@Account Closed What I haven't seen anyone mention here is this is a great opportunity. This is a house with $400k in equity built in. If your dad is on board with your investing, you can pay off Mom and take 1/2 ownership of the house. Then take a HELOC for $380,000ish (80% of the equity) and double your liquidity to buy small multi-families.
Then buy a multi-family (for cash) and use the income from the rentals to pay the HELOC until you can refi the multifamily and pay off the HELOC. (BRRRR it.) You can essentially use the multi to pay off Dad's house so that he can not have to worry about a mortgage for the rest of his life. Have him write a will leaving you his half of the house or sign a quit claim deed now so the entire house is yours. You can structure it so you take possession upon his death or when he moves out, whichever comes first.
It's a win/win/win. Your Mom gets her $150k, Dad gets his mortgage paid off and can live comfortably for the rest of his life, and you get a revolving line of credit against the house that you can tap over and over again to BRRRR properties. You will be set for life.
The best part here is you get to help Mom and Dad through this difficult time in their lives. There is no better feeling than giving back to those that gave you everything.
@Jonathan Bombaci I think you might have missed the info in my signature. That's okay, I often don't read that either ;) I'm a licensed deleader.
I know the laws and the costs like the back of my hand, I have to.
Most folks don't want to spend $500 on a lead inspection before they buy the property, and many sellers will push back against that because they will then have to admit there's lead paint instead of using the standard disclosure form in the future if that buyer backs out. That's why I say to use $5k per unit and count the exterior as unit when negotiating a purchase. If the windows and exterior doors need to be replaced, it can get expensive, it could even be over that $5k. If they don't need replacing, it's usually less than half that number. Had your client in Taunton used that $5k number in negotiations for the 2 family and got a $15k concession, they would be up almost $4k in the deal right out of the gate. Heck, even if they only got half of the cost from the seller, they would only be "out" $4k on it, but with the grants you mentioned they would actually be way ahead. About $18.5k ahead. $7.5k discount on the purchase, then $11K in grants. I saved a BP member over $10k with this method. They negotiated $20k for the deleading, and it cost them under $10k to have me delead the building... and we got it done in time for some huge tax credits that were being offered that year.
When the laws changed in 2017, they also made it so you now only have 90 days to delead in order to remove the liability. If you don't delead in the fist 90, someone that lived there before you even owned it can sue you if their kids got lead poisoned adn anyone who moves in after you own it, even if it's been deleaded, can still sue you. If you don't delead within 90 days but do it within 120, it's possible that a tenant makes a claim that you didn't do it soon enough and their child got sick. So even after you delead it, you can still be sued and lose if it wasn't within 90 days of purchase.
The law can be interpreted that no matter what the circumstances, you only have 90 days to delead a property after closing. It can be (and is) assumed that any rental with more than 1 bedroom a child under the age of 6 "will become" a resident at some point. The law specifically excludes units under 250 sq ft, so small studio apartments can be skipped because they assume that no family will ever live there. It'd expect it's against a law on occupancy capacity to have more than one person renting a space that small, but I never cross referenced to find out.
Here's the lead law (emphasis added by me):
460.100: Duty of Owner(s) of Residential Premises
(B) Whenever any residential premises containing dangerous levels of lead in paint, plaster or other accessible structural material undergoes a change of ownership and as a result a child younger than six years old will become or will continue to be a resident therein, the new owner shall have 90 days after becoming the owner to obtain a Letter of Full Compliance or a Letter of Interim Control, except that if a child younger than six years old who is lead poisoned resides therein, the owner shall not be eligible for interim control, unless the Director grants a waiver pursuant to 105 CMR 460.100(A)(3).
You can see by the emphasized parts that they have basically made it law that all units need to be deleaded within 90 days. You can't discriminate against a family even if it's to protect them from lead paint, so this new law essentially gives people only 90 days after purchase to delead in order to avoid the liability of the lead paint. If they take longer, they violated this 90 day law and can still be sued. MA wants ALL residential rentals deleaded and this is how they're going about making that a reality.
