All Forum Posts by: Chase Fender

Atlas Shrugged- Ayn Rand

This book eerily mirrors some situations going on currently in the US. People wanting things given to them, and having twisted sets of morals. It encouraged me to produce more than I consume.

I recently purchased my first deal back in October. I made plenty of mistakes, but I will save those for another post. The biggest issue I have run into is with my general contractor. I found this contractor from the wholesaler through whom I bought the house. He marketed himself as an investor-focused contractor and I liked him from the beginning.

He had recently purchased the company and it appeared that this was his first time running operations (should have asked more questions here). After discussing pricing and scope of work, he explained that I would pay for each phase of work as it was about to begin (this should have been a huge red flag).

It is now February and the house is still not complete. I noticed the expected finish date kept pushing and dove more into what was going on. As the story goes, his business partner had been embezzling money from him. At the same time, his daughter was admitted into the ICU. He has now informed me that the company has been shut down and he may soon be declaring bankruptcy. I am estimating that there is still about $5500 worth of work to complete the project plus the dishwasher, refrigerator and some bathroom items (that I have already paid for).

The gentleman and I still have a relationship and he is paying for a guy to come work when he can afford it (telling me he is building mobile homes for $12/hr during the day and managing the night shift at McDonald's to cover bills and my work). Although the gentleman got himself into this situation, I am at fault here for letting it happen. I threatened that I would take him to court over this but I do not want to screw over his family, plus I know he doesn't have anything anyways. He mentioned that he was four months behind on his rent and I told him I was willing to let him and his family move into the house so he could work on it as he lived there, hoping to would get done quicker. He declined, saying his mother in law had helped them out with some rent money. But he mentioned that the gentleman he had been paying to work on the house would be willing to do this. The issue is, I do not know this guys as well. There isn't too much work left to do, so they would move in and out quickly or would be expected to pay market rent once the project is finished, which I do not think he and his family could do.

My concern would be that if I let them move in to finish it, then I could not get them out after and would have a lot of legal issues. I understand that this gentleman had personal reasons for not wanting any form of law to get involved, but that still does not convince me I could get him out of the house when I want him to.

Has anyone ever dealt with an issue like this?

In the past few months I have been hunting for my first deal. I have found a good wholesaler who has been a great help. Yesterday, I attended a showing/bid for a house. It was listed at $175,500 and had ARV conservatively at $260k. I had repairs at $35K and closings/taxes at $18K. My goal was to make $18-20k on the deal so I felt comfortable going up to $189k if the state of the property was what I thought.

There are a lot more details to this story, but in the end, although it may have actually needed around $40k in repairs, I still felt comfortable purchasing at $187k. The frustrating part came in when I lowered my number to $185K based on the reaction of a contractor who walked the property with me. He had done a few investments in the past, but sounded like he had been burned a couple of times. In hindsight, he may been a bit more conservative than I am. 

$187,800 ended up winning the bid. Either way, I would not have won it. But I did learn a lesson about sticking to my guns. Has a similar event happened to anyone else? What is the smallest amount of money you have lost a bid by?

It is a very unique situation, indeed. I gave the option for % returned on investment or % of profit. They understand that the project may not make money and are willing to take that risk. 

I suppose I could rephrase the question to ask "Based on the commonly used 'interest rate' payment structure, what percentage of your profit do you end up paying private investors?" I understand that nobody really calculates it like this, but its worth a shot.

I have recently made an agreement with a private money source to fund my house flipping endeavors. They have decided to take a percentage of the profits instead of a percent return of money invested. As neither the funder nor myself have done this before, we are trying to decide how to split profits. Has anyone been in this situation or know what some common profit splits are?

Eric,

Yes that is very understandable. As expected as this response may be, my intention is not to pull one over on him. He is currently investing in other forms of real estate, so the proverbial door has been cracked in the sense that he not only believes in real estate, but has expressed willingness to invest when the dollars make sense. So, since I know he has the funds, I 'd like to wrap my mind around how it can benefit both of us. At the end of the day, he is a business man. And a successful one at that. If the dollars dont make sense, I know he will not be involved and I wouldnt expect him to. 

Hello,

From this post I hope to find resources and material on convincing my father to be a funding partner behind future deals. He has a couple hundred thousand dollars in cash and has plenty of exposure to real estate as he and his brothers hold $30+million in commercial real estate in my home town. Having said that, he runs the other family business and is not hands on with the real estate.

Now, my father has expressed willingness to let me offer cash on my first property (whether he buys it and I buy from him or he transfers me the funds and I pay him back, we have not decided the best way around this yet). But what I am most looking for is feedback on the resources and knowledge from the standpoint of already having half a million in cash to lend. What sort of partnership can we create where I benefit from having access to the cash and he gains higher than market returns? Id like to go to him with a pretty thorough understanding of the ins and outs of how we can both be better off with such an agreement.

Thank you,

Chase

Emily, Michael, Jay-

First off, I really appreciate your feedback. It was not only extremely helpful to my situation, but confirmed the great reputation of this platform and the people contribute. I have a quick update to the aforementioned situation:

My wife just received a call from her dream employer offering her dream job in the area we currently live in. Now, this area is much more expensive than the area we intended to move into and, although I have not put the hours of search in here, I do not believe there will much opportunity to buy here. I believe we will still move to the Ft Worth area eventually, but now I have another ~9 months to keep searching (9 months because her job offer is only that duration as she just received her Masters in Speech Pathology and has to work this supervised position before she can move on to other SLP jobs).

Given this extension of time, what would you advise someone in my position to do over the next 9 or so months to set myself up for success when the time is up?

Sub-Question- Is there any advise for the situation where we will most likely be renting an apartment for the next year while Im searching for a duplex? What happens if I find a great deal one or two months into my year lease? 

Hello all,

This is kind of a "two-fer" as I am not only new to BP (this being my first post) but also have a big issue I am struggling with.

My wife and I are soon approaching the end of our apartment lease, and are looking to purchase our first home. I have been dead-set on finding a duplex to house-hack in the Ft Worth area, but have not found something that meets our criteria. We both work in the area, and her parents live near as well. We have gotten their clearance to move in for a few months as we continue our search, but it is something neither of us want to do for long. To get to the point, I am feeling alot of external pressure to give up on the house hacking "dream" and just buy a single family home to live in. 

Should we wear out our stay with the family, and even potentially rent a house for a few months until we find a good deal on a duplex? Or fold and buy a single family and attempt to increase the property value and rent it out after a year or two? (My fear with this is that its easier to convince a spouse to move from a duplex to a single family than the other way around.

Thanks in advance,

Chase