All Forum Posts by: Derreck Wells

In MA lead paint is an issue. The law says you have 90 days from the date of purchase to get a Lead certificate or you are liable for past tenants. Yes, you can be sued by past tenants that were lead poisoned before you even owned the place. fined

State law also says you cannot rent to a family with a child under 6 years old unless you have a Lead Certification on file with the State. You also can't discriminate against a family even if it's to protect that child. 

Don't let that scare you though, use it in your negotiations. Every rental larger than 250 square feet will need to be deleaded if it wasn't already. There's a database I can check for you to see if they've ever been inspected. If it has been inspected and it wasn't deleaded, then you cannot do renovations until you get a Lead Certificate or you'll get flagged for unauthorized deleading (UD) and could get fined. Again, a great bit of knowledge to have before you negotiate. 

Assume $5000 per unit for deleading and count the exterior as a unit, so a 3 family is 4 units = $20,000. I have never seen one go over that and usually they're about half that, but if the place needs windows and exterior doors, then the price can get up there.feet

Good luck and let me know if I can help!

Derreck

Hi David, 

Here in MA the Lead Paint laws are super strict, but don't let that scare you! 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.

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, 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 you might find here through the database for you and see if they've been inspected or deleaded for you. 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 Unautohrized 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.

For a Lead Inspector, 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 here in MA.

Good luck on your investing!

Derreck

I see post after post and hear podcast after podcast about investors having trouble finding and keeping good contractors. Did you ever stop to wonder why?

Well... It's because contractors don't work for you any more than you work for the contractors... but you both make money off each other. Weird, right? 

You are both self employed, you're both your own bosses, you're not the contractor's boss! I'm fact, in MA, every contract needs to, by law, specifically have verbiage saying that the contractor is not your employee. You don't pay worker's comp insurance or taxes on them, right? If you want to pay an employee, hire one and cut them a paycheck every week. If you want a skilled contractor with licenses and insurance, hire a contractor instead of the employee.

But always remember... the contractor doesn't work for you.

If you want a good contractor, there are several things you need to do; 

1. 1: Be a good landlord. Contractors don't want to work with slumlords. We don't like going to a job and doing substandard work because you don't want to pay for it to be done properly. Stop being cheap.
   
2. 2: Never tell a contractor that if he gives you a discount, you'll give him more work because you're an investor and will have more properties. We know you're just being a cheap prick at that point and will actually charge you more because we know you're going to try to screw us over in the end to save a couple hundred dollars. It actually works the opposite way... we give repeat customers better rates. Trust is earned, not given freely. If you want better rates, show us you're bringing us more work by actually bringing us more work, don't tell us you're going to.
3. 3: Always remember; Contractors don't work for you, we are self employed.
4. 4: When a contractor doesn't answer your call in the middle of the day, it's because they're working. Send them a text asking them to call you at their earliest convenience. Their time is valuable to the person who's house they're working on. Would you want a contractor to stop working on your house to talk on the phone to someone that isn't paying them? I personally don't answer my phone when I'm on a job unless it relates to that job I'm on... ever. Some days I work until dark, then often grab a burger at a drive through on the ride home, then I'm taking care of a kid and 3 dogs for the evening, I'm a single parent with some custody of a 14 year old girl. Stop expecting a contractor to answer the phone every time you call, and stop thinking their horrible at communication because they have lives that don't involve you. You are not the most important person in their lives... There will always be plenty of work for a good contractor, your job won't make or break them.
5. 5: Get a scope of work. A scope of work is very important. But don't ask for an itemized list and NEVER try to save money by getting the materials yourself. You will buy the wrong stuff, every time. And asking for an itemized list is telling us you want to use us to make a materials list and design the project for free but you're going to try to do the project yourself. Pay an architect if that's what you're after, or pay me a consult fee to do that for you. And if you're thinking you can save a hundred dollars by getting materials at different places, sure, so can I. But then you're paying me for the time and fuel to drive all over town and pick them all up. It will cost you more in the long run. My time is valuable and you WILL pay for my time, because trust me when I say, I have other things I could be doing. There aren't enough hours in the day as it is, I don't need someone wasting my time. I have a life outside of work, and if I'm not working, I'm living it.
6. 6: See #3.
7. 7: Don't try to negotiate a better price. A good contractor will never compromise himself. We are already giving you an honest bid... we're not used car salesman that pad up the number so we can give you a fake discount so you feel like you screwed us over and walk away happy. This is what it costs to get the project done right. Any less and it doesn't work. A good contractor doesn't add in wiggle room. We add in materials and an estimated labor rate, that's it. A good contractor's contract will have contingencies in it for cost overruns and change orders. Look for them, if you see them, you're probably dealing with a good contractor. My contract states "Homeowner agrees to pay up to $2000 in overruns, anything more than that requires a signed change order." This is simply to allow for an emergency situation such as a rotted sill beneath an exterior door. If we're replacing a door and come across that, we don't have to stop work and wait for a signed change order, we can just fix it and move on.
8. 8: Never expect or ask for a contractor to do something free because they're there anyway. "Can you fix this while you're here?" Time is money so, yes, I'll fix it, but it will cost you $XXX. 
9. 9: See #6.
10. 10: Pay your bill. Do you like it when a tenant doesn't pay? Well, you are just a tenant to a contractor. A good contractor has bills to pay. If you rip off a contractor, you're only hurting yourself and your fellow investors. Contractors distrust investors because they tend to rip off contractors more than homeowners do. This is why contractors will charge more. We also have our own version of Annie's List where we report on problem and non-paying clients. You don't want to end up on it, you'll never get a good contractor if you do. 