For @Erick Sembrano and any other Massachusetts investors, always remember to put Lead Paint Remediation into your numbers. MA law says you have 90 days to delead all rentals larger than 250 sq ft after closing on them in order to remove the liability of past tenants. If the property doesn't have lead certificates on file with the state, you are going to have to professionally delead the building.
Assume $5k per unit counting the exterior as a unit, so a 3 family is 4 units =$20k to delead. It rarely gets that expensive, but if it needs all new windows and exterior doors, it can. Usually it comes in about 1/2 that number, but $5k per unit is a great negotiation number when you're buying the property.
There is a state database that can be checked to see if the building has ever been inspected, and if it was, if it was deleaded. If you need me to run any addresses through the database, let me know. It takes me 2 minutes and costs nothing, but could save you THOUSANDS in the purchase at negotiations.
Let me know if you have questions on the MA lead paint laws and good luck on your investing!
Derreck
I just wanted to drop you a note on the new lead paint laws in MA. They now only give you 90 days to delead when you buy a rental. If you don't delead within 90 days, you can be held liable for any lead poisonings that have ever happened at the building, even if it was before you owned it... and even after you delead it you would still be liable for previous issues because you didn't do it in the 90 day deadline. They basically hold the building liable rather than the owner and that liability transfers from owner to owner until someone deleads it and breaks the chain. If you delead, and maintain the standard, you will be in the clear. I recommend a Post Compliance Assessment Determination (PCAD) every 5 years or so.
Here's the law (emphasis added by me):
460.100: Duty of Owner(s) of Residential Premises
(B) Whenever any residential premises containing dangerous levels of lead in paint, plaster or other accessible structural material undergoes a change of ownership and as a result a child younger than six years old will become or will continue to be a resident therein, the new owner shall have 90 days after becoming the owner to obtain a Letter of Full Compliance or a Letter of Interim Control, except that if a child younger than six years old who is lead poisoned resides therein, the owner shall not be eligible for interim control, unless the Director grants a waiver pursuant to 105 CMR 460.100(A)(3).
Note it says "a child younger than six years old will become ... a resident therein...". It is assumed by the state that any rental larger than a 1 bedroom will fall into this category at some point because of the anti-discrimination laws that prevent landlords from refusing a family because they have a child. The law specifically excludes rentals under 250 square feet. Basically this is their way of getting all rentals lead safe. If you don't delead, you will be putting yourself in a dangerous position.
This isn't a bad thing! You can use this knowledge in your negotiations. Assume $5k per unit and count the exterior as a unit. So a 3 family is 4 units = $20k for your negotiations. They rarely cost that much, they're usually half that, but if the property needs windows and exterior doors it can get expensive. Like I said though, most come in about half that because the windows have usually already been updated, so use $5k per unit to negotiate and even if you get a 50% concession you could still potentially get it all paid for by the seller.
I can run any addresses through the database for you and see if they've been inspected or deleaded for you. Right now they’re behind on updating it though, so it may have been inspected and I just can’t see it yet but you would just negotiate as if it still needs to be inspected. Sometimes they get inspected but not deleaded and this creates a whole other set of problems. If that's the case, you can't do any renovations until you have it professionally deleaded or it would be flagged for Unauthorized Deleading and you can get fined and the property would never be able to get a Lead Certificate, only a letter of Environmental Protection that states you did illegal work, got caught, then had to pay a professional to clean up the mess. You don't want that.
If you don't already have a lead inspector you like to use, I recommend Anderson Lead Inspections, www.andersonlead.com. No, I don't get a referral fee or anything, I just know he's fair and works to help owners.
Let me know if you need any help or have any questions.
Good luck on your investing!
Derreck
I just wanted to drop you a note on the new lead paint laws in MA. They now only give you 90 days to delead when you buy a rental. If you don't delead within 90 days, you can be held liable for any lead poisonings that have ever happened at the building, even if it was before you owned it... and even after you delead it you would still be liable for previous issues because you didn't do it in the 90 day deadline. They basically hold the building liable rather than the owner and that liability transfers from owner to owner until someone deleads it and breaks the chain. If you delead, and maintain the standard, you will be in the clear. I recommend a Post Compliance Assessment Determination (PCAD) every 5 years or so.
