All Forum Posts by: Bryan Hartlen

@Kyle Geoghagan that is some story. I’m assuming that there were no visual signs of shoddy workmanship. Other than confirming the permitting which you noted, I don’t know that there’s much else you could have done.  It sounds like you got caught with every bad bounce possible on your purchase. You made some risk reward decisions that didn’t go your way (eg not scoping the sewer lines).  

When we buy a home for ourselves:
- if it has been flipped, we ask for the addresses of previous flips and contact the homeowners
- we always get a home warranty as part of the sale.
- any indication of mold needs to be remediated as part of the sale (I live in AZ and invest in AL so I don’t know if this has the same level of concern in damp FL)
- we always inspect required repairs (ourselves or pay the inspector to go back) prior to closing

Anecdotally, same applies in Phoenix. A fellow investor was working on a MH. The final touch for his property to qualify as a SFR (and SFR financing) was adding a portico / cover over the front entry way. So the assorted options that @James Hamling mentions can be head scratchers.  You need to read the regulations for your area. 

@Payson Kelley - that would work if the contractor agrees…. A couple potential gotchas to look for / discuss. Make sure you know how having him on the note will affect your holding costs. Many (but not all) contractors are living paycheck to paycheck and may not help you in acquiring capital and they may not be able to float the entire project's effort without some cashflow. And unless you trust him 100%, you'll still want to work out how to handle payments for materials and subs that will be required in advance of draws (my partner had a situation once where his JV contractor had subs pad their invoices and then took a kick-back).

@Payson Kelley , the comments above are all solid so I won't repeat them. I'll try to add points to consider that are specific for JV'ing with contractors. We invest out of state and now JV 100% of the time with someone local. It's most frequently a realtor but we are currently in a JV with our contractor.

Is the contractor going to do the work at cost in return for his share of the profit? Is he going to manage the cash flow (advances and payments) to his subs and for materials? I assume that you trust the contractor (otherwise you why would you JV) but you should have a check and balance over his costs.

- Penalties for late delivery or cost overruns may not be the answer. In many cases they’re unfair to a legit partner (oh $***** happen in every project) and could get to the point where the contractor has little upside motivation to complete a project.
- Monitoring (or even controlling) payments of rehab expenses will provide visibility into costs but can be a significant time drain for you.

- if you will not be able to visit the flip yourself to monitor progress (schedule and quality of work) then I would highly suggest you find away to have someone you trust monitor the work on your behalf (realtor?).

- What are your options to unwind the JV if schedule, cost or quality of work isn’t being met?

Other rental strategies typically have higher returns but require more work and can be location dependent:  short-term (by the day aka AirBnB) and mid-term (less than 12 months targeting traveling nurses and other workforce labor).  You’re in Tampa which could support both depending on the property’s neighborhood.  Renting by the room can also increase returns.  Lastly house-hacking…. You live in the preoperty with roommate(s).

@Josie Stephens What are you planning to do with it: rent or sell?  Either way check your comps. Generally, an extra bedroom increases home sale value. But you need to make sure that your market has demand for 5 BRs.  5/2 is an odd configuration for most markets (you’d usually have more baths to support larger families).  Also need to make sure that you’re not sacrificing other important features for your market (eg larger kitchen).

If you’re planning to rent then the extra BR could be a bonus especially if you’re planning to rent by room (like a university / college market).  If the target is standard LTR then again you need to consider many of the same considerations you’d have for selling the property.  

@Monish Anand - you can get STR demand numbers from companies like AirDNA (and similar). I also believe there is an STR focused forum here on BP that I would expect to have more STR specific resources and experiences that could help. You could also engage a professional STR management company. There analysis would provide projections on occupancy and avg rates and they would most likely be able to assist with trades to complete your rehab. Of course this would come with fees but you'd have more data to make your decisions going forward.

Holding costs can be killers. DOM is a downward spiral on ARV and holding costs.

We’ve started to add an extra 3 months into our holding costs even in neighborhoods where inventory is moving well.  It’s become hard to predict if/when rates will change, if/when buyer sentiment will cool because of world affairs, if/when etc etc. We’re also sticking closer to average properties within their neighborhood to reduce risk in our ARVs. The hardest part for us is initial pricing - you created a quality product and want to get top dollar so the temptation is to push the listing price.  In post-mortem analysis we’re generally better off pricing a little below ARV, generating high demand and selling faster. 

We use https://biginsurance.us/ in AL & FL (I’m pretty sure that they’re nationwide)

@Catie Fihn, the wholesale value will be the price a flipper is willing to pay. You do your same analysis as you've been doing as a flipper: Price = ARV - Rehab - Holding - Profit). That's your price to flippers. You may need to adjust the price up or down depending on the profit targets your investors look for but your familiarity with doing flips should make this an easy exercise for you.