@Mark Navarrete 

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.

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, so use $5k to negotiate and even if you get a 50% concession you could still potentially get it all paid for my the seller.

I can run any addresses through the database for you and see if they've been inspected or deleaded for you. 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 Unautohrized 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 an 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 here in MA. 

Good luck on your investing!

Derreck

Finally!!! A thread about LBP that has answers by people in the original posters state! Thank you all for responding!

If anyone from a state other than MD is reading this... THE LAWS ARE DIFFERENT IN YOUR STATE! Lead Paint laws vary greatly from state to state. Never take advice on lead based paint from someone that hasn't gone through the process IN YOUR STATE. It will only get you in trouble.

@Samuel North and @Steven Caligaris,

Lead Paint!!! Every house you two are looking at WILL have lead based paint in it. (Everything built before 1978 probably does.) This isn't a bad thing, it's actually a great negotiation point. 

MA law says you need to delead every rental property built in 1978 or earlier within 90 days to avoid liability from any past tenants that may have been lead poisoned while living there. Yes, you're responsible for people that lived there before you owned it, crazy, right? They have basically taken the liability and transferred it to the property and it stays there until someone deleads it. If you don't delead it, you can be sued by people you've never met and you'll lose. 

Also, by law you cannot rent to a family with a child under 6 unless you have a lead cert on file with the state, and you also can't discriminate against a potential tenant because they have kids (even if it's to protect that kid). So you really have no option except to delead. If you don't delead it when you buy, you will have to when someone with a kids wants to rent it or when a tenant gets pregnant, so you might as well do it while you can get the seller to pay for some, or all of it, in negotiations. 

Again, this isn't a bad thing!! Assume $5000 per unit to delead and count the exterior as a unit, so a 3 family is 4 units = $20k to delead. I've never seen a job go over that, most come in around half that, but they could go high depending on if it needs windows and exterior doors, those can get expensive. Use that $5k per unit number to negotiate during your purchase if the property hasn't been deleaded. There's a database I can run addresses through to see if the property has ever been inspected and deleaded for you if you want me to. It doesn't cost anything and can save you thousands on a purchase. Sometimes they've been inspected but never deleaded, this prevents you from being able to rehab that property until you get a lead certificate. It would be illegal if you did and the property would be flagged for unauthorized deleading (UD) and you'd never be able to get a lead cert., only a Letter of Environmental Protection stating you did UD and then had to hire a pro to fix it. Knowledge is truly power!

Good luck on your investing!!

Derreck

Someone definitely screwed up then.

Ahh. This is what I was going off of...

"Just a few days ago my lender requested the lease again before getting clearance to close. The Seller's attorney then mentioned that there would be a lease at the Housing Authority. Lo and behold - when I thought I was getting an active lease - I received an active lease ending 2/2020"

 Once a lease expires it converts to m2m automatically. This lease expired long ago, so the tenant is now m2m and there is no longer a lease. 

Along with the things mentioned above, you're going to run into; 

Lead paint issues. 

Issues with the electrical... both units will need to be completely separate from each other, including panels and meters. 

Issues with plumbing... again, both need to be separate, unless you're going to be dumb and include hot water in rent. 

Issues with parking. 

Issues with septic... it won't be big enough and will need to be rebuilt to be brought up to code. 

When all is considered, I'd bet the numbers don't work. What would you get in rent if you renovated to make a great single family rental vs the rents from two less desirable, probably weirdly laid out, small units? Factor in the expense of gutting the house to the studs and converting to a two unit VS simply renovating and keeping it a single family and see what your returns are. I'm betting renovating and keeping it a single will cash flow better than the 2 unit approach. 

When people rent a single family, they tend to think of it as their home, not just their temporary apartment, and will take better care of the place. They get the pride of "ownership" that doesn't come from an apartment with annoying neighbors and will stay longer too. I never hear of super long term tenants (10-20 years) in a multifamily, so you make out on vacancies and turnover costs too. I'm sure there's a metric you can find that will show you average stays in our area for single family rentals vs apartments.

Whatever you decide to do, the house will need to be deleaded if it's going to be a rental. The state law gives you 90 days from date of purchase to start the deleading in order to remove the liability of past tenents. Yes, you're responsible for past tenants that got lead poisoning there if you don't delead. The state basically changed the law to keep the liability with the property and transfer that liability from owner to owner until one deleads and breaks the chain. If you delead, the the past tenants can't sue you, they need to go after the previous owner. This is actually a good thing to know during the purchase... If it isn't already deleaded, it will have to be so it makes a great negotiation tool.

Assume around $5000 per unit and count the exterior as a unit, so $10,000 to delead a single family. Most come in at around half that, but if windows need to be replaced, or if the exterior doors do and need to be custom sized, it can get expensive quick, so $10k is a safe negotiating number. This will be the case for any property built before 1978.

If you want me to, I can run addresses through the database and see if they've ever been inspected. Often people get them inspected then don't actually delead, they just lie and check off unknown in lead paint disclosure. The state knows this happens, so every inspection goes in a state database so we can tell if it's been done or not. 

If it has been inspected and not deleaded, you cannot renovate until a licensed deleader makes it lead safe and you get a Lead Certificate from the state. It would be illegal and get flagged as unauthorized deleading (UD) and you would NEVER be able to get a lead cert, only a letter of environmental protection which states you performed UD, got caught, then had to pay a licensed deleader to come in and fix it. This will likely increase your insurance and will tell tenants that you do illegal, sketchy, dangerous stuff with your rentals. Not the reputation you want!

Good luck on whatever you decide to do!!!

Derreck