All Forum Posts by: Rob C.

Thanks for the examples of what you would consider doing versus not, @Jim Adrian. That's very helpful. And the approach you recommended, is in fact exactly how I've been operating thus far- "If this is my house what would I do?" Thanks for reaffirming that.

Thanks @Franklin Romine for your input. I just noticed I missed your post earlier. You really think it's a couple thousand dollars worth of repairs? If so, then I need to hurry and find a new contractor. Mine has quoted a figure north of 10k

@Brandon Hall, Great insights. I didn't even look at it from that perspective. thanks, Rob

Thanks for the responses guys. @Account Closed, this is a property I have under contract to purchase. In fact, the background on that purchase is currently being discussed in another thread: https://www.biggerpockets.com/forums/67/topics/248.... I agree with you that the seller ought to perform the repairs, but not be responsible for improvements. Unfortunately the seller is not willing to, which has me wondering how to renegotiate (i.e. the topic of the other thread), and what specifically I might be able to omit from the long list of repairs.

@Jim Adrian, yes, the inspector is awesome. I'm a big fan of his. Thanks for your comment confirming you would do most of them. That helps. Are there any particular examples of items you would not do?

Thanks again, Rob

Great discussion evolving here. 

Thanks @Leigh C for clarifying your position. I probably should have clarified that the reinspection report I had done after the seller "performed the repairs" makes it look like only about $2,000 worth of repairs were performed. Some of the shoddy work actually needs to be redone. I'm still expecting it will take about $14k-16k to address all the repairs correctly

Leigh, I think I kind of understand what you're saying here about wanting to recoup more money as the seller if you take on the effort/risk/$ for the repairs. However, if a seller markets the property at a certain value (i.e. based on market comps), and then later finds out that there were $16k worth of repairs he/she wasn't aware of, it's hard for me to understand how that seller could then increase the asking price after performing those repairs. If market forces have not changed, then how can the price increase be justified? And why not just originally market the property at the increased price in the first place if the market will bear it? I understand your point about new materials versus old, but that doesn't seem like a significant enough difference to raise the price more than 5% upon relisting. I'm not saying you're wrong Leigh; I'm just trying to better understand your position.

Thanks @Charlie Fitzgerald for weighing in as well. I also think I understand your comment about both Leigh and Christopher being spot on. But how do we reconcile the two polar opinions? I understand we as investors expect retail buyers to buy at full retail value. However, doesn't that assume that the retail buyer is being sold a retail property that is move-in ready, and not in need of repair (or at least much repair)? At what point (i.e. $ amount for repairs) does the property move from the classification of retail sale to wholesale property. It seems to me that the property I have under contract is perhaps somewhere in between. I would think that $16k worth of repairs would scare off the vast majority of owner occupant / retail buyers (please correct me if I'm wrong) That leaves the investor pool as the target market. And if that's the case, is it reasonable for the seller to expect more than 80% ARV - repairs?

Charlie, I also appreciate your comments about establishing fundamental buying criteria and sticking to that. Admittedly, I have had a hard time doing that and need to get better at it. Thanks for the reminder. 

Thanks again, 
Rob

Thanks @Christopher Brainard for the lengthy response. You raise a good point about the realtor bias. I don't believe that's the case in my situation personally; my realtor has proven her integrity to me and I do think she is looking out for my best interest. I'm just not clear if it's she or I that is misjudging things here. Nevertheless, I appreciate your giving validity to my position.

Regarding your comment about speculation, I admit that's what I am doing here. However, I figure it's a safe play because it'd cash flow at the 125k price that assumed no repair costs (albeit less than 10% after maintenance, vacancy, prop mgt, etc) and it's in an area that has municipal funds being pumped in for redevelopment and ground has been broken.

As for the option of terminating, that is not ideal either. Yes I'd get my earnest money, but other costs (e.g. appraisal, inspection, my time) would be sunk. Doesn't seem fair given the seller is on the wrong, but I admit it doesn't appear like I have much choice. Makes me wonder why sellers aren't typically expected to put money into escrow...

