All Forum Posts by: James Baker

I believe there is a lot of advice on basic and advanced rehab advice. I'm glad to see this. 

However, due to my own experience, I would assume a lot of investors start off with a rehab right smack in the middle of basic and advanced.

For example, I am currently buying a property that is a total gut job. While that may sound like a lot, this gut job is going to be very easy and I believe any beginner would be able to handle it if they used a good contractor. I'm not going to go into detail on the project, that's not what this post is intended for, but you get the point--- it would not be uncommon for a newbie to invest in this property.

As I do this rehab, I am noticing (and evening learning) some things that I definitely would not have understood when beginning my RE journey. I read a lot of books, watch a lot of podcasts, and a lot of YouTube videos, and I can't remember being taught this stuff.

I wanted to make a list of some questions I could see some new investors asking and maybe we could try and answer as many as possible?

Some of these questions I'm even wondering myself!

1. When doing a rehab, do you hire a project manager and a contractor. Do you just hire one? none?

2. Who writes the scope of work? Do you write it yourself? Does the Project manager? An outside source?

3. Do you use a scope of work templates or draft them yourself? 

4. Do you need an attorney to draft your scope of work?

5. How detailed does the scope of work have to be?

6. How to you manage change orders in a contract? Do you rewrite the contract and re-sign?

7. Can you have the project manager double as the contractor too? 

8. Is it best to have the project manager write individual scopes of work for each subcontractor, or just one large one for the contractor? What if you don't hire a contractor though?

9. Do I have to pay 50% up front to the contractor?

!0. Should I buy materials or should the contractor? 

11. Who gets the dumpster?

12. If I have cash, should I pay for the rehab in cash or with check? Will I get a tax write off with cash?

13. How do you keep your projects organized? Manage money, timelines, subcontractors.

14. Is there a special Home Depot account I should open?

15. Where do I go to get building permits and inspection? 

I'm not a beginner, but I have only been investing for 3 years. A lot of these questions had be guessing. I'm sure a lot of people are in the same boat as me. 

I hope this post can help some other beginner investors answer questions the internet just doesn't want to answer!

Thanks guys!!

@Alessandro DeVito pictures would really help.

Sometimes when they built house 100 years ago, they didn’t use levels (were they invented yet?)

Your joist’s could be uneven, or since they used nails instead of screws back then, they could be shifting.

It would only cost you a couple $100 to have a structural engineer come out to check it, or even have it done at the inspection period.

You’ll have 12 days for due diligence before you’re locked into the deal.

Maybe even a contractor with a free estimate could identify the problem easily for you.

Hope this helped

@Jaysen Medhurst so you believe eventually I’ll find one that allows what I’m trying to to do? I’m willing to do that. Just didn’t want to continue making 196 calls if I read the book wrong or something.

I live in a Triplex that I own on a portfolio loan that I put 20% down on.

My mortgage is $800 a month.

My insurance is $1200 a year.

I owe $95k on the property and it is worth $150,000.

Unit 1 rents for -$550

Unit 2 rents for -$650

Unit 3 (my unit will rent for -$700-$800)

My plan was to move out of this house into a Fourplex, then rent out my current unit- resulting in $800 plus cash flow out of the Triplex.

The sales price on the fourplex would be $220,000.

The fourplex is worth around $280,000. (It’s a failed short sale)

Each unit can rent anywhere from $800-$1100 a piece. That’s around $700-$1000 of cash flow a month WHILE living there.

So back to my plan.

The plan was to move out of my current triplex, rent out my unit, then get into the fourplex for a low down payment. Somewhere under 5%.

I thought I could do that since it was an owner occupied loan.

Unfortunately, I’ve called 4 residential lenders, who have all said it doesn’t matter about the equity or rental income, it only matters what my w2 income is.

I only make $70,000 a year on my w2, which is obviously not enough to finance two mortgages.

So I can’t even get pre qualified.

Then, I called 5 commercial lenders, and they all said I HAD to put 20% down or they won’t even talk to me.

I even tried to do a blanket loan.

Am I doing something wrong? Is there no way to get a low down payment while living in the fourplex?

It thought that was the whole point of house hacking?

Someone please help!

I recently had a mess up in my taxes due to my personal finances being too intermingled with my business finances.

I own a Triplex that I live in. My book keeper and CPA have recommended me to open a separate bank account for business and run all “business” things through that account.

How would you guys go about doing this? Would you put all expenses an a credit card?

Would you pay mortgage, insurance, and water through the business account, then personal expenses like electric and cable through your personal account?

When you collect rent, do you create a Venmo for the business?

Do I need two phones so I’m not login in to two different accounts all the time?

Thanks for the help!!

@Bill Brandt you have no idea how much you just helped me. Thank you!

I am new investor.

I just bough my Triplex in April of 2019.

I had no idea about tracking expenses or book keeping, so I simply did not.

Come tax time. I go to my recommended CPA and he sends me home because he said it would cost far too much for him to do my taxes, since I am so unorganized.

He instructed me to make an excel spread sheet, print out all my statements and list all my expenses and profit.

I live in my triplex so he told me to list all utilities that I pay for the building as well.

So my issue is #1. I do not know how to use excel and #2. I have so many expenses on different credit cards, credit lines and bank accounts from my small rehab that it’s getting pretty over whelming.

Does anyone have advice on how to make this a little simpler or is it just a long drawn out process? Should I just take my losses?

Thanks!

@Bjorn Ahlblad

Thanks! Building has been on the market for 6 days

@Tj Hines the 4 units rent for $600 each right now.

It is a true 6 unit. The last two units are just in such bad shape that they cannot be rented. They are on the 3rd floor.

I’ve recently been look at a property right down the street from me.

This property is a 6 unit building, with 4 units currently rented and 2 units that’s currently need rehabbed.

The building is a fantastic deal. 6 units for $125k, each one rents for about $600-$700 a month.

Is this deal so good, because in order to rehab the last 2 units I would need to install fire escapes and sprinkler systems?

What’s are the rules and regulations from converting a 4 unit into a 6.

What would you do?

Thanks for the help!