In this episode the discussion is all about the details that you discover when doing your due diligence. I give you multiple examples of how we save thousands and thousands of dollars as we find and secure properties. This is so important with what we do as we buy homes for cash as is. We absolutely have to cover our butts in the events of finding issues that go beyond the naked eye.
So if you want to save yourself 30, 50 or even 70 grand pay for your property to have an inspection. Take your time and do your due diligence with every investment that you make.
As always if you need anything come find me at billyalvaro.com and billyssecrets.com
Talk to you all soon!
welcome to unstoppable real estate investing wealth. My name is Billy Alvaro, AKA the unstoppable BA former billion dollar mortgage banker gone bankrupt turned professional real estate investor where each week you'll learn the tools, strategies, systems, and secrets myself. And other, a highly successful real estate investing entrepreneurs use to start, grow and scale their businesses, creating massive profits and how you can too.
[00:00:31] And we'll teach you how to put those profits to work. So you no longer have to get ready to finally experience financial freedom and generational wealth. Now let's get started.
[00:00:43]What's going on guys. This is Billy Alvaro, the unstoppable BA, and you're listening to another episode of an unstoppable REI wealth. We'll, teach you the tools, tips, tricks, strategies, and systems, and secrets. That's a mouthful on how I built my business to a multi-million dollar real estate investment company and how a lot of the people are into viewing, how they've started grown and scaled their business.
[00:01:07] And I have people of interviewing that have multimillion dollar businesses. 600 deals a year, 50 deals a month. I have other people that are in that phase that I've been interviewing that are just starting to grow their business. They have others. I want to get you the perspective and give you the perspective, rather of those people who are just starting out what they're doing, what struggles they're facing.
[00:01:29] So you can get a whole holistic view of how, what it takes to start, grow, and scale your real estate investing business. Now, as you can see if you're watching this on YouTube, if you're listening, you might hear a little background noise, but I am multitasking and doing this podcast. Vehicle. And the reason being is we are extremely busy and both in New York and New Jersey on the wholesale side of the business, on the renovation side of the business and on the development side of the business, we have multiple projects that we've undertaken and my time really is limited.
[00:01:59] So for me to quantify and to get as much done in a 24 hour timeframe, I'm learning to do things with multitasking. I thought that my whole life, but this whole podcast thing with the vehicle, it's just one more thing that I've. Implementing it to keep putting out content, but at the same time, making sure that my jobs are running smoothly, I'm running from job to job today.
[00:02:20] Cause my project manager this is one of the challenges you face. My project manager took a shit, basically fried himself out. After five weeks on the job, couldn't handle the stress and the pressure and that's a whole nother subject would hire him, but we were dribbling out jobs to him to get him acclimated and he just didn't have the mental or the.
[00:02:39] Emotional fiber to get through what it takes to run. And he was only doing three. I didn't give him all the jobs because I wanted the passion had crushed me. But, so that's the reason why I'm running around today. Up today's episode. I want to speak last couple of episodes. We went on, it was all about marketing today.
[00:02:56] I want to speak to you about it's timely. Want to speak to you about due diligence specifically with rehab? Now look, if you're a wholesaler is not a lot of due diligence, you're going to have to do it all. It's a matter of fact, you're probably going to do none. You're going to tie a property up into contract.
[00:03:13] You're going to then take that property, put it out to your buyers list. And it's your buyers guys like me. And we're going to be renovating those properties that the due diligence really falls on our shoulders. So let's go through the importance of due diligence of the importance of the items of what you should do.
[00:03:31] I'll tell you exactly what we do and how we do it and how it has uncovered certain things that we. And otherwise would have known about if we didn't do due diligence and it could have cost us 20 grand, 30 grand, 50 grand. In some cases we've, could've bought deals where we couldn't do anything with them because the property was actually over the property line.
[00:03:52] And there was no way for us to rectify without knocking down the house. So, first and foremost, let's go through the due diligence process. So what are the specific items that should happen when you're buying a property for? It's an either renovate and flip. Or to renovate and hold the Sorento. So I'll tell you what we do.
[00:04:11] First thing we do New York, New Jersey. We get a property under contract number one. First thing that we do is we hire a home inspector to go into that house. Now, some people out there may be saying, you do renovations. Why the hell would you want to hire a home inspector to go out to the property? And it's simple.
