All Forum Posts by: Lynn Hill-Torres

I'm anxious to see what  Ned has to say. He's a real pro at this stuff

Oh right, the property is in Baltimore County, Maryland.

I have a townhouse and converted the basement to a unit. The two tenants share the laundry room/utility area, which is just outside the basement tenants unit. The tenant who lives upstairs formerly lived in the basement before we moved out. The current basement tenant actually lived there previously too. So, I say all this to say, both tenants know what it is like to live in that basement. 

I am at the point where my upstairs tenant is not neighborly. He has late night (and loud) company, plays music loud and late and does his laundry well into the night (like after 1 am). He does NOT work overnight. When the basement tenant sends a text to keep it down or tried to set an agreement not to do laundry after 10 pm, the upstairs guy will almost "punish" him by not giving him his mail or do laundry even later or tie up the washer and dryer all weekend and still play his music loud, or be loud in general. He had a fight until 4 am on a Thursday. 

My basement tenant has asked if he can move. He's added me to their text message conversations and then is called a snitch for trying to resolve things that are clearly issues. The neighbors next door have also complained. 

He usually pays early every month, this month will be the first time he's late and he told me about it beforehand. This is his second year with us. While he was in the basement, we never had an issue, but since we moved out, and he came upstairs, he's showing out!!!  .....and costing me money. I like the guy, but ...dang.

We gave him a sweet deal since he would have to be more concerned with the tenant below as there is no separate utility for the basement, he would have to be mindful of noise and place the basement tenants' mail in his mailbox out back. 

So far, this isn't working and I'd like to instill house rules. Can I do that so early in the lease? While I think he's not being neighborly, some of these offenses fall under my counties nuance laws. Can I send him an Addendum and have him sign it? 

Hello BP folks,

We've had a crazy journey for our first rehab. It turned into a big job and now we are needing a new contractor. We are more than half way done, dry wall up, but have been moving very slow. We've had 3 break ins in just the past week, 10th over all. The current rehab has taken over 4 months and we still haven't gotten to sanding any walls yet. I'm seeking some recommendations for any contractors that you've use that may speed up the process and get us done before October. I know this is busy season but we are faithful that we can find someone. Property is located on N. Patterson Park Ave  & Monument 

deep sigh. 

I will take all into consideration. Thank you all. 

Help BiggerPockets!  

I am in desperate need of some help and advice  to steer me in the right direction.  I jumped out there  and bought a house that was supposed to be a rental property but when we looked at the area, my husband and I felt to  get us some Capital to get started with the rest of our real estate ventures, which is to buy and hold. This isour first property  and I'm feeling that it's heading towards disaster and all the people that I've been speaking with are not helping  partly because their family members .  Mistake number 1!  

So here's the scenario...(this is going to be long)

 In October,  we we're looking for our first rental property to buy  in Baltimore Maryland.  We met a wholesaler who had a couple of houses that were right in the price range that we were looking for and since this was my first  buy, we had read all the books,  read a bunch on the website, listened to podcasts, I felt we were ready. So, we went to our bank and got a personal loan at nearly 11%  for $35,000 .  We were looking for a house that would be about $20,000 that would need about $10-12K in rehab costs and then rent it.  We came upon this house and got it at $24k on Patterson Park Avenue and Monument in Baltimore City. This house is 5 blocks down from Johns Hopkins Hospital  which they are buying up blocks and blocks all around  the hospital  and they're gentrifying the neighborhood. It's one of the hottest neighborhoods  that is upcoming in Baltimore right now. Even though they haven't really started doing the major renovations yet but everyone knows that something big is coming because they're buying up blocks at a time.  And the city is all behind it and have really started  making the community  beautified, planting trees and fixing the roads. To the right of me, next door, that house just went up for sale for  $35,000  and it is a complete gut job . To the left, next door, is for sale a turnkey rental for $65000.  Next to that house  is a group  of 4 townhouses  that are for pre-sale  at $250,000, by a developer in New York .  They are going high end.  One block down, in the  800 block, reno homes are  for sale  for $200k. On the 900 block, the same. These are fully rehabbed upscale high end homes. 

My intention was to do a mid-grade rehab (because we didn't have a lot of money), have my brother (who's been doing carpentry and rehab work for other investors' rentals) would do the work and my husband would help......well, we got ourselves into a little mess. Basically, the money was getting spent but the work wasn't moving as I had anticipated. We ran out of money. 

