All Forum Posts by: Rob C.

Thanks @John Weidner and @Luka Milicevic for the replies, and sorry for the delayed acknowledgement on my end. I've decided in line with John and a few others here to address the vast majority of the items in the inspection report. Luka, I appreciate your input though too, and can't really disagree with results- I'm glad to hear your choice has worked out well for you two years in. And I do agree that inspectors are uber-conservative for liability reasons.

For those that might be curious, I've pasted below the scope of work that I'm anticipating to have done. I'm surprised that so many folks on here said the work could likely be done for about $5k. Is that perhaps for work by unlicensed / uninsured subcontractors? I've opted to go the general contractor route for most of the work (except for mold and tree removal) as opposed to managing a bunch of subs myself, and the bids I received have been over $10k (not including the mold remediation and tree removal, which appear to be about $4k and $2k respectively). I budgeted about $18k for the rehab. Of course, it would be great for it to come under that number, but I'm not counting on it. I'm curious to hear if others say that cost estimate is crazy after reviewing the scope of work below.

Note the numbers that follow in parentheses reflect the corresponding problem in the re-inspection report expected to be corrected. The re-inspection report was done after the seller attempted to have some items corrected (but did a miserable job). It can be found at https://dl.dropboxusercontent.com/u/105466347/713bonniebrae.pdf

PLUMBING: Replace PVC piping connections to water heater with copper (37), repair or replace damaged ice maker (45); replace damaged dishwasher hose (48), replace leaking pipes under sink (49); replace sub floor under tub and toilet with accompanying tiling to area floor and address relevant leak(54); replace flexible drainline(64); Install missing bathtub drain stopper (62); add backflow prevention to outside spigot (91)

STRUCTURE: Replace hurricane straps with approved nails (71); reclean ductwork (74); extend gas fired flue (86); Remove standing water; dig vent wells and/or repair basement walling etc to stop water entering crawl space (87); insulate water pipes in crawl space (92)

ROOF & GUTTERS: Replace damaged duct end-cap and cover (10); Add downspout extensions to divert rainwater away from house: Add matching gutter extensions to extend from roof into gutters; Clear moss from roof (20); Add splash blocks and diverter pipes away from structure (14); Replace rain boots and do remedial roof work(13/15); align gutters properly and renail to fascia for correct flow(16); extend downspouts into gutters (18), clean out downspouts and gutters (19); repair leak point (70)

ELEC & HVAC: Install 1 carbon-monoxide detector in hallway near base of stairs (27); Install balance of internal coverplates as well as exterior outlet cover (28,29); Make good loose light fixtures (30) and attach faulty dishwasher bracket (46), replace HVAC filter (77)

INTERIOR: Remove old or molded caulk and silicone to tile in bathrooms (58,59,61,63)and and kitchen back-splash (50). Remove broken or thinning grout to grout lines. Re-apply grout to areas requiring (shower corners and floors, mostly) and then using colored silicone to match, finish off all areas requiring soft joints.

TRIM: Adjust all interior and exterior doors to latch (80, 84); repair all windows for freedom of movement (81); Replace broken window to kitchen (81)

FRAMING: Repair over-notched flooring joists (89)

EXTERIOR: Remove soil from wood contact (4,11)

PAINT: Touch up baseboards after all polly work, walls and doors.

ATTIC / PESTS: trap existing rodent infestation using cages, clean out all contaminants, seal off entry points (68)

GROUNDS: Replace rotted wood (2), Add drip edge and replace piece of damaged wood behind HVAC unit (6); replace rotted corner boards (7); replace damaged siding and paint, as well as siding screws and loose soffit (9)

Thanks for the response @Account Closed, and apologies for the delayed acknowledgement. Yes, it's an Oak probably about 30 inches diameter and maybe 3 stories high at the moment. Probably about 20-30 years old. I did quite a bit of research on the subject, and talked to a couple different arborists, and it sounds low risk. Yes, the foundation is visible from the crawlspace, and my home inspector didn't recognize any problem with the foundation. Neither did the other arborists. I'm planning to have it removed for about $2000. 

For what it's worth, in my original post I had said I didn't think it would be possible to tell if there are any foundation problems until after the tree is removed; I've since learned that's not the case. Removing the tree won't reveal any more signs of foundation problem than is already visible. If any unforeseen complications arise, I'll follow up on this thread for the sake of others curious about the subject in the future.

thanks again, Rob

There is a tree within five feet of a property I have under contract. It's got a noticeable lean to it and the unanimous advice I've received is to remove it. However, what is more concerning to me is whether it is impacting the foundation. From what I've learned so far that won't be known for sure until the tree is removed. Does that sound right? The home inspector wrote in his report that it could be affecting the foundation given its proximity, but when I spoke with him he said that there were no visible signs of a problem and it was probably not much of a risk. He did suggest that I have an arborist take a look though. So I had a couple arborists take a look. One said there was a 50/50 chance it could be affecting the foundation. Needless to say, that was rather alarming. The second didn't give a percentage, but thought that it was not a problem. And for what it's worth the general contractor I'm working with said that the foundation seems fine to him. Is there anything else I can do to be more certain? Do any of you biggerpockets veterans have any experience with this sort of thing? I'm having a hard time judging the level of risk involved here

