All Forum Posts by: Chris Luksha

Background ....

I have the opportunity to finally purchase my next home and convert my existing into a SFR. A friend of mine from teenage years (about 35 ago) is getting rid of his parent's home since his dad is going into long term care. The background is just to say it pays to always tell people when you are interested or that you are even on the lookout in general. I mentioned wanting to invest in the home over 2 years ago.

Anyway, he wants to sell me the home for $80 in order to help keep his dad out of medicaid for a few months. Because of this he is not willing to seller finance but is certainly willing to leave me anything in the house I might want to sell etc. (probably only about $3k in large woodworking tools and a small upright piano in great shape.)

.... End Background

In talking with home about creative financing he mentioned to me that when he sold his home just next door, he listed it for $175k and the prospective buyers came in and offered him $198k. In effect trying to over value the home to the bank as they were qualified for quite some amount so long as they had 20-25% down. When they did finally buy the house at the asking price of $175k, the bank supposedly gave them two checks, one they used to pay for the house, and one had back to the bank in some way for the down payment or the remodeling, he was not sure exactly what happened.  But the total amount the bank gave him was $198k

With that little bit of information, can anyone tell me what it was that home owner did? I don't know all the exact details. My friend has said he asked about it years ago and was given hard core "What they did borders on fraud" and hardcore "This goes on every day. Banks know what it is and wouldn't do it without knowing they were getting their money back."

Anyway - I would be purchasing the home as my primary residence, remodeling it considerably to fit my wife's desires, an then subsequently renting my existing home.  

This is all finally in the realm of possibility and my wife after many years is on board with the prospect of owning a rental property, so any and all guidance is greatly appreciated.  Thank you all so much!

Chris

Sales Price: $80k

3/1 cape with addition of garage and breezeway converted to kitchen and dining.
1212 sft

Town Valuation: $120k
Redfin: $149k
Zillow: $165k

Rehab costs : ~$25k to do what my wife wants. We can pare it down because it truly only needs cosmetics to start and I am a contractor so will do as much as am allowed.

Conservative ARV: $130-$150

Private sale

Sorry @Parker Fairfield I didn't see your response until now as I was on the road.  The meetings happen monthly at 6:30 to 8:00. or 8:30.  I don't know when it officially ends because I don't usually leave for some time :) You can get more info at www.nhreia.com  

I am an hour away myself.  I hope you made it. If not, there is always next month. It's a great resource. you can chat with @Matt Lefebvre. He can give you some good insight and would be a great resource for you as well in looking for some properties.

Blessings,

Chris

welcome Joe. Not sure of you've been yet, but the nhreia meeting is tonight at the best western in Manchester.  Check it out if you have time. Lots of good resources there as well.  Sorry so short, posting on the fly :)

Welcome Ronnie. I will tag along with Dieggo in offering up a set of eyes for you if needed.  I live local to Keene as well and am a local contractor.

One thing to keep in mind is the amount of lead based exterior painted buildings in the area. There are a few reputable EPA certified painters to help keep you out of trouble in that arena.

There are also the occasional wholesale deals around as well.

@Dieggo there is NHREIA in manchester every 2nd Wednesday.

Blessings,

Chris

@John McKinnon lead is a big deal yes, but as @Matt Lefebvre pointed out, it's a manageable one.  I can say for sure the the cost goes up considerably when you are forced to abate.  There is considerably more expense in abating because you have to deal with every item found and they will find many, and much more liability and precautions that must be taken. (decon units, showers, portable bathroom, endless reports to write, etc.)

The key is to treat things that cause the most dust or have the most attraction to kids, every time you turn over an apartment. Especially if you have an apartment that is appealing to a family of some kind.

Before reading the simple steps, know that I too am not a lawyer, or state inspector, risk assessor, etc.  I am giving basic ideas. If you want exactly what you need, you should call a risk assessor for each property.  

