All Forum Posts by: Bruce Clark

@Jonathan Kelly Thank you for the insight. Your concerns definitely make sense. I see you are in Youngstown. I am not far from you. I invest in the Steubenville, OH/Wheeling, WV area. If you ever wonder this far south or need anything in the area, do not hesitate to contact me. 

I actually have an update on this deal.

So after discussing the deal with the contractor, he suggested an alternative deal. He indicated that if I put the money in, he would be concerned about the time it took him to finish the project. He essentially wants to work on the project in his free time or when his guys are down. He indicated that if I had my money in it, he would constantly feel pressured to work faster than he may be capable of. He didn't want this added stress for either of us and we agreed that delays could ruin our business and/or personal relationship. Again, he is a pretty honest guy. So he proposed the following.

I put NO MONEY into the deal. He covers ALL cost of labor and materials. We split whatever holding costs there are while its under construction - insurance, utilities etc. He finishes the house at his own pace. Once the house is done, I handle selling and transferring the house (I am an attorney, so I can keep closing costs relatively low). After we sell the house, we deduct closing costs and holding expenses. then he gets 65% and I get 35%.

Personally, I like this deal. 

My partner and I recently acquired an empty lot that is in a "downtown" area. The lot used to have a large commercial garage on it, but the garage burnt down and now it is vacant. Just blocks away from this lot, a local investor is currently developing a large industrial building into several high price (for the area) condos. With this in mind, my partner and I are thinking of building self storage units on our lot. We have contacted the City and confirmed that the zoning is fine, and the inspector actually indicated that the City would love to have the lot developed for storage (dont know what this is worth). 

We currently only have rental properties and have no experience with self storage. I am just starting my market research to determine if this idea is actually doable/profitable. I plan to research all storage facilities in the area. Im planning to research how many units are around and how many are actually available. (I have not done this yet). However, after I get these numbers, I am not sure how to analyze them. 

Other than this, I am not sure what numbers I should be gathering; what analysis I should be making; what considerations are important; etc.

Any tips, tricks, suggested reading, or advice for a brand new self storage investor would be greatly appreciated.

Thanks in advance.

Update!

So after discussing the deal with the contractor, he suggested an alternative deal. He indicated that if I put the money in, he would be concerned about the time it took him to finish the project. He essentially wants to work on the project in his free time or when his guys are down. He indicated that if I had my money in it, he would constantly feel pressured to work faster than he may be capable of. He didnt want this added stress for either of us and we agreed that delays could ruin our business and/or personal relationship. Again, he is a pretty honest guy. So he proposed the following.

I put NO MONEY into the deal. He covers ALL cost of labor and materials. We split whatever holding costs there are while its under construction - insurance, utilities etc. He finishes the house at his own pace. Once the house is done, I handle selling and transferring the house (I am an attorney, so I can keep closing costs relatively low). After we sell the house, we deduct closing costs and holding expenses. then he gets 65% and I get 35%. 

Personally, I like this deal better than my proposal. 

@Yia Her In Ohio (at least in the counties in my area), properties with delinquent taxes are auctioned by the county treasurer. The sale is published in the newspaper and various other places a few months before the sale. This gives property owners notice that their property is going to be sold. They have up to the day of the sale to pay the deliquent tax. If the tax is not paid as of the day of the sale, and someone successfully bids on the property, they lose their interest in the property. 

If you win the property, the property is transferred to you via deed signed by the Sheriff. It usually takes a few months to actually get the deed, but that is generally just the result of the time it takes the sheriff/county attorney's to prepare and file all of the deeds from a given sale. The big piece of information to be aware of is that any property you buy is subject to any and all liens, mortgages, etc. that are on the property, so you have to do a title search before bidding. 

@Yia Her I did not know that it was stripped down the the studs. I knew that it was on a relatively nice street and from the outside, I could see that it had a new roof and new windows. Based on those facts alone, I thought it was worth bidding on. I was the only person to bid, which was really surprising. Typically in my area several people would have been all over this property. I guess everyone else just missed this one. Every once in a while you get lucky.

@John Leavelle I am looking to flip the property generally. However, if the contractor is not interested in doing the deal, then I may decide the hold it as a rental. I will have to get the full estimate and then run the numbers to see if it makes sense. I have another rental in the area that rents for $650, so this would get at least that. 

@Yia Her thank you for the advice. I am definitely going to be meticulous with the due diligence on this deal. I will touch base with a result regardless. Thanks again.

..I can learn something (not sure what I did there)

@Luc Boiron my idea is to pay for materials only - receipts would be required. He would be responsible to either perform the work and/or pay for any subs that perform the work. He would not be paid for his time. Then at the end of the deal, we would split the sale price 50/50. 

I could probably finance the whole deal, but it might be a stretch, depending on what the total bid is. On the other hand I could easily come up with $20k or so for materials. This is why I am considering partnering with him. I wont make as much money at the end, but it will be easier to finance, I will have less risk, and I can learn on

I picked up a house at a tax sale for $1,500. It is a small 2 bed/1.5 bath. The owner before me was renovating but then just walked away from it. The house has a new roof, new windows, and new drywall in the living room. The rest of the house is completely gutted to the studs, but the bones are good. The estimated after repair value of the house is about $65,000. I have a few rental units but I have never undertaken this type of deal. My rough estimate to finish the house is between $30,000 and $40,000, but given my inexperience, I am not sure how close I am. I have a good friend who is a general contractor and also has an accounting degree. I have no concerns about his ability to accurately bid this job or his ability to complete the job timely. I met him at the house today. we did a full walk through of the house and we went over some ideas for a floor plan. He said he would get me a rough estimate in a couple days. Then a few hours later, presumably after he started realizing the value/profit that was hidden in this house, he text me and asked if I would be interested in selling it to his company. Rather than selling it to him outright, I would rather do the deal with him. First, I think I would stand to make more money, but more importantly, I would like to be a part of the project for the experience. My idea is to propose that I will finance the cost of all material, he provides all labor, and then we split the sale price. Again, I do not have much experience with full rehabs, so I do not know if this is reasonable for him or for me. Any suggestions on how I could put this deal together in a way that would make sense?

I picked up a house at a tax sale for $1,500. It is a small 2 bed/1.5 bath. The owner before me was renovating but then just walked away from it. The house has a new roof, new windows, and new drywall in the living room. The rest of the house is completely gutted to the studs, but the bones are good. The estimated after repair value of the house is about $65,000.

I have a few rental units but I have never undertaken this type of deal. My rough estimate to finish the house is between $30,000 and $40,000, but given my inexperience, I am not sure how close I am.

I have a good friend who is a general contractor and also has an accounting degree. I have no concerns about his ability to accurately bid this job or his ability to complete the job timely. I met him at the house today. we did a full walk through of the house and we went over some ideas for a floor plan. He said he would get me a rough estimate in a couple days.

Then a few hours later, presumably after he started realizing the value/profit that was hidden in this house, he text me and asked if I would be interested in selling it to his company. Rather than selling it to him outright, I would rather do the deal with him. First, I think I would stand to make more money, but more importantly, I would like to be a part of the project for the experience.

My idea is to propose that I will finance the cost of all material, he provides all labor, and then we split the sale price. Again, I do not have much experience with full rehabs, so I do not know if this is reasonable for him or for me.

Any suggestions on how I could put this deal together in a way that would make sense?