehab! Stay tuned for more adventures, because here’s where the real fun begins!

Rehab is all about turning an ugly house into a pretty house. That means, Murphy’s Law applies everywhere: Anything that can go wrong, will go wrong.

In a way that’s good, because then we can really make sure that we’ve done a real good job with the rehab.

After we closed the deal, we ordered oil to be delivered to the house for heating, and for the plumber to come turn on the heating. Fortunately, the driveway of the house was partly plowed (we’ve been having some real big snowstorms lately).

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The plumber showed up the next day and discovered that the winterization of the heating system wasn’t done properly. It seems after draining the pipes, it is necessary to blow them to remove water collecting in the low points. The winterization service had not done this. So, we now had frozen pipes. As we tried to turn the heating on, some of the pipes burst. The plumber had to fix those frozen pipes and stop them from leaking.

Also, to fix these leaks, he had to make holes in the ceiling. So we needed to fix that with sheetrock. Fortunately, he was very experienced at this and made neat holes that were easy to close up.

This meant a couple of days of extra, unanticipated work and expense.

Meanwhile, there are other things that are waiting for us after we fix these pipes. Once the heat is on in the house, we’ll begin work on them.

• There’s a lot of wallpaper all over the house that needs to be taken down. We’re hoping to get that started next week. Then painting begins.
• Also, the carpets need replacing – so we’re taking estimates to find out the costs.
• And last, but not the least, we’re going to refinish the flooring.

So, there you go: a few discoveries made, a few jobs underway and a few more waiting for us. Isn’t that just fun!

Stay tuned for more updates and find out what’s happening at our rehab house!