@Leigh C thanks for your input as well. You have taken somewhat of an opposite position to Christopher's, and appear to be in the same camp as my realtor. 115k would not be discounted enough to even cover the cost of repairs. May I ask your reasoning for choosing that figure?

Thanks again, 

Rob

I have a property under contract in a hot area of Atlanta. I was comfortable with the $125k asking price given the impression that it was move-in ready (my plan being rent it out and ride the wave of potential appreciation as the area continues to redevelop / gentrify). However, the inspection turned up about $16k worth of repairs. The seller agreed in a contract amendment to do some of the repairs, but ultimately failed to do even half of what he agreed to (and what was done was shoddy work). And he's not willing to hold up his end of the bargain. Now, I'm left to renegotiate or walk (do I have any other options?)

Now that this appears to be more like a rehab than a turnkey, I'm not sure what price to ask for in renegotiations. I know the golden rule (or guideline, depending on who you ask) is to purchase at 70% ARV - repairs. As a buy and hold investor, I don't mind going north of that 70% figure. From what I gather though it's not prudent to go much beyond 80%.

I suggested 80% ARV - repairs to my realtor. I actually kind of figured the seller, who was motivated to begin with, would be lucky to get that from me given that he's in breach, and looking at the prospect of having to relist the property in the winter months with the legal obligation to disclose all the repairs I've uncovered. My realtor though thinks I'm being unrealistic because the current market is a hot market. Is that true? If so, what is the right compromise?

Thanks in advance, 
Rob

I know that a lot of investors don't bother to repair a lot of the problems found in an inspection report. But how do you choose what to address and what not to? When I talk with the inspectors, naturally they tend to suggest repairing everything. As a buy and hold investor, my instinct is to address all problems in property that I acquire, but is that just wasting dollars?

I'm asking myself this very question again with a property I have under contract. Here is a link to the inspection report: https://dl.dropboxusercontent.com/u/105466347/insp...

It's a really long list, and I don't expect folks here to read through it all. But I'm curious if some of you could point out examples of items you would explicitly not bother repairing. (Note that the repair summary starts on page 56 of the pdf)

Thanks, Rob

btw, I just came across these comments in regard to decontamination:

The good news is that most insurance companies will pay for this under damage to the home. Also the federal government is giving a tax break of up to $1500 for increasing your insulation powers. And the power company will normally give you a credit of up to $400. What all this means is that you play the cards correctly, the insulation removal/replacement process may not end up costing anything.

Copied from http://www.allwildlifecontrol.com/InsulationRemoval.php. For what it's worth, the owner of that company was the guy I came to trust the most when I was gathering information on the subject a few years ago

Kim, I actually ended up doing nothing. However, that was because the deal fell apart. Long story with bizarre turns (details @http://www.biggerpockets.com/forums/12/topics/79584-hard-knock-1)

I'm surprised you heard from one of the exterminators that the openings didn't need to be sealed. As I recall, all my research at the time pointed to that being a must do. Otherwise the pests are bound to return, and the problem will persist. Did the exterminator explain why he didn't think the openings needed to be sealed?

How to approach the cleaning is not as black and white. Huge gray area if you ask me. I got so many mixed opinions (not just from investors, but from professionals and online sources as well). Frankly, I'm pretty sure at this point no one truly knows what level of decontamination is sufficient. Personally, I would have been sure to do some level of decontamination. And as close of escrow was drawing near, I started leaning toward the L3 decontamination (i.e. including full replacement of insulation). My reasoning was that the numbers for the deal still looked good taking the extra cost into consideration, and it would give me further peace of mind knowing I did as much as possible on a subject with so much uncertainty. With that said though, I'm almost positive the L2 decontamination (i.e. spray of disinfectant and cover with additional insulation) would have been sufficient (at least for the issue I was looking at). Ultimately, it's a personal decision (i.e. guess)