[00:04:30] He or she is going to find things behind the walls. Things that you can't see your project manager. Can't see. When are you going out there? And he's going to. What a flashlight is going to illuminate the potential issues and tell you here's an issue we see, you may want to contact a roofing specialist or accepting specialist or a foundation specialist to go through and do further research.
[00:04:52] So every property we get that we're going to rehab or rent. My operations girl gets a trigger in Podio and she automatically, after we have our in New Jersey, it's called eight attorney. You review after attorney review was up at, in New York it's during our home inspection process, we usually have 21 days to do our due diligence.
[00:05:13] It's in that timeframe that she orders the home inspection. Now what our home inspectors do is they go in and they just rip apart the house, knowing that we're going to be renovating everything. We don't care about light switches, not working, or certain things are small things. We're looking for big ticket items or hidden items that may not be present.
[00:05:35] The naked eye. So let me give you some instances of how this has saved our ass. So in the state of New Jersey, we had a home inspection done and we had the home inspected and they found out that the sill plates were completely rotted out with termite damage. Now to the naked eye, the house looked like it was in pretty good condition.
[00:05:59] Looked like it was actually fine. We were going to do a little interior re redevelopment home inspector went in. He checked out all the sills. And he said completely, the sill plates are rod. And he started poking through the pig and found out not only, still plays rotted on the whole basement that one of the walls was collapsing.
[00:06:17] It couldn't see it because he had it framed on the outside. He started doing a little research and found out termite damage was extended, was throughout the silver plates, both on the first floor, the second floor where the whole back and right-hand side of the house needed to be reframed. And the downs.
[00:06:35] Stairs B speed wall was collapsing and had major structural cracks that you couldn't see from the outside. And the only reason why he did it from the inside is he started poking. He cut a little hole in the sheet, rock and sore, how bad the cement was behind the wall. So home inspections, what else could we find out with home inspections?
[00:06:55] What are the other things that have been brought to light with us? Termite damage is that is a huge one. I'm not talking minus where my dad would cook a major shit with stuff is going to go to collapse. You have to reframe. We also found through a home inspection due diligence process that the septic tanks were completely blown out.
[00:07:12] Now, when we do our home inspections for us, we do a home inspection. We do a septic cert, we'll do a cesspool cert. We'll do a, an oil tank cert or sweep, especially in New Jersey to see if there's any oil tanks on the ground. And those inspections are going to bring to light a lot of the bullshit that you would otherwise not know that can cost you.
[00:07:35] The box with the septic inspection. So we had a situation out in ballbarrow New Jersey, where we got the home inspected. The home inspector said, look, I see that this place has a, an older septic tank. You might want to get it inspected further. You do diligence. So it costs us another $350 to have that septic tank inspected.
[00:07:58] And what we found is that it was at its life expectancy. It was just that it's life expectancy. So. If we would have renovated, not done the inspection on the septic, going, everything was good. And then tried to resell that problem. He and El buyer came in and did his own home inspection with this surgeon.
[00:08:18] He would have realized that the septic tank was that his last life leg, it would have ran about $28,000 to put this new septic system in. And they want, they would have wanted us to either give them a cell as credit or to replace the septic. So a mere $350. Our inspection fee upfront saved us a $28,000 expense.
[00:08:40] Because once we got that report back, we went back to the seller and we negotiated with the seller and simply said, look, we had our inspection, we'll buy the property as it is based on what we can see. But after we did our due diligence, we found that the septic system was at his last leg is a $28,000 expense.
[00:08:57] We had two or three different bids that we got. We gave it to them. We settled on the medium bid and the seller ended up giving us 28,000. It's a dollar credit at the closing. So it's important if we didn't do that, our profit margin would have went from $70,000 down to about 30, 30, $5,000. That's real money out of your pocket.
[00:09:18] That's why the due diligence and I can't stress enough. It is so freaking important. If you're going to rehab or to flip or rehab the rent that you in your due diligence deal, you do diligence process. Then you take your time and go through the steps. Deviate from doing your due diligence, because the time you do, it's going to bite you in the ass.
[00:09:42] Another example of how do you deal with and says, save their ass. We do with the property right now, over here at nine pine, we call it the London bridge property. And with that house, we knew what we were buying. We were buying an absolute piece of shit and we got it at a great number 70,000, just because we got it so low below market.
