All Forum Posts by: James H.

I can't tell if you are adding additional structure to increase the square footage or if you are getting that from the basement finsih out.

I also am not sure about installing a new pool for $2000.00. Maybe you are performing maintenance on an existing pool?

Adding a second bedroom and bath (even if it is part of the basement finish out and not an addition) as well as new countertops in the kitchen will likely require new paint and flooring throughout the rest of the house.

It just "feels" like 22K is really light for a cost estimate, even if you do much the work yourself. I would have to see it, but if my gut told me 20K, that means real costs could be closer to 30K. Just what I have noticed as little hardware pieces and tools and extra labor and other crapola tend to bring costs up about 20 to 30 percent of my initial estimates on just about every project I do. I know this, so I budget accordingly. Again, I'd have to see it.

Marian,

Nobody can provide you with information regarding the appropriateness of your oppurtunity because you have not provided enough information. Not that you would have known to in the first place. I am guessing(only guessing) that since this is a slab foundation, and you indicate there are issues with other houses in the neighborhood that these foundation damages are due to shrinking and swelling of active clay soils. If this is the case, you will not find a repair within the bank's numbers that will permanently solve the problem. If this is clay heave/shrink related, the common and cheap method is to use pressed concrete piles. This repair can be made for about $200-$300 per every 6 to 7 linear ft around the perimeter of the house in my area (Dallas/Fort Worth). There are shortcomings in this repair method that I will not cover in depth here, but it basically doesn't work. I know people will claim it does, but it doesn't. Your house will continue to move up and down and you will have to shim doors and windows and patch cracked sheet rock, etc for the life of ownership. Any dipstick will see the house has movement issues by looking at poorly made sheet rock repairs or just looking at the cracks in the mortar of the house next door. That's where your "stigma" will occur. Basically, anybody ever looking to buy your house in the future will be taking the foundation issues into consideration when evaluating their options.

However, foundation movement is so widespread in the metroplex (where I live) that it is still not a deal killer. Some areas have worse issues than others, though. One of the higher valued areas (Las Colinas) has some of the worst soil conditions, but they are usually addressed during new construction where the bottom line can afford it.

Plumbing lines may or may not be an issue. Many times it is not. I think you may want to stay away from this one, but maybe not. If you live in a region where this is common, you may find that many, many houses in your price range have some degree of foundation movement. I have certainly found that to be true for me.

You have not provided enough information. Where (regionally) is the property located? This is important because the depth of frost penetration may or may not be an item of concern when determining the repair type (depth of repair, etc). Also, some regions have issues with expansive clay soils (requiring continued maintenance over seasonal changes in soil moisture content). Are there larger trees nearby? How is the drainage around the damage and around the house in general? The problem you are describing is the effect of countless possible causes.

I would ask why it has happened in the first place. Armed with that knowledge, you could make a better informed decision. Be careful with foundation repair companies. There is a lot of misinformation out there about the cause, effect and repair methods for foundation damage. Get a lifetime warranty if possible and only use a company who has long history (good history of course) so that you can have a better chance of a lifetime warranty being honored.

Ultimately, anything can be fixed if you throw enough money at it. I would simply deduct the cost of the repair from what my offer would be if there was no need for repair (provided a positive and sound repair is possible - again, anything is possible with enough money). There is a possibility you could use the distress to your advantage and get a deeper discount than what the repair will cost.

I qualify my opinion by offering to you that I am a geotechnical engineer during the day.

If you spray with oil base it will look terrific. Just make sure you (better yet your painters) tape it off good as latex won't stay on oil very well.

Thanks for sharing Bienes. Have you had much success with room mate situations in general?

Simply, I would reduce my offer equal to the amount of the repair cost below what I would pay if there was no need to do the repair.

If you know the perimeter of the house in feet, devide that number by 6 or 7 and that will tell you how many pressed piles you need. Pressed piles cost about 200-300 each depending on how deep they need to go (total foundtion repair likely about $10,000 for a 1,200 SF structure). There are other better repair methods but they cost more (usually twice as much and up). If you are gonna flip it, you might not be concerned with the "lifetime warranty" of the repair, if offered, but if you are going to hold it for more than one season (wet season to dry season or vs/vs) you will want that lifetime warranty so you can call them back to shim up the foundation because it WILL move again.....and again and again -you get the point.

Some foundation movement is to be expected in many areas of the metroplex, but I would advise staying away from those houses that evidence a lot of movement. The movement never stops and it's a never ending sheet rock repair and door and window shimming story. Those neighbors slowly fixing their houses will likely never be done with it.

FWIW, I am a geotechncical engineer that invests part time in real-estate, so my input on the foundation proper is sound. But if you REALLY should or shouldn't invest, I am not the most qualified to say. If the movement looked bad to me, I wouldn't do it. But you may not know how severe the movement is unless you have experience evaluating such things and have a basis to compare.

Okay, so since you have a sales note you are legally "foreclosing." Then do you have to pay a mortgage originator to legitemize the loan? Or is it like a car note and you repo it?

Sorry for beating you over the head with these questions. I am just starting to learn my way around owner fincance rules. I know they would vary from state to state, but the general structure is probably similar between TX and FL.

I wouldn't make an offer on a mortgaged property unless it generated cash flow with 0 percent down. And this deal does not appear to do that. If you are going to get 750 in rent, you might consider a more reasonable purchase price would be about half what you are considering (2 percent of rent rule of thumb).

Then I would do a life cycle analysis (10 years in your case) comparing what kind of returns I could expect if I invested the required (or additional) down payment in the stock market in its lump sum right now over ten years vs applying the monthly cash flow from the property to the stock market over the 10 years and then add equity at sale. I use a 7 percent return because that is a rough historic average that is conservative at today's return rates.

John, if you used the 50 percent rule, that should cover the roof for the purpose of the analysis, would it not?

There is a topic that Josh Dorkin started a while back about the top 5 mistakes landlords make and some of the comments get into using L/O. One of BPs regular posters MikeOH brings up some good points about how L/O is more of a theoretical "best of both worlds" kind of strategy to improve rental returns. Chances are, the tenants will do a crappy job maintaining the house (they are renters at the heart of it all) which is one of the "benefits" and they also usually don't exercise the option to buy (so you don't get that inflated sales price you were planning on getting). "Great," you say, "I keep the option money!" But do you really want to let tenants take control of your property's maintenance and then get into an adversarial situation with them (more than typical for rentals) just to keep that non-refundable option? Then you have a shoddily maintained unit that gets destroyed because they are pissed you won't refund the option money which you will now use to fix your trashed unit for the next sucker. I have never done a L/O, but this logic makes a lot of sense to me.

Why would you have holding costs when wholesaling? If you are wholesaling, you get the seller to sign the contract to sell the house to you or your assignee. Then you assign the contract to a cash buyer (your assignee) and charge a fee to tranfer the contract. This way you don't actually buy the house, so there is only one set of closing costs which your buyer pays. It doesn't cost anything to hold a contrat except the earnest money you give to the title company to hold which is the "consideration" that makes the contract valid. You set the earnest money at 25 bucks or some other insignificant nominal amount.

So the answer is, your holding fees = oppurtunity cost of 25 bucks until you get it credited back once the property is bought.