Here's the law (emphasis added by me):
460.100: Duty of Owner(s) of Residential Premises
(B) Whenever any residential premises containing dangerous levels of lead in paint, plaster or other accessible structural material undergoes a change of ownership and as a result a child younger than six years old will become or will continue to be a resident therein, the new owner shall have 90 days after becoming the owner to obtain a Letter of Full Compliance or a Letter of Interim Control, except that if a child younger than six years old who is lead poisoned resides therein, the owner shall not be eligible for interim control, unless the Director grants a waiver pursuant to 105 CMR 460.100(A)(3).
Note it says "a child younger than six years old will become ... a resident therein...". It is assumed by the state that any rental larger than a 1 bedroom will fall into this category at some point because of the anti-discrimination laws that prevent landlords from refusing a family because they have a child. The law specifically excludes rentals under 250 square feet. Basically this is their way of getting all rentals lead safe. If you don't delead, you will be putting yourself in a dangerous position.
This isn't a bad thing! You can use this knowledge in your negotiations. Assume $5k per unit and count the exterior as a unit. So a 3 family is 4 units = $20k for your negotiations. They rarely cost that much, they're usually half that, but if the property needs windows and exterior doors, it can get expensive. Like I said though, most come in about half that becaue the windows have usually already been updated, so use $5k per unit to negotiate and even if you get a 50% concession you could still potentially get it all paid for by the seller.
I can run any addresses through the database for you and see if they've been inspected or deleaded for you. Right now they’re behind on updating it though, so it may have been inspected and I just can’t see it yet. Sometimes they get inspected but not deleaded and this creates a whole other set of problems. If that's the case, you can't do any renovations until you have it professionally deleaded or it would be flagged for Unauthorized Deleading and you can get fined and the property would never be able to get a Lead Certificate, only a letter of Environmental Protection that states you did illegal work, got caught, then had to pay a professional to clean up the mess. You don't want that.
If you don't already have a lead inspector you like to use, I recommend Anderson Lead Inspections, www.andersonlead.com. No, I don't get a referral fee or anything, I just know he's fair and works to help owners.
Let me know if you need any help or have any questions.
Good luck on your investing!
I just wanted to drop you a note on the new lead paint laws in MA; They now only give you 90 days to delead when you buy a rental. If you don't delead within 90 days, you can be held liable for any lead poisonings that have ever happened at the building, even if it was before you owned it. They basically hold the building liable rather than the owner and that liability transfers from owner to owner until someone deleads it and breaks the chain. If you delead, and maintain the standard, you will be in the clear. I recommend a Post Compliance Lead Determination (PCAD) every 5 years or so.
Here's the law (emphasis added by me):
460.100: Duty of Owner(s) of Residential Premises
(B) Whenever any residential premises containing dangerous levels of lead in paint, plaster or other accessible structural material undergoes a change of ownership and as a result a child younger than six years old will become or will continue to be a resident therein, the new owner shall have 90 days after becoming the owner to obtain a Letter of Full Compliance or a Letter of Interim Control, except that if a child younger than six years old who is lead poisoned resides therein, the owner shall not be eligible for interim control, unless the Director grants a waiver pursuant to 105 CMR 460.100(A)(3).
Note it says "a child younger than six years old will become ... a resident therein...". It is assumed by the state that any rental larger than a 1 bedroom will fall into this category at some point because of the anti-discrimination laws that prevent landlords from refusing a family because they have a child. The law specifically excludes rentals under 250 square feet. Basically this is their way of getting all rentals lead safe. If you don't delead, you will be putting yourself in a dangerous position.
This isn't a bad thing! You can use this knowledge in your negotiations. Assume $5k per unit and count the exterior as a unit. So a 3 family is 4 units = $20k for your negotiations. They rarely cost that much, they're usually half that, but if the property needs windows and exterior doors, it can get expensive. Like I said though, most come in about half that (windows are usually already upgraded), so use $5k to negotiate and even if you get a 50% concession you could still potentially get it all paid for by the seller.