[00:10:02] And just because we knew this house needed everything. Do you think. We still went through and got it all expected. We did. And I'll tell you why, because there was still things that are naked I could not see. So the first thing we found out is that the septic binds from the sewer lines, from the house to out into the to the street were blown out their head infiltration with roots, which means they were blown out.
[00:10:25] Now I didn't renegotiate with the seller on that because I said, all right, we're buying the house as is. It's going to cost us a few grand more, not much, but just knowing about it up front, we were able to. Add that into the budget. So there were no surprises. However, one of the big things that we found with doing a home inspection is we had, what's called an oil, takes, sweep that depending on where you're at certain parts of the country, oil tanks work buried in the ground.
[00:10:51] And in New Jersey, New York, they buried a lot, especially in the older houses. And when those takes are buried in the ground, they over time, they erode and they sometimes leak. And if they do leak and it's known, you could. We have a major problem with the DEC. So what we did with this property is we mandated prior to going to closing waterfall due diligence process.
[00:11:14] The first 30 days that we had it was to do a oil tank sweep. We found there was an oil tank at that moment in the state of New Jersey, different from New York in the state of New Jersey, it's mandated, you can't extract. Nobody will like try to hurt their license. They will make sure that if there's a varied oil tank, you have to go through the proper channels.
[00:11:34] Unless you're going to put a bunch of guys in at night and you dig that thing up. I did not want to go down that road. So what we did, so we had a company test. We extracted the oil tanks. We had to extract it as we extracted it, mandated that they do a soil test to see if any oil leak and lo and behold what happened.
[00:11:54] The freaking oil was in the soil. It came down and I can't remember the exact numbers. It was either 21,000 or $27,000. Due diligence process that it was going to run us to remediate. So we immediately went to the we went to the seller, we gave them a report and we said, look, this is going to have to happen no matter what you have contamination and we'll pay for the, and we agreed up front, we'll pay to have the take extracted, but if there is any contamination, that's going to be on you.
[00:12:27] We negotiated that upfront. And so we went to them and they had to pay that money out of pocket to get the. Soil remediated. And so if we didn't do that would have come out of our pocket. And one of running, yes, 20 something thousand dollars to remediate that soil where we did the, all the tests up front, we were able to negotiate it up front.
[00:12:48] We got that credit upfront and we got everything remediated. So just to show you a couple of these things that it's important when you do any due diligence. To take care of. Right. So one of the other things we just experienced in the due diligence process is surveys. Like, I'm going to be honest with you.
[00:13:06] And the beginning when I was house flipping, I very rarely in long island had surveys and I'm like, what am I going to waste my money for $750 for a survey? If the fence is out of line a little bit, I'll deal with it with the next buyer and I'll take care of it and it works. And it's good until it does it.
[00:13:23] And we got Brittany ass, years back and we got bitten the ass to a point where it cost us 10, 15, $20,000, because we could not come up with a number that was going to be good. Otherwise we would have had to, it was a driveway and stone. And walls that were on our property. And because we didn't do our due diligence, it was it was a disaster.
[00:13:43] So we made it a point. Now, every time we buy a property, if this old seller doesn't have a survey, we go in and our due diligence processes, we order a new one. Here's an example of how does just save our asset a deal that if we would have closed on it, this is recently. If we would have closed on it, this deal would have.
[00:14:02] Cost us the purchase price of the property. What we did is we got the survey done, little house. We called the three little piggies house. Cause this thing looked like a fucking check. If you would've sneezed, it would have blown over three little piggies house out on four 40 north Maine. We had the survey done.
[00:14:20] The seller was selling the property extremely cheap. We thought are we selling it cheap? Because it's a shack. Everything has to get redone will become the fine. Is the house itself. All land around the house rather first was sold off to the United States of America. So that's like red flag. Number one.
[00:14:40] Why would the United States of America, why was this property donated? I'm talking acreage like 40 acres around this one house is all owned by the United States of America. Then this survey showed us the house itself on the property line. There was 10 foot of our property that was unknown as to who owned it.
[00:15:02] And our house was over our property line, six foot onto the U S America United States of America property. And so here's what would've happened. If we would have closed on this house and we would have renovated this house and we would have put this house back on the market, the new buyer would have gotten the survey.
