All Forum Posts by: John Choe

I have a property that I'm in negotiations with the owner. He bought the place several years ago for $500K and has an additional $150k HELOC on it that may or may not have a balance. I have an offer on the table for $1,100,000 to purchase it and he was prepared to accept the offer but then he came back and said he would have to pay too much in capital taxes to make it worth selling. It is a rental and profitable so he sees no urgency to sell. He also said he doesn't see any properties out on the market that he would be willing to do a 1031 for. This is a commercial property and not a primary residence so how does the capital gains play a part here?

How would you change your offer to help him save $ on the taxes he would have to pay.  He does not want a subject to or lease to own.  If he is going to sell it he wants out.

@Manolo D. I agree that I was within my rights to pay up to the capped Not to exceed plus the overages that I authorized but in the end I paid a bit more than that because fighting it in court would have cost me even more money. So it cost me some more money then what I had budgeted and cost that contractor another $20-30k in work that I have remaining on the property.

The problem is when I work with a contractor, i need someone that I can trust and by not abiding to our original agreement I've decided it's best that I find someone else to work with.

The foreman gave me an hourly rate with a cap on the total invoice to not exceed a specified number.  If they finished in under the time allotted then great for me I pay less, if they go over then I pay up to the capped amount.  I must not be explaining myself clearly since it's confusing people here.  

In the end I just settled with them today, we split the difference.  While I feel I'm in the right, it's not worth the headache of fighting a lien and going to court over it so we split it and I'll find a new contractor for the remaining work.

the amount over is about 5k.  The invoices are for hourly labor rates, but since they have taken longer than what they quoted, it's gone beyond the not to exceed number.  The owner is invoicing based on man hours and not abiding the not to exceed

The overages that I authorized are fine, and I agree I need to pay extra for those.  it's being overcharged for the work that was on the original scope of work that I have issue with.

I'm in the process of a remodel on a 4-plex from about 4 hours away.  I contacted a contractor and asked for a not to exceed number for each unit.  After much back and forth the foreman for the job gave me a number for each unit.  I negotiated all of this via email so I have records on what the job will involve for each unit and a not to exceed number.  The wording on the estimate given by the foreman is "IF ANY UNFORSEEN HOLD UPS OR SET BACKS THAT CAUSE THE JOB COMPLETION TO TAKE LONGER THEN THE ABOVE ESTIMATED TIME FRAME A CHANGE WORK ORDER WILL BE USED AND MAY CAUSE AN ADDITIONAL CHARGE TO THE HOME OWNER LISTED ABOVE."

I had them begin on 2 of the units.  While the work was going on I came in to review the progress 5 times over the last several weeks.  They sent me daily work reports and weekly invoices.  After 4 weeks they were still not done but getting close.  They invoiced me through out the process and I paid the first 3 invoices totaling 70% of the total not to exceed.  I did add a little when they uncovered some unplanned repairs (approximately $500 additional).  I contacted the foreman to confirm that we would stay on budget.  I was ok with going over a little on time but I needed to stay on budget.  The original scope of work included installation of granite countertops but they told me that they would not be able to do that. Apparently the foreman didn't know that they didn't do granite fab.

Fast forward another week and I receive another invoice which took me up about 35% beyond the not to exceed number.  Still with more work remaining, I was shocked that we had gone over the not to exceed number.  I have yet to pay any more invoices and I agree that I owe the remaining 30% to get to the not to exceed number + the additional work that I approved, but where should I stand when it comes to the overages?  After saying I would not pay the 4th invoice or the pending 5th invoice fully, but only up to the not to exceed number the contractor has sent a notice of a pending mechanic's lien on the property.  

After another conversation today, the contractor said they would back it down to a total of 25% above the not to exceed and finish the remaining work.  I never received nor approved any written change order but they say that the daily work reports were covering the overages.  What would you do in this situation? 

What?!!?? You took out that amazing wallpaper?  J/K The flip looks great and you're on your way!

Congrats

@Brandon Turner has mentioned in the past that his big mistake was not accounting for the management fees.  This has locked him into either managing his property himself or not getting his cashflow.  If you aren't making cashflow with management fees taken into account then I would say it's not cashflow positive.  That doesn't mean you shouldn't buy it but it does mean you need to account for management.  For now as a beginner feel free to manage yourself, just account paying yourself management fees as part of your expenses.  That way you can pull yourself out of management in the future when you have 100 properties and don't want to manage yourself any more because you have all that cashflow coming in  :)

Congrats to you. So was there more investors in the deal or did CN put up the remaining funds? Curious on what the average per door rents are. What is the long term for this building moving forward? What are your plans for that IRA now that you have more to play with?