I can run any addresses through the database for you and see if they've been inspected or deleaded. Right now they’re behind on updating it though, so it may have been inspected and I just can’t see it yet. Sometimes they get inspected but not deleaded and this creates a whole other set of problems. If that's the case, you can't do any renovations until you have it professionally deleaded or it would be flagged for Unauthorized Deleading and you can get fined and the property would never be able to get a Lead Certificate, only a letter of Environmental Protection that states you did illegal work, got caught, then had to pay a professional to clean up the mess. You don't want that.
If you don't already have a lead inspector you like to use, I recommend Anderson Lead Inspections, www.andersonlead.com. No, I don't get a referral fee or anything, I just know he's fair and works to help owners.
Let me know if you need any help or have any questions.
Good luck on your investing!
As a side note, beware of the lead paint laws. You cannot rent to families with kids under 6 without a lead certificate on file with the state. When you buy a rental property, you also only have 90 days to delead it or you're liable for past tenants that may have been lead poisoned there.
When you find a property you want to purchase, you can send me the address and I can run it through the database and let you know if it's been inspected for lead paint and/or deleaded. If it has been inspected and hasn't been deleaded yet, you can't rehab until you get a lead certificate of you'll get fined for unauthorized deleading (UD) and you'll never be able to get a lead certificate. You'd be able to get a letter of environmental protection saying you did illegal work, got caught, then had to hire a professional to come in an clean up the mess. You'd be able to rent to families with kids, but you don't want this as it jacks up your insurance and shows everyone you do sketchy things as a landlord.
Also, since you have 90 days to delead to remove the liability, you can use that in your negotiations in the purchase. The house is going to have to be deleaded if it's not yet. Assume $5k per unit to delead and count the outside as a unit, so a 3 family is 4 units = $20k. They usually come in about half that as long as they don't need all the windows and exterior doors replaced, but they can cost that much, so use that in your negotiations, that way even if the seller concedes to cover half, you might still get it all paid for.
Hey @Matthew Leal, the way I would structure this if it were a flip, with me being the "boots on the ground" and my partner being the money, is that the money investor just puts up the money. I'd find the house (both our names would go on the title), rehab the house (plus, in my case, I'm a licensed deleader so the property would get Lead Certificates too), then get the house sold.
During the process, I'd take small salary ($1500 a week) that would come off my half of the profit in the end. I'd give 6 months on the market and if the house didn't sell my name would come off the title and my remaining share of the profits is forfeit and the house is owned entirely by the money partner. That means if the house was overpriced and didn't sell, the selling price could be reduced by my share and the money partner still gets their full share of the profit. Worst case if the market dropped out, the money partner owns the house solo and could then rent it out, or lease option, or go with whatever secondary strategy they choose.
For the sake of this example, we'll assume the money partner is all cash and let's use $200k as the purchase, $40k rehab (includes my salary for me doing the work and materials), 8 week time frame ($12k in salary to me out of that $40k), resale of $300k. So the money partner is all in for $240k. We'll assume $10k in closing and holding costs that brings it up to $250k, leaving $50k in profit ($25k per partner). Subtract the $12k off my half that I already took as my salary and that leaves $13k to me and $37k to the money partner. The money partner gets their half of the profit, plus a refund on the salary he paid out to me during the rehab.
I know the math is a little tough to follow and people might say that I shouldn't get paid during the rehab... let's say I did the work without the salary, that would increase the profit by $12k to $62k. Each partner then would get $31k, so the money partner actually makes more in the first scenario with me getting paid during the project.
Yes, I would make more money to wait to the end, instead of $25k I'd get $31k, but that doesn't mitigate the risk.
Structuring it this way minimizes the risk for both partners and motivates me to get it done as quickly and inexpensively as possible. The quicker it gets done, the more I make in the end.
Worst case if the market crashes during the process and the house doesn't sell at $300k after 6 months on the market, then my name comes off the deed and the money partner can reduce the price by $25k and still make their expected profit. (If it was only reduced by $13k then they'd still get their refund on the salary I got as well.) In this worst case scenario, I'd still get a fair wage for the work I put in rehabbing like any other job I would have done during that time and only lose out on the payout in the end. The money partner gets to keep the house and rent it out until the market comes back up.
