All Forum Posts by: Erin Church

@Brittany Minocchi has some great advice and I totally agree about it being challenging to have enough equity to pull out your downpayment with a turnkey. I also want to mention that if you're pulling the downpayment from a HELOC, the lender on the new property will count that into your debt to income ratio. I'm not sure if they'll have an issue with it or not (lender specific), but they may.

If the numbers work, I'm buying :) Because I prefer buy and hold, I'm less concerned about the ARV of the property in the next year or three and more interested in the rental rates. If those seem like they'll remain strong, then I'm in! :)

Hey @Mohammed Rahman

Thanks for the response! I totally agree with you about using referrals that are mostly "mom-and-pop" type operations. That's exactly what I've done and how I've found some of my great contractors. :) We also agree that hiring bad contractors means paying for it twice - that's the main reason I put much more weight on the recommendation I've gotten from other investors than the cost of the contractor. 

I hear you about the polite version of "suck it up buttercup", and that's what I've done traditionally. :) The reason I struggle with this is because I've used a contractor that someone else gave an "average" review on when asked about their experience. Because I knew I could check up on the job frequently, I felt confident that I could get a good enough experience/product out of the contractor. I was wrong. When bluntly sharing the bad experience with the reviewer, they had an experience that was much more similar to mine than I realized. 

I agree with you that sharing my recommendations/referrals/avoid list is important and I definitely will with those I have contractor conversations with. However, I'm fully aware that I'm not nearly "important"/connected enough (nor would I want to be) for every local investor to ask me about my experience/recommendation on contractors. :)

So, to ask clarifying questions and to make sure that I'm understanding your response: If you have a recommended contractor do terrible work (literally, ripped out), run over schedule, and you fire them, do you only share that experience with people that ask you directly? Is that true even if you know that many others in your investor sphere will likely hire them in the near future? I feel like your response is "yes" to both of these if I understood your response correctly. 

Again, I appreciate your response and going through this mental exercise. :)

I'm curious what other folks do when they have terrible contractor experiences. I've been rehabbing properties for more than 3 minutes, so I've had both good and bad experiences with contractors. :) I want to add as a disclaimer that I feel bad contractor experiences fall on both parties. I've been too lenient on contractors - trying to show compassion, listening to their BS reasons that they're behind or that the work isn't properly done "yet", and so on. I don't think that having bad contractor experiences is 100% on a contractor as someone had to give them the opportunity to do the bad work/continue to be employed.)

When bad contractors happen, what's the best way to handle it? It feels like if a person stands on a soapbox and shares their experience with everyone, then they could be viewed as a "risk" to other contractors and seen as "unprofessional" and someone to be avoided by investors/community members. Also, it opens up the "he said, she said" dynamic. I've had contractors explain to me how certain clients were unreasonable, didn't understand the scope of work, didn't understand construction. It seems this is done in an attempt to discount any possible negative reviews from the person or to help guide the expected behavior of their future clients.

When someone does have a bad contractor experience and doesn't share it, it's like helping the contractor continue to dupe people. 

I feel like the "correct" answer is to leave a review on Google, Facebook, really everywhere you can about the facts, share your story with other investors that may cross your path, accept that some will view you a person who overreacts, and move on, but what do people really do? 

I'm currently having contractors redo work from a contractor that was within the local investor community. The "amount of bad" is higher than I realized as we are fixing some parts of the project. The guys I chat with about "daily investor things" know who the original contractor is, but I don't know if I'm enabling unethical contractor behaviors by not leaving written reviews. 

So, again I ask, when bad contractors happen, what's the best way to handle it? :)

I haven't heard of a lender that will do DSCR with an owner occupied unit. That being said, does the rent from the other three units give you a 1.25 ratio when you divide rent (of the three units) by the PITI? If so, then maybe. :) If not, then likely not. I'd still call a whole bunch of them and find out though! :)

Also, check with FHA and any first-time home buyer programs. I'd suggest checking with a mortgage broker or two (they'll shop multiple lenders for you, unlike going to a bank). See if there's a way you'd qualify. :)

Hey Kevin,

I was going to ask if it was manufactured or modular. There is a significantly different building code for the two. 

