All Forum Posts by: Bob Ebaugh

That's correct, but best I can tell now, anyone not already part of one of the lawsuits is SOL.   The person we purchased from looked around with a lawyer, the developer was out of business and the class actions closed to adding new litigants.

@Sandra Gibson, This particular CDW example was a shame to have to demo.   You really could not detect the presence of CDW until you looked at the copper ground wiring or air conditioning evaporater coil, then it was clear, but really in now way impacted the livability of the unit.   No odor at all.   But the previous owner had to disclose it since she knew based on an inspection it had CDW.   And to sell at market, it has to be remediated, unless you find a really silly cash buyer.   But there is no way I believe the the property appraiser would have declared zero value for the building on this one.

I personally hope that for some of these milder cases they will determine the out gassing from the drywall stops at some point.   Makes sense, since the evidence is humidity or moisture is what reacts with the drywall, but at some point whatever the flawed content is in the drywall would be exhausted and stop reacting.   But some lab/chemist smarter than I am needs to prove this is more than an educated guess.   The young person buying this in 2009 did all the right things, large downpayment, current on her mortgage and had to write a 30K check to the bank to sell it to me...unlike many of the others in this complex that are in or have been foreclosed.  Because it's a mild problem, many are in denial until it comes time to sell.

Tax wise it was never my personal residence, so I don't think I can claim the tax relief.

@Wayne Brooks,  It still worked, but did a full replacement of the AC, new indoor fan/evaporator and new outside condenser.

@Sandra Gibson, It would have been deductible for the person I bought it from, if she had completed repairs.  I don't think we can deduct it, we purchased with full knowledge of the problem.   Tax wise, we are "dealers" on our flips and I don't think this will be deductible for us.   But if there is a tax expert that disagrees, please speak up!

Anyone can sue you for anything anytime.   That said, in Florida, I use licensed GC's and other contractors.   The GC's can't generally pull a permit in FL without their workers comp on file in the building department.   I think you are OK if you pay the licensed contractor.   If you pay the workers directly, then all bets are off.

Hopefully someone from Washington will chime in, workers comp laws varies a lot from state to state.

We've been using wood look tile in a couple of our rentals.   No complaints and we think it looks pretty good.

We expect to close in a couple weeks on our 2nd flip, a 2400 sqft 3/3 Townhome in Tampa. We purchased this via the MLS from the original owner of this 2009 built home for $115K. Yes 2009...conventional wisdom would say defective or Chinese drywall (CDW) installations ended in 2007. Not so.

We were out looking at property more like our first flip, the rennovation of a home in the Historic Uptown section of St Petersburg with our realtor.   Our agent mentioned this property, his listing while we were out.   After I got home, I called a couple of my contractor friends to get pricing on hanging new drywall.   Armed with that, some basic research on CDW, I created a complete remediation estimate and made the offer.   At this point...I hadn't even seen the property, all I had was my realtors description of the property and his estimate of resale value and my legwork so far.   This was something like the 10th transaction (most others were buy and hold) with this realtor and he was an old friend, but he very much a part of my trusted team.

The offer was accepted, and we closed about 20 days later.   The contractor started remediation the same day and we finished 10 weeks later.

I decided early on to follow the current Consumer Product Safety Commision guidelines for remediation.   They seem to be the most recently updated, and recent changes to them like removing the requirement to replace all wiring based on Sandia Labs analysis of the impact of CDW on building materials made sense in my opinion.     Earlier guidelines and still followed by some, came from a Federal Court in Louisana, suggesting far more remediation.   During the project, I met a couple other guys doing similar projects, one was doing board by board X-ray testing and replacing only those determined to be defective.   I'm not sold on that yet, so we replaced every board in the unit.   Absoluety every one.   We had hoped to salvage the wet board in the baths, but found tile layed on CDW and replaced those and the wet board too.   We found CDW everywhere, ceilings and supposed "firewalls" in the garage where there should have been 5/8 board, but wasn't.

This isn't a complicated rennovation, just time consuming.   You have to pull out everything, demo the drywall, hire a drywall crew to hang new drywall, then put everything back and paint.   Beyond that, all electrical outlets and switches must be replaced, tile flooring can be cleaned, but carpet has to be replaced.   Hire an insulation contractor to replace the attic insulation.   We had to retile the baths and elected to replace the air conditioning system.

Under contract now at 205K, after its all done, we should net about 35K.   Put a full estimate together before you tackle one of these, the new drywall cost was substantial at about 10K, but represents <25% of the total cost.  If we did these all the time, we might shave 5K off the cost and 2 weeks off the time, but more I think would be wishful thinking.

We did full disclosure during the sales process, even did a write up of the process with before, during and after pictures documenting the renovation.   It's a good time now in the market, but we had lots of showings and a contract in about 15 days.

Hope this helps anyone thinking about tackling one of these.   Will answer any questions I can.

Bob

Pinellas County Florida, St Petersburg city limits, so not your market. I purchased a property from another investor in a market selling for far more $$$ per sqft than I paid. But unlike the higher priced properties, this property, a duplex, was multifamily and sold based more on return, than the SFH in the area based on size.

I was able to negotiate with the property appraiser for a significant (10-15%) reduction in assessed value through the property appraisers office.   Some of this was clearing the assertion that the property appraiser made that the sale was unqualified, ie. not an arms length transaction, which it truly was.

I'm expect much depends on your locale...but here at least...I found the county officials willing to listen to reason.   Even before a formal appeal.   But I did hold that in my back pocket, and would have done so, without the relief offered by the property appraiser.

@Bob Ritner 

None of our properties are in what I would call a battle zone, but some are close.   Some of that is this area, $400 a SqFt property can be only 4-5 blocks from $100 a foot neighborhoods.

Florida is a service based economy, not a lot of traditional working class neighborhoods like there are in the rust belt.   Florida and transient seem to go together, although there are exceptions, we moved here in 1985 from and never looked back.

Good Luck!

I can only speak about St. Petersburg. In the last 12 months we have purchased 9 properties that would meet your criteria. 1 Triplex, 2 duplexes, and the rest are SFH, we think B grade. It's too early to talk about actual NET, but we expect to do a little better than your 7.5-8%, but we do our own property management. With property management, it would probably be a little below your expectations.

There is lots to like about the area, vibrant downtown revitalization essentially complete, people moving to get close to the activity, vacancys rent in less than a week in our $750-1000 price range.   But we could be a bit late to the party?   Only time will tell.   Also be prepared to deal with our higher cost of property insurance, should you want to insure.   All of ours are out of flood zones, but the windstorm is still very expensive.

Best Bob Ebaugh

Well... an update to this thread....

It closed today at $174,900, basically netted us about 40K.   We feel extremely lucky for a first flip.   I am really uncertain if we can duplicate this one.   We've been looking for a month or more for the next opportunity, and come up with nothing we feel confident about.

My advice based on this one is it will be clear to you, not hazy when you see a flip opportunity.   I saw the original bank listing and said it must be trashed (or a typo) for that price in that neighborhood.   We looked and began to understand why.   But our friend and GC we brought over indicated the issues were mostly cosmetic and could be fixed.   We saw the possibility, worked out a budget, stuck to it, and took a chance.

I hope everyone gets the same opportunity!

Best, Bob

The folks in the St Pete area that made this work for us:

Ron Puckett of Ron Puckett Construction (GC)

Rob Van Stronder of Keller Williams  

David Kweller of Kweller Mechanical (air conditioning)

Jillian Biltz of Urban Upgrades (colors and interior design)

There are many others who helped along the way.   But I wanted to give credit to those who went the "extra mile" to make this work for us.