Some simple steps you can do help;

• Go take the one day RRP course nearest you so you can better understand the dangers and precautions needed.  You can be creative from there.
• Call a risk assessor. This could cost a few hundred dollars per unit or per building but you will get an itemized list of what is wrong and what you can do to prevent future issues.
• Another option for encaspulating your indoor window sills and aprons would be to just replace them. Especially if the sills are below 4 feet. Give yourself about 45 minutes to figure out he best way with the first window, the about 15-20 minutes each window once you have it figured out.  you can encapsulate the rest of the window trim, but you have technically eliminated the chewable threat.
• If you have wooden window sashes, you really should put replacement windows in. When you do that, you can save yourself trouble down the line by covering the inside casing with 1/4" luann prior to installing the replacement. (This means measuring the replacement 1/2" smaller in both directions, and may also require a permit because you are technically changing the size of your window.  But if you talk to your building inspector and let him or her know what you are doing, it probably wont.)
• If you are replacing windows, you should be sure to either put aluminum coil stock around the exterior trim or wet scrape and repaint the exterior trim.  You probably had to remove a storm window and that left behind a ton of lead paint chips.
• Wherever possible, if you have old solid doors that you know were hand made, covered in lead paint, just take them out where possible.  For example, exchange the closet doors with bifold louvered doors. That also gives you a chance to box in the old trim.  In other words, the trim may still be there underneath but no kid will ever be able to chew on it.
• Put quarter round over all the tops of your baseboard, This does not remove lead, but it greatly hinders a child from chewing on it.
• If you have carpets in the apartment, get rid of them.  They collect lead dust.  
• If you want to make your tenants feel special while also helping them out, buy them a HEPA home vacuum and offer to replace the filters every quarter or something like that.  Make it a welcome package or "Thank you for being a long time tenant" gift. However you want.

None of these things are guaranteed to prevent anything, just ideas to get you thinking "How can I help my tenants and help myself at the same time?" Please remember you need to get yourself trained in RRP or hire a licensed professional to do any work that involves window/door replacement, or disturbing more than 6sq feet indoors and 20sq feet outdoors. This keeps everyone safe and trash properly disposed of.

Also any of these items have to be for the purpose of remodeling or renovating.  If your intent is to actually abate the lead, then you are required by law to hire an abatement professional.  So put in a place a "Turnover Renovation and Upkeep Plan" that includes items to help you prevent future poisoning, and stick to it.

I would copy and paste Matt's last paragraph here.  I am not a risk assessor or lawyer, but I have personal experience and other resources so drop a line if you want to talk.

Chris

I was trying to share the report link on this comment but it didn't work.  In case it may in the future, here it is anyway...

https://www.biggerpockets.com/calculators/shared/562688/af4545e0-9df8-49a1-8b52-1fb798af2b03?share_on_forum=true

Hi all, 

Recently I did some work for an out of state landlord and asked him if he wanted to sell his SFR rental property. I was looking for some input from those that know better than I. Here are some basics on the property.

• SFR Rental
• Long term (3yr) tenant pays $1350/mo + all utilities (tenant is local school superintendent)
• Owner possibly refinanced at $100k in 2003
• .26 acres
• 2 /1
• 1 1/4 story cape
• Waterfront
• Detached 1 1/2 story garage
• Town Assessed Value: $122,300
• Actual resale value: potentially around $150k 
• Deeded access 

I have put in 10% management, 8% vacancy, and about 6% others (capex, maint, etc.)

So here is what I would like to send his way for a seller financed offer with no money down:

• Seller financed at 5% (30 yr amortization) with a 5 year balloon payoff payment
• Balance payoff payment at 5 years (~$91,829)
  • Early payoff <24 mos = 10 points ($10000)
  • Early payoff >=24 mos <36 mos = 8 points ($8000)
  • Early payoff >=36 mos <48 mos = 4 points ($4000)
  • Early payoff >=48 mos <60 mos = 2 points ($2000)
• Option for buyer to extend payoff date up to 15 years (within 6 months of payoff date, at a cost of 2 points.)
• Buyer to pay all title, recording, transfer fees etc.

