All Forum Posts by: Eliot M.

thanks @Jassem A.

I wonder if there's anything to worry about if I hire a friend, or maybe a handyman to be GC.  But maybe make the deal such that, as the GC, he only has the authority to deal with licensed/insured subs.  So, I pay him to "manage" the project, and he calls a licensed HVAC guy, then a licensed mold guy, etc.  I think that in order to pull a permit you have to be licensed, right.  So the licensed electrician/HVAC guy, who is the sub of my friend/handyman, actually is the one pulling permits.  My friend can go to the job daily and take pics, videos, call me if something goes awry and generally keep me abreast of what's going on.  Just trying to think through this... am I missing anything?  What does a licensed GC get me in additional to my "friend" GC'ing the project?  Not trying to be offensive to any GC's here... just trying to talk this one out and find solutions.

So far I've been dealing with the expensive, "organized" guys.  The ones that friends have recommended because they are licensed/insured and did a good job.  But am very tempted to go with the smaller guys if they are the only ones who give me the time of day.  Again, I never once gave any indication of what $ I expected to pay.  Completely silent on the issue and wanted them to throw out the first number.  The funny thing, on this particular project I actually have the room to do everything correctly, up to code, etc and can pay a little more.  On my other rentals, yes I would cut some corners, do things myself, and gone with the cheaper guys, but on this flip I want everything done properly and on time so I can flip for a good retail price.  

@Chris Collins That's an interesting idea having a subcontractor GC the project.  Yeah I may have been too lenient when discussing timelines.  Even though I am technically flexible on this job, I should've let on that it was urgent.

@Aaron McGinnis Sounds like you're making assumptions... :) 

I've not asked for any particular budget numbers from anyone.  Just looking for an accurate, reasonable quote.

Really wanting to get moving on this flip but I can't seem to get any contractors to call me back.  I met with 8 general contractors 11 days ago at the house I want to flip and no one has gotten back with me, even after trying to follow up.  I don't even have any cost estimates yet, let alone a timeline for when work can begin.  This is not a small project, but not a huge project either, and so I figured it would be right in someone's wheelhouse to jump on.  Getting really frustrated and wondering what some other options are.  

I do have 2 or 3 guys I could call to "manage" the project for me, but they are unlicensed and uninsured (more like "handymen" that I would work with on my rentals no problem, but I'm not fully comfortable doing a flip that I want to retail).  Up til now I have wanted to do everything very professionally and only work with 1 fully licensed and insured General Contractor so that I have insurance against liability and legal recourse in case something falls through the attic or something - but jeez now I'm wondering if I should go with my handymen to do it if the big boys won't call me back.  Can I go with handymen to "manage" the project as long as THEY use licensed subs??

Has anyone been through this before?  What am I not doing right?  I had wanted to go with general contractors so they would pull the right permits, do the right inspections so that I could turn around and not have any hiccups when listing for sale.  

To give some context, what I'm needing done is as follows: roof repair, 3-5 floor joists replaced or "sistered", surface mold remediation, 3 bathrooms remodeled, hardwoods sanded/buffed/finished, exterior and interior paint, drywall repair, granite countertops and new appliances in kitchen, new HVAC and ductwork, branches cut away from roof, gable vent repair, insulation.  That should give a rough idea.

Is there a difference between "cutting" and "sanding" hardwoods, and if so, which one would you go with, and why? I had a contractor walk through the house the other day and said that he would "cut" my particular hardwoods down about an 1/8th of an inch, as opposed to sanding them. He said cutting would bring the floors out much better than sanding, and that the cutting would be $3.25/sqft as opposed to sanding which would be $1.50/sqft. That's a huge difference and I'm wondering if anybody has had this experience?

@David Faulkner Thanks for taking the time to reply with such detail.  I do agree that 32 properties will take some time to manage, but I've been doing this for 4 years and I keep track of my time pretty diligently.  I figure that in the last 4 years, I've worked about 1 hour per month on each rental, on average.  Once "freedom" is achieved at 32 houses, I consider 32 hours of work per month aint' bad at all, compared to 160 hours plus daily commutes!  

