All Forum Posts by: J Scott

If you have a significant other, have him/her get a license. This way you have the benefits of having the license, but there are no extra disclosures or hindrances when it comes to buying/selling...

I use several contracts/forms for all my projects:

- W9: The first time I work with any contractor, they sign a W9 form (IRS form). This ensures that I don't have to pay taxes on the money I pay them.

- Independent Contractor Agreement: This lays out the schedule, terms, insurance requirements, responsibilities, etc. Most importantly, it establishes the fact that the contractor is *NOT* an employee, hence relinquishing you of the responsibility of managing the person as an employee and paying associated taxes.

- Scope of Work: This lays out specifically what work is to be done, in as much detail as possible

- Materials List: This lists the materials that should be used for all aspects of the job, including where they should be purchased, SKU numbers, and anticipated pricing (if the prices are off, call me to figure out what to do)

- Payment Schedule: This lays out when the contractor will get paid, generally using 2-5 draws (depends on scope of project and schedule)

This is true for traditional Fannie/Freddie loans, but not necessarily the case for portfolio lenders, rehab loans, or hard money.

Do your research...if you have decent credit, income and/or cash reserves, you can find loans...

Keep in mind that if you would have offered 70% of asking price when the house was listed at $219K, you would have offered $253K. You could likely pick it up for that amount if it's now down to $175K.

In general, I don't see a lot of 70% offers being accepted on REOs in my area (Atlanta), but if there are no other takers, the price will eventually drop.

Buy low. Sell high. Make positive cashflow in-between.

By the way, if you ever make purchases at Home Depot for more than $2500, go to the Contractor's Desk and ask about the "Pro Bid Desk."

Basically, they will take your materials list, send it to the corporate office, and give you back a discounted total price for your materials. Generally, this discount will be somewhere between 15-40%.

For example, I went into HD earlier this week with a $2900 order (retail HD prices) for doors and windows for a couple projects, and ended up paying about $2100 for the order, for about 25% discount.

There are lots of bad contractors out there...hopefully this isn't too much of a surprise...

Make sure you protect yourself upfront:

1. Check references before you hire a contractor. This includes seeing (GO VISIT!) the last one or two jobs he completed, and speak with the person who hired him.

2. Never pay ahead of the work that's been completed (i.e., after 25% of the work is completed, pay 25%, etc);

3. Get a schedule from your contractor before the work starts. If you know where he is supposed to be in a project, you can tell if he is ahead, behind, or on-schedule at any point.

4. Make sure you visit the job site at least a couple times a day, and make sure you "drop in" by surprise. You want to make sure your contractors are working when you're not around.

5. At the first sign of trouble, don't hesitate to get rid of a contractor. While it may be a pain in the *** to have to find a replacement mid-project, it's much worse to have to deal with a bad contractor for any amount of time.

I have a materials list that is mostly Home Depot. This allows me to give my list to my contractor and he only has to go to one place to purchase most of the materials (saves both of us time and money vs. having to run around to different places).

For some things, find a specialty store. For example, I have a carpet store where I get all my carpet, and the owner gives me good deals because I keep coming back. My contractors can walk in there, mention the carpet is for me, and get the good price -- the store owner knows what brand/color/style I use, so there's never any confusion.

For very inexpensive appliances, try Best Buy. You can get a set of stainless steel (the fake stainless) for about $2000, which includes tax and delivery -- this includes fridge, oven, microwave, dishwasher, washer and dryer.

For paint, set up an account at Duron or Sherwin Williams, and send your contractors. The account should list the colors/brands/types of paint you use, so there's never any confusion for the contractors.

Do the same for flooring (find a good specialty store and negotiate)...since a good % of my costs are flooring, some negotiation and long-term relationships can go a long way.

I let my contractors worry about the tools...there are a lot of advantages to that method... :)

REOs are listed on the MLS much like any other property. You can get access to the MLS via a number of free website, or you can find an agent who can help you.

I suggest if finding an agent that has some experience with REOs (buying and/or selling), as the process can be a bit tricky when dealing with certain banks. Also, an agent that has relationships with REO listing agents can be of additional help as well.