Why is the seller paying for anything over $1000 that needs to be remediated? I've never heard of that and the seller's agent would be a bad agent if there was a stipulation put into the contract that allowed that. You get a roofer out, siding buy, deck guy, plumber, electrician (you get the idea), they can all find work that needs to be done to a 20 year old home. If you do have a stip in the contract that forces the seller to pay for anything over $1,000, please share it as I'd love to see it. 

On the inspector, you should be able to have as many as you'd like - especially with it being vacant. I'm not sure if it would be worth the money though. It's around $400 (give or take a hundred) where I am for a SFR.

As far as your outs, I'm not familiar with WI real estate contracts. Do you have a due diligence period?

As for the mold smell - it's probably super musty if it's been sealed up for two years. Of course, have experts test if you feel there's a safety concern. I would expect the property to smell though. If there are no soft spots in the bathrooms/kitchen, then you're a step ahead of the game. I think almost every manufactured home (also called mobile homes even though it's not totally accurate) I've been in that's more than a few years old has soft spots in the floor. Maybe they took care of all that with the roof work.

Just to double-check, does your lender know you're buying a manufactured home? They don't get the same rates/terms as a stick built in most cases.

Ask your agent if you have a due diligence period, when it ends, and for what reasons you can get out of the contract if you want to.  Ask your agent what other contingencies you have (like financing, appraisal, etc). This will let you know all the ways you can get out. That being said, how much is your earnest money? That's what you're risking if you break the contract with fault and I'm hoping that knowing that offers some comfort. I'm guessing it's less than all your inspections. :) 

Also, it sounds like you may have some nerves and are wanting to get out of the contract. Run the numbers and reassure yourself. It sounds like you got lucky to get this one under contract. :) It's totally normal to feel nervous when you get a property under contract but don't let those nerves make you step away from a great deal (assuming it is). :)

I think there are errors on both sides. Not sure what all he did, but sounds like he was a dual agent and didn't disclose (maybe). Or is the buyer just a customer, not a client? 

You should have actually fired him when you figured out you didn't like him. You not firing him is the reason you need to pay him... you gave him the opportunity to complete what he was hired to do. 

Let's step away from real estate... You order a steak dinner, the server says it will be the best mid-rare steak you've ever had, most delicious potato, and the bread will make you cry. You get the meal and take a bite of everything... it isn't what you want. You'd need to send it back after the first bites if it isn't what you expected and you don't want to pay for it. It sounds like you've basically eaten all but the potato skin and are now asking for a free meal. 

 I probably wouldn't require the tenant to rekey the locks to match. Sounds like he's going to have her leave and it's a waste since he should be rekeying everything in between tenants. That being said, if using the Kwikset Smartkey system, if a tenant put in a "non smart" lock, charge for the new lock, or do whatever your lease says. Often, leases have a fee specifically called out if the tenant changes the locks.  

Joe, have you given the tenant notice that you aren't renewing/ending their month-to-month? Does your lease allow showing the last 30 days? Are there consequences to the tenant for you not being able to show?

If your lease doesn't have answers to some of the points brought up, this is a great opportunity to add to your lease and make it better for your next tenant. I'm sorry to hear that you missed out on a 750+ credit score, but hopefully, the timing will work out well with another well qualified tenant. :)

 Navy Federal used to offer HELOCS on investment properties, but not sure if they still do. 

I know a hard money lender that will partner and lend 100%; they will also be an equity partner in addition to "hard money points" up front. Obviously, it's very deal specific if he's becoming a partner on it. :)

Did you fill out a property disclosure? Why did it flood? Was there a plumbing issue that you had a plumber come in and fix or did the water come from outside (and likely to repeat)? If it came from outside, then I think they've got a pretty good case. I'm hopeful for you that it was a plumbing issue that you had properly fixed. 

We had a basement in a property we sold "flood" (get a little water in it) about 2 weeks before we put it on the market. We disclosed and let folks know that we were having professionals do the recommended work to prevent it from happening again. We were covered, future liability was transferred to the company, and buyers were happy. The timing sucked because if the house had held out another month or two, we truly wouldn't have known and if the house had done it a year earlier, we would have remediated it sooner. Happening right before selling is definitely stressful, but you've always got to be above board.