[00:15:23] The new buyer would have realized that six or eight foot of our house, that our land, our house was built over the property line. And because it's owned by the United States of America, who the hell are we going to go to, to try to work a deal with it never would have happened. So we would have closed it in house renovated that property gone through the process of getting it fully permitted.
[00:15:45] And at the end, when we tried to sell, we went to realize not sellable because the house is on the property. So what are our options? What can we do to save this deal? Well, the only option is to knock the house down and the rebuild the house in the middle of the lot lines. To conform with the area after we did a due diligence and realized that regardless of how cheap we're getting at the resell values of the houses in this area, with the cost of lumber, the cost to build, it's not going to be justified the close on it and cost us $1,500.
[00:16:18] But we saved ourselves probably about $175,000 in expenses and fees and purchase price and closing wasn't a rehab cost because that house never would have been able to sell. So look guys, and this is going to be a shame. Short and sweet podcast. It all comes down to my clock. It all comes down to due diligence.
[00:16:39] If you do your diligence upfront, it's going to save your ass down the road. Don't look at it as a bullshit expense that you're forced to pay and that you're otherwise not going to do. It's a few hundred dollars. It could be up to a thousand, $1,500 depending on what you're actually inspecting or having a due diligence process looked at.
[00:17:00] But that money. I look at it as an insurance policy, and eventually it's going to save your ass or it could make you more money as in the cases with the oil tank and the cases with the rock, with the house where we had to renegotiate. So it can be used as renegotiation tool to cut back on the purchase price if it warrants it, but it could also be utilized to save your ass for those deals, that if you would have closed on it, you couldn't sell it.
[00:17:28] You couldn't flip it. You would have been out whatever the purchase price was. Course everything else. So this podcast is all about due diligence. This podcast is for those who were buying renovating and flipping or buying and holding, I can't stress to you enough importance of going through and doing your due diligence.
[00:17:44] Now, a lot of the other things that we do, that's like on the property itself, what we do in New York and in New Jersey, New York, it's called the foil request F O AI freedom of information act request. And in New Jersey, it's called an Oprah request. Open public. Records now, why is this important? This is all part of a due diligence.
[00:18:05] Redo this to find out what was permitted on the property. What was not permitted on the property? Are there any violations on the property? What are the CFOs of the property cold for? So New Jersey, we pull an Oprah report. We'll find out instantaneously within a few hours to two a week, depending on the municipality that we're pulling it.
[00:18:28] Every fight, every open violation, enclosed violation, while that. And why is that more? So with the violations we want to know, is there a violation for, I don't know, an illegal extension put off the back that they never closed out or an open permit that they never closed out for a bathroom that they put in.
[00:18:46] It's important to know this. So when you're going in to do your due diligence, where to flip this property, we had one that we got the contract. We realized that there was an added bathroom that they told us was permitted. It was an open permit for it. We didn't do the open report by the way, this house needed no work.
[00:19:05] We were buying it, closing on every listing and selling it. If we didn't catch it, that Oprah report, that bathroom didn't have an open probate. And we would have tried the resell and we had a buyer came in, it would have been a Cindy ass because then we would've had to have gone in. We went to have had to open up walls, had the towel, come in, get a survey, done, all this bullshit in the backend.
[00:19:25] It would, of course us time, money, and energy. We just do it up front. So it saves your ass again. When you do the. Reports for the format reports. Another thing, the due diligence with the Oprah, the foyer does is it tells you any open permits. Like I just said, for the CFOs what's CFO in the property, if you have a CFO for that second edition extension that was put up, we just had a house in long island that we just got done in the due diligence phase.
[00:19:52] We had nine months to get the property approved for with the town. So here's what happened. The guy had a house that he put on his second story addition. Okay. The garage extension off the back you went through, but he never actually finalized the prevents didn't finalize it because he did an approval through zoning because he was too close to the property line and he had to go through and get an exception.
[00:20:15] And so what we did is we negotiated with this guy instead of us closing on the property and taking eight to nine months cause of long island, that's how long it takes eight or nine months to get this deal approved with the town and go through the process of. Expediting and surveys and hearings, the zoning board.
[00:20:34] We said, look, we'll do this all up front on our dime. You keep the property in your name, let us go through and get this approved. And once we get it approved for closed, it took us nine months to close to $15,000. But now we have a property that's a hundred fully percent permitted and we can turn around and do a small lipstick renovation, put it back on the market, sell.
