All Forum Posts by: Bryan Hartlen

We have a bay-side waterfront property under contract in Panama City Beach. This is a new market for us. Our current insurer only writes policies for < $1M. ARV on this property will be in the $1.6M range. Anyone have a experience with insurers in this area and/or for this amount? I have an inquiry into NREIG. Thanks, Bryan.

@Tim Silvers ask your title company if they offer an enhanced policy. For us it was only a couple hundred bucks more and it protects against mechanics liens (plus many other title defects). 

@Uendy Garcia in general $30k projected profit is pretty slim.  There’s not a lot of margin for error in your assumptions. One oh-$hit during rehab can eat into that very quickly. That said, a projected $30k return may be a great opportunity if the hold time is short, if you want to keep your crew/contractor (or funds) working, if there is very little risk in the rehab, etc.  It also depends on how conservative your underwriting assumptions are.  The more conservative the underwriting the more likely you’ll exceed the $30k return.

Quote from @Felipe Lecaros:

I have. It was my first investment in AL (Jan. 2022) and they are GREAT! Complete worry-free investment in Tuscaloosa. It cash-flows well and they are very responsive. I am thinking on investing with them again soon. 

Good to hear.  How accurate did you find their prospectus projections?  At what stage did you buy: in-process rehab or one that had completed rehab and was leased?

You will have line item end quotes from multiple GC’s; so you may not have experience but you will have data. Negotiating doesn’t mean just a lower price- in many cases it’s the mitigation and allocation of risk. Asking questions will help you both understand where some of these less obvious (but real) costs are allocated. And negotiation doesn’t have to be confrontational, and there is an art behind it. I’d be happy to discuss in more detail if you like.

Quote from @Bruce Woodruff:

Quote from @Bryan Hartlen:

you can always negotiate and see if they’re willing to discount. 

In my many years of experience, if a GC would even consider negotiating, that would be a huge RED FLAG. We all have our margins, our exclusive costs and our profit/overhead. People think we just add in an extra few thousand for negotiating purposes? No.....that's not how it works. I guess only other GCs understand how this pricing thing works....?

In our experience, we've almost always had success negotiating. And I'm pretty sure I understand how their pricing works. We understand that GC's need to make their margins and we want them to be around for our next properties. We're always looking for a long-term relationship. 

@Account Closed get multiple line item quotes and then ask lots of questions. Ask if the GC has any employees (or dedicated crews). Ask what tasks they handle and what tasks he farms out to other contractors. Compare the lines item pricing across your quotes. If on GC seems significantly higher (or lower) than the others ask why. It may be his pricing or it may be a difference in scope understanding. Whichever GC you decide you want to use, you can always negotiate and see if they’re willing to discount. 

@Benjamin Amaral, if you haven’t yet, you need to have a frank discussion with your GC. If you can come to agreement on how and when things will be done, you give him a chance to continue but you monitor progress closely. Any slips, fire him and move to one of the vetted GC’s.  If you’ve been paying him for work as its been completed, you can negotiate what if anything he’s owed for unpaid work and materials (or let him sue you). In parallel start talking to other potential candidate GC’s to see what their costs and schedules would be like (make sure you ask them how hard it is to transfer permits).  In parallel,

If you’ve been paying him some other way and you’d he behind, the decision can seem to be more difficult as you’d be in the position of having to request for funds back and/or suing him. But realistically, if the work isn’t getting done, you’re already in that position and generally dragging out the decision isn’t going to improve your situation.

I've read the discussions from 5 years ago.  I'm wondering if anyone on BP has recent experience (last couple years) with a Spartan Invest turn-key property purchase. 

@Hoa Nguyen it depends on your terms. Some HML charge you interest on your max loan amount from day 1 (they call this Dutch interest or loan) others only charge on funds actually drawn. If your loan is interest is Dutch (charged on max loan amount) you should sharpen your pencil and balance the cost of the overestimated rehab costs before closing - make sure you know how much playing it safe is costing you.

Regardless of the type of loan (Dutch or non-Dutch), HML's only provide rehab funds for work completed after some kind of inspection (in-person, photos). They call these draws. The max amount of the draw will be from your agreed rehab budget. Most HML will let you make draws less than budget and some will let you make partial draws (eg you have $6000 for new floors, you draw $3000 against the floors completed in half the property). Most HML charge a fee for each draw. So optimizing your draws will improve your return. If your loan is Dutch, there's no incentive on you to draw less than budgeted (you are already paying interest on the full amount). If it's non-Dutch, you'd typically only draw what you needed (especially if your lender allows partial draws). The other consideration for non-Dutch draws is if you came across an oh-$hit in the project that wasn't budgeted for. In these cases, you can use the full value of your budgeted line items to help offset the out of pocket impact of the oh-$hit.

At the end of the project when you close the sale of the property, you'll have to repay what you borrowed. Any ‘left over' rehab budget, doesn't matter you only repay funds received from the HML.