All Forum Posts by: Sam LLoyd

Very true... that's why this business is such fun.  Yes, I can't help you with figuring out that wording.

Does the inspector carry a tape measure?  I have a basement apartment that is 6'6.5", and building code is 6'8.5".  My last inspector said he wouldn't care about if if he was doing the inspection... since it's not new construction.  Granted, that was a building inspector,  not a CHA inspector.  My point is, if you don't make a big deal of it, and it's that close, they might not go to the effort of measuring.  Keep us updated.

Who's doing the work, and how is it being payed for?  If you had a contractor that could give you a bid for around 80k to do the whole thing, and he was honest, quick, and never made any mistakes, and you had 115k laying around, I'd sat it's a no brainer.

More realistically, I don't know what material costs are on your side of the world, but I flipped a 4/2 here (without doing the roof), and I was into it for around 50k... but I did a lot of the work myself, and part of that is a year of holding costs because contractors bailed, worked slow, or never returned bids... So I ended up hiring a helper and doing most of it myself.  

I also had access to the money to finish the project, but it tied my real estate investing hands up for over a year.

So... if material costs are close to mine, you have the same contractor issues I did, and you can do a lot of the work yourself... and the roof costs less than 30k, I'd say there's potential.  Now, if by gutting it, you mean you have to do all new insulation, wiring, and plumbing?... at least in my area, that would not make money at all.... as an investment... might be worth $25/hour if you do it all yourself.

I was just reminded by Avi that they send those checks, which you can write to yourself with the one time 3% fee.  I've never actually done this, but I've talked with my mortgage broker and banks about it.... here's what I found.

Banks don't like the balance transfer checks, so plan on them taking a few days to clear. Also, if you're getting any conventional financing... they are going to want to know where this money came from.  So, if you're using it for a down payment, make sure it's in your bank account for at least 2 months first.

I took 6 months off of work (layed off) for our first live in flip (and hold).  In that time, I went from almost no experience other than library books, and a duplex unit that needed all the wiring redone, sheetrock, finish, kitchen, 2 baths, flooring, fixtures..... to having a unit ready for the appraiser to give it the thumbs up.  So, if you have full time to work on it, and that's what you want to do with you time AND if you're handy and a quick learner, it is possible.  Disclaimer:  I intentionaly bought in an area without zoning and building codes. 

I was using an FHA 203 rehab loan, so I was at least getting the material paid for. We put the material and living expenses on credit cards, and used the 2 loan distributions to pay the mortgage since the bank wouldn't take credit cards. So, even though I had the sweat equity, it probably wasn't the best financial option.... no regrets though, it was great working at home through a beautiful summer and what I learned is priceless.

The stress of the flip is the dust and dirt that is always there... you'll be constantly cleaning.  Also bathrooms and kitchens really are hard to do without for any period of time...If you're buying a 3/2, make sure one bathroom is servicable before working on the other... this is key.  If you're redoing the kitchen, find a picnic table and hook up a plastic deep sink if there's going to be any delay getting the new kitchen in.  It's all doable.... it just might not all make money. 

Good point.  Where I am, it's hard to find a home older than 40 years.  We had a big earth quake in 64, and before that it's common to find old wiring... so a lot of investors stay away from that old of houses unless it's a tear-down.  You are absolutely correct though... a house can start with a cosmetic rehab and go downhill quickly.

Story: I met a guy who tried this, ended up changing the roof, redoing plumbing... got everything tore out to the point where him and his wife had to move back into an apartment because the water was off.  Then, right when he was starting to put it all together, a building inspector noticed that he didn't have any permits, and some of the structural things he had done wrong.... when I met him, he was literally hiding from the building inspectors... driving up quickly to show us the house, and then tearing off as soon as we were done.  Worst part was that there was an antique rifle collection he was storing there that was ruined from water damage.

Moral of the story:  Plan ahead, and ask ask ask people for advice.  You can do it.

Been there, done that... couple times.

Don't get into a live in flip unless you are handy.  I had no experience with handyman tasks until I bought my first project duplex.  However, I am very handy, I had books (now there's youtube), and a friend helped me quite a bit.  Now I have 10 doors, one of which is a house I built from the ground up...  I do almost all the maintenance... using skills from my first rehab.  So, if you are handy, go for it, if not.... stay away from a live-in!!!  

That being said, if you qualify for a conventional mortgage, you shouldn't have any problem getting pre-approved and making offers on houses, foreclosed or otherwise.  While you're learning the ropes, it might be best to purchase a home that can be financed...  Doing a cosmetic rehab is a good place to start and you're less likely to loose your shirt if a foundation/electrical/plumbing problem escalates.

Personal advice:  Don't do the rehab with high interest loans or credit cards because the time it takes can get away from you.  I did, and had the ability to pay them off, but if I didn't....

Well, the numbers look like they work together for the most part. Looks like you have debt service... and then you have PITI.... is the PITI actually just taxes and insurance?

Also, I realize this is just a sample, but if you're looking at a specific house, you need to nail down the rehab numbers as a a big change here changes everything.  If you're just making an educated guess, make sure you double it, and then add 10% just in case... or something like that.

So, most people would agree that the more bills that go to the tenant, the better.  So, if there are two electric bills, the tenants pay that... if there are two heat bills, the tenant pays that.  Same with water and sewer... If there are 2 meters, then the tenants pay that... but if there's only one, then the landlord will pay it.  I can tell you from personal experience that it's a headache trying to get a tenant to pay for another tenants utilities.

In Alaska, the rules say that the landlord does not have to pay for trash unless it's 3 or more units... but if you have tenants that won't take care of their trash, that's something you might want to pay for... just so the place looks better.

Of course, internet and TV is the tenants responsibility.  How much of the interior maintenance (light bulbs), and exterior care (lawn mowing), all depends on how you put it in the lease agreement.

I hope this helps, let me know if you have a more specific question...though things might be a little different for me due to location.

I've done this once on a flip, and I'm it the middle of doing it again.

1st, I bought the property with hard money, and then used CC to purchase all the materials and installations that I could.  Then I transferred the balance (only 3%) to other CC, which I paid off when the house sold.

2nd, I did a job for someone.  I put all the materials on CC, and then deposited the money they paid me.  Transfer the balance (3%), leaving not only my wages, but also the material costs in my bank account.  These funds served as reserve funds to help me qualify for financing on my last 4 plex, and maybe even another property or 2 before having to pay off the balance in 6 more months.

How to pull out the money without doing a balance transfer... I have no idea.  The e-bay thing seems like there could be more to it, but if you've done your research...  Also, you'll note that the second time I did this... I have the money to pay it off at any time.... much more helpful as far as being able to sleep at night.