[00:20:53] So again, guys, the due diligence process, use it to your favor and you can get discounts from price. You can get discounts for price because of issues that are not seen to the naked eye. What I don't want you to use it for is don't use it to the go sheet with the sellers on bullshit items. You're in the business of buying properties for cash based on what you're seeing.
[00:21:15] So if the boiler is bad, you're engineer comes back. Your home inspector comes back and says the boiler's bad. You're looking at it. You see the house is shit. Don't try to utilize that as a tactic to negotiate a lower price because the boiler's man I'm talking about high ticket items that are going to.
[00:21:31] You down the road, when you're trying to redevelop a resell, this thing, those are the things that you want to bring the light and then renegotiate with the sellers, the bullshit items you're buying the property. That's what you're buying. If you're buying it to renovate it, what if you have the, a wall that's fully down to the foundation and you can't see it, you didn't calculate that into your cost.
[00:21:50] When you made your offer, you're going to have to go back in and renegotiate. If you have the house, we'll turn my written, which you couldn't see, and the whole thing needs to be reframed. And you can calculate that in upfront and you find that out. And due diligence process go back and renegotiate. And I have another example.
[00:22:04] We have a property down here in Tom's river where it's a small house. The house looks like it's in pretty decent condition. It's a lipstick renovation. It's a cottage, it's like 900 square feet lipstick renovation of $20,000. You're talking to kitchen, a bath paint, some trim in some floors, small house. We had the home inspection done.
[00:22:25] They came back and the whole entire back of the house is not sitting right. Oh, the right support choice, the right support beams. It's not holding it up the right way. And the whole back of the house is actually seeking it. And so that now has to get jacked up and we have to redo the whole back of the house, supporting it.
[00:22:45] And so that's going to run us some money. We have to go back in now and renegotiate with the seller of that property. If we didn't know that, and we didn't take the $700 or seven 50 to go do the due diligence with the home inspector, we would've come in way over budget. It's really budgeted 20 grand.
[00:23:02] When now it's going to run us like 35 because we have the Jack House. So you see how you can utilize this as a tool. And look, if the sellers don't want to renegotiate, that's fine. Yeah. You're not going to buy a property where you would put all this money in a breakeven. You're now going to buy the property.
[00:23:16] You still going to make your 10 or 15 or 20%, whatever you're going to do. So guys hope this podcast helped. I hope you can hear me because I'm talking from the car. This is Billy Alvara, unstoppable REI wealth. Now, if you're a wholesaler, if you're a renovated. Or if you're a home buyer that wants to buy, long-term go to Billy secrets.com.
[00:23:36] I have a lot of the tools and tips and tricks that I've been utilizing. And a lot of my podcast guests have utilized over the years. Certain guys that do radio or TV or lists or driving for dollars, where we bought with how we do our marketing, all those certain items where Billy secrets.com. I put it on there as a very simple way for you to go in and search what you're looking for.
[00:24:01] Get the information that you need it's readily available. Instead of texting me, I am a BPM and B it's all there. One specific area of unified. Also, if you're a realtor, New York, New Jersey, we have a realtor program that we just launched. That is absolutely crushing it. I'm going to show you how you can get the initial 10 deals a year and how you could triple up on your commissions.
[00:24:25] It's a very unique program. I'm only launching it right now for New York and New Jersey. If you're in. Just it in that program, go to Billy alvero.com log on to that site and go to the joint ventures with Billy Porter, a Billy do that. Tell me your realtor. I'll have one of the people by staff get back to you and we will coordinate a call.
[00:24:46] You'll be speaking with me directly and we will get you launched ended up program. We right now have a half dozen agents, three in each state that we will, we've been working with and it's working out brilliantly because the agents are able to make it a very. Tough market right now, they're able to make higher commissions working with us based on the way we structure these deals.
[00:25:07] We're basically bringing you in as a joint venture partner, and it's a wonderful way for you to get involved with real estate investing, without having any of the money outlay and where you can make double and sometimes even triple the commissions. It's a no brainer. So if you're into that, hit me up and that's it guys.
[00:25:25] I wish you all the best. Remember nothing happens unless you take action. And get out there, make it happen on a daily basis. Know that you're going to come up against brick walls. You're going to have issues. You're going to trip and fall and fail. You got to get yourself back up and pressing forward peace out.
[00:25:43] Okay. Show the next week. .