Thanks

Rob

Thanks @Robert Adams for the follow-up. That is helpful to know. Yea, I wouldn't feel comfortable buying at 90% in the current Atlanta market I'm targeting, but I do think over 70% is more than justifiable. And I can certainly see how flippers still made money at 90% in the crazy boom days. I had my realtor proceed with sending the amendment at a figure I think is equal to 80% ARV - repairs. Awaiting the seller's response at this stage. Thanks again, Rob

 @Cody Kauzlarich, thanks for your comment. I suppose there was some miscommunication there. I understand that sort of thing is a cost of doing business. And it's not enough to influence my decision to move forward or not. I was just expressing my frustration over the current rules/system, which basically allows a seller to get off scot-free when they default, but buyers forfeit EMD.

Thanks @Jeff B.. Do you mind elaborating on how you arrived at the conclusion it is cash flow negative? My calculations assuming $1250 rent, $125,000 purchase price, and financing (i.e. cash-out refi bank loan) @ 4.625% with 25% down yields about 7% cash-on-cash return. Can you help me understand what I might be missing? thanks, Rob

Thanks for the tips @Jerry Bruckenheimer. I see how that approach would work for a DIY flipper that tackles repairs on their own. Do you ask your contractors to take a similar approach, and just see what scope of the work they decide on?

thanks, Rob

Woops, almost forgot to address Bill's post. @Bill Florence, You've got some good questions. In fact, one of them is the topic of another thread I started: https://www.biggerpockets.com/forums/67/topics/248.... I'm not sure myself which repairs are necessary, and which are not. 

Good point about making sure the title company does a thorough job. How do I make sure though? This is not an area I'm as well-versed in. Are there certain things I should ask the title company for? Or should I just carefully find a way to ask them to make sure to be thorough (i.e. without sounding insulting). All they've really told me is that title is clear. And my understanding is that title insurance will cover me in the event that problems arise after the fact, correct?

And just to clarify- although my realtor has different opinions than I do on this matter, I'm certain she will submit any offer (or termination) I desire. She's a good agent in my opinion, and I respect her

thanks, Rob

Now that I'm through with the dayjob workday, I just wanted to circle back and respond more personally to some of the above posts that I didn't have time for earlier. 

@Charlie Fitzgerald, you're right about the owner being ignorant of the deferred maintenance. I gather he was pretty much an absentee landlord... Would you be willing to share your fundamentals, and/or whether those ever shift based on market dynamics as Robert Adams suggested can be necessary?

@Leigh C, Thanks for the clarification. I understand your position better now.

@Jeff B., May I ask what makes you suggest walking away as opposed to trying to renegotiate the price to make it a deal (i.e. perhaps even a lowball offer)?

@Robert Adams great insights with regard to markets accelerating in appreciation. May I ask how you changed your fundamentals during those boom years in Vegas, e.g. what %ARV you were targeting before and then during?

Thanks to all who have contributed to the discussion. I'm sure this is valuable to a lot of the biggerpockets community beyond just myself. 

Thanks again, Rob

Thanks for the continued discussion everyone (@Charlie Fitzgerald, @Leigh C, @Jeff B.). Really good feedback. All of it. I agree with the thought being echoed that if I had fundamental purchasing criteria established that would be saving me a lot of headache. I think part of the problem is that I'm interested in a couple different categories. I'm willing to buy turnkey properties @ 100% ARV that cash flow in markets experiencing redevelopment (i.e. higher chance of appreciation). I'm also willing to buy wholesale properties at a discount, but admittedly don't have a hard threshold on what that discount should be. That is also one purpose of this thread, as I hope to get feedback from all the experts on this board to help me determine and cement the threshold I'm willing to buy at. I started in on this purchase with the expectation that the property was turnkey, so I offered full asking price (what appeared to be just slightly under market, let's say 95% ARV). However, now that it appears there is work to be done, I'm not comfortable taking the property on at the same price less the amount for repairs (i.e. 95% ARV - repairs). Of course I want to be compensated for the time/effort/$ that goes into those repairs. Not to mention there is risk associated with some (e.g. water entry / mold in crawlspace, tree adjacent to the house which could affect foundation despite no visible signs, etc.). The question is what % ARV (minus repairs) is a reasonable one, particularly in a quickly appreciating market. And I understand that is a personal decision. However, I'm interested in continuing to hear where others stand on the issue to help shape the decision I make now and going forward.

Thanks again, Rob