All Forum Posts by: Aref Shehadeh

@Jennifer Kinzle It will likely generate a good amount of interest. Very cut-throat market here and deals get picked up fast. It's a good shell of a house in a great area.

@Jennifer Kinzle I am completely okay with forgoing any commission, my interest is on acquiring the property at a lower price only! I'm just figuring the best way to do it, maybe I do get another agent to list it... but I'd like to ensure that I'm the one purchasing it, which sounds like it will still be tough since it'll be on the open market at that point. 

(Sent on the go)

Hopefully the right forum here. I'm beginning here in my search for information.

I had a homeowner reach out to me from a direct-to-seller marketing campaign looking to sell their home. They are low on the equity side, but are looking to get out of their property fast and are OK doing so at a discount. Unfortunately their loan balance is quite high in relation to the property value. The property could be a great wholesale or rehab.

The sellers were given a letter stating they could initiate a short sale (a loan modification was denied). I am a licensed realtor as well and could help carry forward the process for listing the property as a short sale, but I am looking to acquire it myself. I know that the property must be listed on the open market and I want to avoid any ethical issues associated - any thoughts on the best way to handle purchasing this property at a lower price? I would have to submit all offers to the seller if I were to list it. I'd like to avoid the short sale if possible since it is currently an off-market deal. Has anyone had success negotiating with the bank outside of a Short Sale? In other words, what are my options for acquiring this property at an amount less than what the seller owes?

Coming short on options here...

 Late reply...

So, like you said. Your situation may warrant your partnership setup for sure, especially just starting off.

I'd like to stir the pot a bit, though... How do you quantify/ come up with your figure? Is it a market based labor charge? For instance if your figure is $50 an hour for other projects, are you using the same numbers with the partner? I ask because I believe there should be some discounting as part of this partnership... Unless your partner is truly just a passive money guy. Is he?

For my potential partnership setup, I am usually finding the deal, making sure we're on budget, helping with house design, helping with materials, and more ON TOP of being the money guy. That being said, im certainly not acting as general contractor so that is where Im seeing value in partnering with one (assuming they're legit). My guy has done his share of house flips so he has an understanding of the law of diminishing returns so I know I can truly let him be if I need to. My vision is to be able to scale quickly and not have to worry about the construction side- holding him accountable to that end.

But, I am interested in the partnership IF he's working to cover what he needs (not necessarily profiting). It's all about the deal, so your example would probably be unrealistic. Putting in $20K of effort into a project that would only yield $10K? And you mentioned that is for labor only. Clearly that deal should never happen. With my partnership, we're looking to only jump into deals in which we make 20% margin. So typically splits of $40K ($20K each) before I pay him for an agreed upon labor kickback... In that example the contractor will likely have $15K of MARKET effort in the project. But we both know he is not getting that. Again, all about the deal. If I needed to pay him $15K ... Then I would need to be reimbursed for my time as well... An acquisition fee, an accounting fee, a project management fee, etc... Gets too hairy. Rather keep it simple and agree on the labor kickback project by project. I'm going to see how it goes for a couple projects!

Thanks for your perspective, though. It truly does depend on the levels of experiences, the deal, the market and more.

Great conversation!! 

 Hi Derek, very helpful. My partner and I have pretty much the same setup. Though, I was following until you said "I come up with a total labor amount that would be $20,000 with the amount of work that needs to be done." This confuses me because you said your investment is in your time, maybe it's just semantics.

How do you determine this total labor amount? Is it determined based on your market rate or is it simply your cost after paying subs. In other words, are you profiting from that $20,000? Like others have said here, if you (or my contractor) is benefiting financially from the labor amount that will be paid back, it would make more sense to just hire a contractor rather than split the profits. Thanks!

Sparing some details here - I've completed a few flip projects using my contractor. Looking to partner up on the next project to see how it'll go. I'm the capital guy and accountant, he's the construction arm- we both serve as 'acquisition managers' finding deals and we're both on any loan we need to take out. Essentially I fund the down payment and rehab costs up to a certain amount. We've decided on a 50/50 split in profits.

I'm hung up on if the contractor should be paid at all for his personal labor in the project as an expense that will be reimbursed before we split the profits. If so, I'd argue I would need a finders fee for getting the deal, a % for accounting etc. It could get messy. My belief is if he needs to sub anything out, we'd agree and the sub would be paid directly. But, what about his own time? Shouldn't his sweat equity be the input in this deal so he should not be compensated? 

Hope I'm clear in what I'm asking.

Going through this now with a contractor I worked with on a flip, things went well so we're looking to scale up the operation. I kind of took the role of GC in the first flip- hired two GC's to do much of the work (one of which I'm partnering with), subbed out other pieces of it. Learned a ton.

I'd rather pick up a pen than a hammer, but this experience gave me better construction literacy. So, since we're truly partnering for this next one (50/50), I can understand and keep an eye on what he's doing, though he's ultimately responsible for the construction side. I also spent time figuring unit costs for materials and scope of work for the different trades. So, as "CFO" I will be able to understand expenses and question when materials get costly. You should have a baseline understanding of typical unit costs, so as to not leave it all in his court, which could get risky - (maybe he'll want to make money on it on the side...). Receipts help with this as well.

The advantage is simply segregation or ownership of duties, assuming all roles are understood and on paper. This will allow you to look at future deals and keep on eye on the health of the projects, while the contractor can focus on construction and meeting deadlines.

What you may be going through is what I am going through now- should the contractor be paid for his labor as an expense in the project that will be reimbursed before we split the profits. If so, I'd argue I would need a finders fee for getting the deal, a % for project management etc. It could get messy. Don't want to hijack your thread, but I'd be interested to hear what others thought about that.

Want to update this thread on what I was able to make happen. After visiting the department of public works (3 times), the city engineer explained to me that the gas company will essentially throw the city under the bus stating that the city will not dig up in the ground after December 1st. The city engineer said that was simply not true and stated "we have a duty to provide heat to everyone." The gas company seemed to have just been behind schedule and wanted to push anyone they could until spring.

After going back and forth with the gas company many many times and pushing them to acquire the permit, I was able to get them to come out yesterday to put in the gas line. I was extremely persistent and even wrote a hardship letter. The gas company rep told me my property address was well known across the construction department by the time it was to be installed :)

Persistence is key, I'll know for next time to start this process very early.

House is 1200 sq/ft. My electrician is quite adamant about that price being competitive. I received a second estimate at $1K. They both mentioned using an arc fault. I'm interested in the wireless system, but understand as @Stephen Joyner mentioned, that wireless is not the same as wire-free. Otherwise, I'd be getting these all day -http://www.homedepot.com/p/Kidde-Battery-Operated-...

I will be calling the Providence, RI building official concerned with fire on Monday. 

Got it down to $900. Still seems high... 

(Sent via mobile)