Brightwaters foreclosure investment nearly proves disastrous
In 1995, when Richard J. Warren, a professional real estate investor now living in Las Vegas, bought a foreclosed home in Brightwaters for $95,000, he couldn't believe his luck. Unfortunately, it wasn't the kind he wanted.
"Basically, everything that could go wrong, did go wrong," says the 54-year-old Hicksville native, who ended up writing a self-published advice book about his experience,"A Rehabber's Tale: The Reality of Fixing and Flipping Real Estate" ($19.95).
He had planned to repair and sell his Brightwaters bargain in six months and skipped a home inspection to save money. Then he discovered the furnace and heating pipes had been ruined because the power had been off for a year. The roof needed repair and there was termite and carpenter ant damage as well as numerous electrical problems. Warren tackled one disaster after another until the home was salable -- two years later.
"I made the classic rookie mistake of underestimating the amount of work needed and the length of time it would take," he says.
Warren spent about $75,000 in repairs and sold the home for $190,000. He said he made money when he sold only because everything around him had appreciated in value. But he learned from his mistakes. A few years later, he and his new wife moved into a fixer-upper in East Islip for $150,000 and sold it after two years for $300,000.
"We did OK with that one," he says.
He counsels novices to study investing strategies and stay within a financial comfort zone. Also, avoid making a hasty purchase just because you want to start on something quickly, a condition he calls, "Gotta Do A Deal-Itis." Lastly, when it comes to evaluating a potential property, keep in mind what Ronald Reagan said about the Soviets, "Trust, but verify."
"There's an old saying in real estate," he says. "You make your money when you buy, not when you sell."