All Forum Posts by: Daniel Marklin

 FYI the comment was posted before you resolved the issue, I just made an update. I was pleased with how the situation was handled and that you refunded the technology package payment. For others that didn't see my revised comment, I respect Christina and her handling of her business-- if her company fits your business plan, go for it.

Quote from @Katherine Roberts:

Quote from @Daniel Marklin:

Quote from @Daniel Marklin:

Hi Katherine, I had this exact situation recently in Houston. The duplex was mid-renovation to the studs when I bought it. I initially just put padlocks on the attic access hatches, however I needed to get final building inspections and they required a firewall not only in the attic, but below the house to the foundation (my duplex is pier and beam, elevated 2 feet above grade). The firewall does not need to be structural, but it must be made out of at least 5/8 in type x Gypsum board and the seams need fire-caulking or drywall mud (below the floor, in the unit, and in the attic). They claim this is standard international building code-- I do not know what Tulsa specifies.

If you don't need permits I would leave as-is with padlocks as long as there isn't a noise-transfer problem-- if there the units are small and there isn't sound-insulation in the joining wall, there could be. If you have separate HVAC and water heaters, it makes it easier to add a fire-wall because then everything is truly separate. The attic wall cost me ~$1200. I personally army-crawled under the house and put up the gyp board to satisfy the inspector-- I would NOT recommend it...

 I'm not sure the resolution will come out well, but here are the details:

 Thank you!! I just got in touch with the city inspectors and they said it’s not up to code. The property hasn’t gone through the last stage of permits and hasn’t received the certificate of occupancy, so I’m hoping that the seller will have to do it beforehand. I definitely don’t want to close on the property if the permits are still open and there’s no CO. I’ll keep you updated!

Absolutely, make them get it figured out prior to closing. In the standard Texas sales contract there is a clause stating that the seller does not know of any outstanding permits or deficiencies-- I assume it's similar for most states. 

The seller could say that it's not their problem; it is their problem if 

1. They opened the permits and never closed them.

2. If the city cites a violation or deficiency.

Because then the seller knows about it; otherwise if it's not cited as a deficiency from the city, then they don't have any legal reason to fix it. 

Hi David,

I joined a group called "Total Wealth Academy" in Houston. They have active investors and also equity (money) providers that are doing deals-- some people buy properties themselves, others partner and syndicate (use a lot of investors).

The founder helped build a national group and then split off 3 years ago to make his own organization. I am very happy I joined because they have tons of invaluable information to use, a network of successful investors and mentors, and access to above average deals-- everyone that joins is vetted first, so it's not just clout-chasers and want to be moguls. If not for them, I would not have accelerated my investment journey and be able to quit my W-2 next year. They have a lot of out of state investors. If you are interested, google them; if you want to talk send me a dm, happy to share.

Majority of real estate wealth is built by increasing value, thus best to buy "below value" to have a better chance at increasing the property's worth-- 

1. Forced (doing rehab, getting better tenants, running better operations)

2. Passively (market getting better, rents increasing, buyer demand increasing)

Specifically, to Force Appreciation you usually look for:

1. Risk -- if there are problems to fix that others can't or won't tackle -- (mold, foundation, roof, HVAC, maintenance issues)

2. Market inefficiency -- if the property can be upgraded to better finishes/layout and the rent increases outsize the rehab costs; counters, floors, appliances, paint -- think kitchen and bath especially

You can also "buy below value" with seller distress-- that comes from:

1. Financial distress (divorce, death, other hardships)

2. Change in outlook (wanting to get rid of properties and move into other assets, or different phase of life)

Brittany nailed it; one add, "underwriting" is the process of "running the numbers." Looking at the income, expenses, cash flow and evaluating the ability to pay for the required debt (banks concern) and provide returns (your concern).

I'll take a stab at your last paragraph. Value-add comes down to increasing the value in the property, more than what you put in. Simple example-- if you buy a property at $80k and put $20k into it, if the property is only worth $100k afterwards, then you didn't gain any equity. It works when you buy a property for $80k, put in $20k, and then it's worth $130k. In that case you made $30k of value!

Now, you can still HELOC or Cash-Out Refinance and the amount you will receive is based on the new value (usually ~75%), regardless of how much equity you own vs how much existing debt you have.

You are touching on the BRRR method-- read the book twice and it will start to make sense; that principle is the golden principle in all of real estate, no matter the class-- it just takes larger scale and time in some asset classes.
 

 I'm not sure the resolution will come out well, but here are the details:

Hi Katherine, I had this exact situation recently in Houston. The duplex was mid-renovation to the studs when I bought it. I initially just put padlocks on the attic access hatches, however I needed to get final building inspections and they required a firewall not only in the attic, but below the house to the foundation (my duplex is pier and beam, elevated 2 feet above grade). The firewall does not need to be structural, but it must be made out of at least 5/8 in type x Gypsum board and the seams need fire-caulking or drywall mud (below the floor, in the unit, and in the attic). They claim this is standard international building code-- I do not know what Tulsa specifies.

If you don't need permits I would leave as-is with padlocks as long as there isn't a noise-transfer problem-- if there the units are small and there isn't sound-insulation in the joining wall, there could be. If you have separate HVAC and water heaters, it makes it easier to add a fire-wall because then everything is truly separate. The attic wall cost me ~$1200. I personally army-crawled under the house and put up the gyp board to satisfy the inspector-- I would NOT recommend it...

Absolutely, check out Bo Bond at www.CPIAI.com for the property insurance. 

For the personal umbrella, use whoever you have for your current home and auto. The policies are cheap, Travelers, All-state, etc. can provide. I use Suzanna Brown Agency 

https://www.texaninsurance.com/suzanne-brown-customers/

Ditto Chaelynne, it depends on your current interest rate. For example,

If your current loan is $200k, going from a 4% rate to 6.5% rate increases you payment $500/mo. (just on the current $200k; that doesn't include the fact that your loan will increase to capture the current equity). That means whatever investment you make needs to bring in an additional $500/mo in value to just break even.

I would use 203k loan as a last resort-- some people have no issues, a lot of others say the application process and rehab draw process is very tedious.

I used a Construction Loan from City Bank-- a local group that gave me 12-months I/O without any points up front as long as I refinanced with them. Local lenders can be more flexible.

Hi Susan, if the house is that small I would not split it without adding square footage. Your best bet is to rent-by-the room if you want to juice the returns. If you convert to a duplex/triplex, you'll need a permit from the City Of Houston and depending on the age of the property, it could be very cost prohibitive. You'll need fire-walls, separate entrances, separate HVAC, etc.

I bought a 1,100 SF house that was being converted to a duplex, each side with 2 bedrooms/1bath. I finished it, but it was a nightmare with permits and got delayed 9 months. It's rented but being that small, it didn't have a living room and that turned away a number of tenants.