Total Interest Paid (If paid in full at five year mark):$24,038

Total Sales Price with interest (If paid in full at five year mark) : $124,038

Keeping in mind that we make money on the purchase, I would like to offer a fairly low purchase price that would help me get my foot in the door, and continue to give him monthly cashflow and delayed capital gains.  And oh yeah - I am looking at this solely as a buy and hold. No flipping unless some crazy offer comes up.

So what are your thoughts?  Am I crazy?  Too high? Too low? I figured my numbers wrong?  Thanks all in advance!  

Chris

Welcome @Jordan Kim!  I will second Tyler's comment about visiting the NHREIA meetings to meet some folks.  If you didn't make it to this last one definitely make it a point to go.  I live an hour away and try to get there whenever I can.  The connections you will make will be invaluable.

Great job Jason. $70k in May. There were a couple back then in that range in Keene. Nice going.

Now you have a start on the rest of them. I am in jaffrey and would love to grab a coffee with you some time. It's hard to find people in our area sometimes. Even the local reia is over an hour away.

Great job!

Chris

Hi All,

A financially sound deal has come across my plate recently and I am looking for some advice. 

Last week I came across an off market deal that seems to work quite well as a flip.  The owner is willing to float the note on the sale price if I get the rehab $. However conventional financing (2 local and 2 large banks) will not give me the cost of rehab while I am acting as the GC. because they have been left with too many poor properties in the past.  This is course how I make a living every day, as a GC and hands on carpenter.

Here are the basics of the deal:

• sale price $95k
• rehab cost ~ $60k
• ARV ~ $210k

As I mentioned, conventional is an uphill battle that I am not looking to fight currently.  When I first mentioned partnering on the deal, the seller was intrigued.  So when I came to him today saying I have tried conventional and need another couple days to look at family, he brought up the idea of a partnership again; this time willing to foot the entire bill.

Too good to be true right?  Well I have been digging, learning, watching, visiting, analyzing, listening and talking to people for a year and a half now. it looks like this could be the springboard.

So with the background there, I would like to ask for your input.  The seller brings to the table the property (with no debt service) and the rehab budget. He is also in need of a GC else he will just dump the property for what he has put into it. I bring the skill set, the time, the desire, and the team to get it done.  We both want to make money on the tail end.

If you were the seller - with all that he holds in his hands - and the desire to either sell it or get someone to 'just get it done,'  what would want from me the GC in order that we would both split the profit on the back end? He knows I am looking for my first real deal and he wants to help me get off the ground.

I am willing to make some concessions in order that we split the profit in some manner knowing full well that I have no skin in the game currently and the rehab would in fact be giving me work for the winter months.

Currently work is slow and steady (tis the season) however I am the sole bread winner in a family of five so I need to consider the impact on my family should I be willing to give up too much. I am eager to make this work but also I know he would love to have GC just get it done. (He get into another business venture that is taking his time away from flipping the home himself.

So here are the beginnings of what I was thinking:

• He is footing the rehab bill.
• I would potentially foot the bill for my salary for length of the project.  (This would entail unsecured or family loan on my part and also take away from the $60k rehab estimate above.)
• A contract that says upon sale, sale fees are paid as appropriate, he gets paid back his investment amount, I get paid my investment amount, the remainder of the profit gets split between us in some amicable percentage.

Another thought would be that he might simply foot the bill for it all including my work and I just ask for a percentage at the end to cover being the GC. The pay I got during the project would only be for my 'laborer' hours not GC hours.

I am not trying to be skimpy, but I am trying to balance his need for a GC and my need for experience with feeding the family.  I don't mind paying for my education :) Just not all at once if I can avoid it.

So I am looking for thoughts, questions, suggestions, reasonable percentages etc.  This is his first flip but third property (buy and holds were his previous efforts.)

Thank you all so much!  I look forward to some good discussion and apologize for the long winded explanations. 

Blessings,

Chris