Even a worst case scenario is still a win/win and no one walks away feeling like they were taken advantage of. The fact is, the market is variable and can change at a moment's notice. That's out of both partner's control. If both partners walk away feeling good about the project even in the worst case, then they will gladly work together in the future when the market comes back up and make more money together, right?
Good luck on your investment!!
To certify a home as being lead free, generally need to do an XRF inspection as opposed to swab tests. If there is lead paint, generally have to provide notice to tenants and follow certain workpractices when disturbing painted surfaces. You dont have to remove LBP but make sure it remains in good condition. Certainly abating the friction surfaces are a prudent measure to minimize future costs.
Not sure where you're from, but in MA the laws are extremely strict on this. The Federal law you're thinking of requires a lead paint notification form to all tenants when renting the unit and also requires a contractor to be RRP certified to work in any house built before 1978. This requires them to use basic containment when doing anything, even drilling through a wall. But the state law is a lot more strict and says you can't rent to families with kids under 6 unless you have a Lead Certificate on file. It also says that you have 90 days to delead a property after closing or you are liable for past tenants if any come forward and claim their kids got lead poisoning there.
Hey Forrest,
Great job on that deal!
I just wanted to drop you a note on the new lead paint laws in MA. They now only give you 90 days to delead when you buy a rental. If you don't delead within 90 days, you can be held liable for any lead poisonings that have ever happened at the building, even if it was before you owned it. They basically hold the building liable rather than the owner and that liability transfers from owner to owner until someone deleads it and breaks the chain. If you delead, and maintain the standard, you will be in the clear. If the 90 days has passed and you then delead, you will obviously be protecting yourself from lawsuits from current and future tenants, but you're still liable for past tenants if any come forward. The law isn't exactly fair to landlords, but it's MA after all, not many are.
You also can't rent to families with kids under 6 unless you have a lead certificate on file with the state.
Here's the law (emphasis added by me):
460.100: Duty of Owner(s) of Residential Premises
(B) Whenever any residential premises containing dangerous levels of lead in paint, plaster or other accessible structural material undergoes a change of ownership and as a result a child younger than six years old will become or will continue to be a resident therein, the new owner shall have 90 days after becoming the owner to obtain a Letter of Full Compliance or a Letter of Interim Control, except that if a child younger than six years old who is lead poisoned resides therein, the owner shall not be eligible for interim control, unless the Director grants a waiver pursuant to 105 CMR 460.100(A)(3).
Note it says "a child younger than six years old will become ... a resident therein...". It is assumed by the state that any rental larger than a 1 bedroom will fall into this category at some point because of the anti-discrimination laws that prevent landlords from refusing a family because they have a child. The law specifically excludes rentals under 250 square feet. Basically this is their way of getting all rentals lead safe. If you don't delead, you will be putting yourself in a dangerous position.
This isn't a bad thing! I know it's too late for this 4 family, but you can use this knowledge in your negotiations. Assume $5k per unit and count the exterior as a unit. So a 3 family is 4 units = $20k for your negotiations. They rarely cost that much, they're usually half that, but if the property needs windows and exterior doors, it can get expensive. Like I said though, most come in about half that, so use $5k to negotiate and even if you get a 50% concession you could still potentially get it all paid for by the seller.
I can run any addresses of future houses you look at through the database for you and see if they've been inspected or deleaded. Right now they’re behind on updating it though, so it may have been inspected and I just can’t see it yet. Sometimes they get inspected but not deleaded and this creates a whole other set of problems. If that's the case, you can't do any renovations until you have it professionally deleaded or it would be flagged for Unauthorized Deleading and you can get fined and the property would never be able to get a Lead Certificate, only a letter of Environmental Protection that states you did illegal work, got caught, then had to pay a professional to clean up the mess. You don't want that.
If you don't already have a lead inspector you like to use, I recommend Anderson Lead Inspections, www.andersonlead.com. No, I don't get a referral fee or anything, I just know he's fair and works to help owners.
Let me know if you need any help or have any questions.
Good luck on your investing!