I have considered buying in higher priced neighborhoods for your points mentioned above, but I just can't make the numbers work.  The price-to-rent ratios are just too high.  I can get $750/month in rent on a $50k house (1.5%), but if I move to a better part of town and buy a $100k house, there's no way I'm getting anywhere close to $1,500 in rent (which would be the same 1.5% (2 x $750)).  I understand the argument for higher price appreciation in a better area, I just don't agree with it.  If you read an earlier post I wrote in this thread, I did exactly that: bought in a nicer area, then moved away and rented it.  10 years later, and the rents have not increased one penny, and worse - my home's value has fallen $10k.  I just don't see how this strategy works.

On buying distressed, I agree with you. I may be close to getting into my first flip (or might be a BRRRR), and I'm starting to see how immediate appreciation can be possible if the purchase price is less than ARV-rehab costs.

I'm astounded at your number on CapEx... there's no way CapEx is $3.3k per year on my houses. At that rate, I would essentially be repurchasing the house at full value every 15 years ($3.3k x 15 years = $50k, or, what I paid for it originally).  There's no way this is the case.  Do you have historical financials/stories to share on this?  This is by far the highest number I've ever heard on CapEx.  I'm not using %s to calculate my CapEx; I'm doing it as you recommend: I created a table with all CapEx items at replacement cost divided by its useful life.  That's the only correct way to do it.

@Matt Bell You're right, the last 2 lenders I spoke to have a 6 month seasoning. 

@Account Closed Thanks for your comment and the encouragement.  I've been hit from many different directions lately from podcasts, books, etc on the importance of having a goal and a plan to meet that goal, so I decided it's high time to put one down on paper.  Good luck to you as well!

@Matt Bell That makes sense now. Thanks for detailing it out. Essentially you are going all cash on the first property, plus rehab, then if everything goes well, taking all that cash out and then some, then BRRRR'ing it.

@Tom V. Thanks for your input, Tom.  If it's similar to your own plan, I wonder how far down the road you are?  Are you retired yet or still on the path, working the plan?

@Matt Bell Thanks.  That's a lot of properties in 10 months.  You must've started with a lot of cash to begin with?  That's interesting that you are refinancing so quickly, but still you must start with the 20% down on each property on the front-end, so you had to come up with 20% x 8 properties in 10 months, right?  And that's not even counting the rehab costs on top of that... That sounds like a lot of moola.  If so, that's great.  I'm just having to sit and wait until I can save the next 20% to purchase another one, and so on.  1 at a time.  If I'm missing something, please let me know.

@Matt Bell I like the BRRRR strategy a lot but I can't see how it helps me scale faster. But I'm open if you can convince me. The way I look at it is, I can either buy a house that needs no work for $50k and rent it out, or I can buy a house for $40k that needs $10k in rehab. In the 1st example, I'm out $12,500 in down payment and closing costs. In the 2nd example, I'm out $22,500 and I've got to wait a year to refi and take the cash back out. I'm all about preserving capital as much as humanly possible so that I can continue to acquire. If I do the 2nd scenario above, I can only buy 1 house per year, but the 1st scenario enables me to buy 2 per year. But please send me any metrics if you're willing to. Send your spreadsheet or whatever you use as your strategic plan. I'm very curious to see how you're doing this in half the time that I am.

That being said, I know you are familiar with the deal I have going right now which is completely different than what I discussed above, so suffice it to say I'm an opportunist and when something comes up that makse sense, I'll jump on it.  But please, if you have a model you can share, please do.

As for the property management, I do it myself.  The $200 is a "finder's fee" that I use to incentivize the current tenants to show the house for new prospective tenants.  I have done this for years and it works beautifully.  They get me a signed lease, I give them $200 in commission on their way out.  The problem about professional property mgmt is, it is really only needed on the front end to find tenants, nothing more.  Actually managing the property throughout the year, they are worthless, I have found.  Not only do they offer no value to me, it actually costs me more $, because when a repair job inevitably comes up, they use their favorite contractors who may or may not be more expensive than what I can find in my own network.  They have no incentive to save me money, while I have no opportunity to negotiate for better rates.