I felt that my brother was cutting corners in the work and basically band-aiding problems and not really correcting them in order to stay on our very modest and tight budget. Since we decided to go with a flip instead of renting it, the rehab changed...but our budget didn't. I quickly learned that we needed more money to do the rehab. We halted the rehab so that Thanksgiving wouldn't be weird. I was getting frustrated and my brother felt like I was micromanaging. We never did a scope of work. He didn't know what that was and it was difficult for me to tell him what to do and my mother who is realtor and has her own rental property that my brother manages, was on his side. The outcome was that I was the newbie and needed to let him do what he does. But he was all over the place. Many jobs got started but nothing was considered "done." At thanksgiving I stopped all work and now my brother has no work for the christmas holiday and it seems like its my fault because this was suppose to support him through January. I felt we had no way to determine if we were on time, on budget, or how we were progressing. 

This isn't important but since I'm venting, why not tell it all. We got into investing to help my brother. Really this is his dream. We wanted to help him get a two-unit house, move out of where he was staying and then he'd have rental income to help get himself on the road to his own properties...so we said if we did a flip, we'd pay him 25% of profits. We were hoping that even if we jumped in and out quickly, we could still make like $80K with the numbers we had. But everything changed with him. We needed to pay him every week, $500, and then he needed helpers, and the money was just going very quickly now and I couldn't see anything get DONE, started but not done. My husband complained, why now should my brother get the 25% if we are paying him now, and paying him a fare wage? What was his risk? His contribution to garner the profits? I was torn between my husband and my family and I, of course, sided with my husband. He was, after all, working to fund this whole operation....and he works outside, mind you, and today, for example, is 20 degrees out there! He wasn't too happy. 

Now that we've stopped. I'm at a lost now. I know that in a couple years that area will be HOTT! But then I really want to get my business off the ground and I think a flip would give us the capital to move ahead quickly and not have to wait a year or more before we get our next property (that's about how long I imagine it would take us to save enough money). 

Here's what I'm thinking, we found a new contractor that has done many many rehabs similar to this one in Baltimore City. He works with my other brother who is an electrician and came highly recommended. I got a good gut read from him and he taught me a lot during our walk thru. His guesstimate on the rehab was to go high end like the houses in the area and the ones next door. He said $40k for the rehab and 12 weeks. He said we needed to do a scope of work to make sure we were on the same page. He even said he'd hire my brother so that he can learn and be able to work with me in the future. But at this point, I wasn't sure about the money. My personal loan is for 6 years/10% fully amortized, so my monthly payment is $687. I was thinking about getting a hard money loan to pay off the personal loan and then add the $40k for the rehab, so a total of $75k we'd be all in. First off, I don't even know if a private lender would even do this type of loan so I'll have to just wait and see. My mom, who is a realtor, thinks that because of the low prices of the houses next door will allow us to only be able to sell ours for maybe $120-130K even if we went high-end, but she doesn't work in that area and hasn't been "actively" doing real estate for years, but she is a wealth of knowledge with 25+ years of experience.  

I'm so stressed, anxious, tired, exhausted, at a lost...I wrote this long book so that you guys can know what it is going on and will best be able to assist, guide, provide advice. 

What are your thoughts? 

Hi Toni.

I am sort of in the same boat as you, but further along in the journey.  I'd say yes you are a bit over simplifying. Because your partner is doing much of the labor, you may be underestimating the cost of labor. That is something you should hash out with your partner. Yes he is doing it for free now for the sake of the rehab and profit later on, but why should you get 50% of all the profit  when you didn't do the work. 

Here's what I mean. I just had a plumber friend come and install a shower in my basement. At the homeboy discount rate, it was still about $2000 just in labor. The materials were less than $1000. The job took five days. When I bidded it to other contractors,  the price was 4500-10k. Three Grand to add a shower, and upwards of 10k of value to my home is well worth it. However, let's move that to the rehab. How much is his time and labor worth and how much is your credit? That is essentially what you are bartering, if as you say, your role is to get the loan. 

If he is not getting paid during the process, then he will need to get his own labor added into the closing/profit money. It might surprise you what he comes up with five  weeks into the rehab. Hopefully he doesn't charge "standard contractor rates." 

What I did...because my contractor is also my brother, we (my husband and i) dug deep into our budget, our personal budget, and decided to pay a weekly stipend as motivation. There is an expectation of work to be accomplished weekly as well as a scope of work detailing each task. This helped our familial relationship much more. Cant have Thanksgiving  feeling weird. Because we both knew/know what is expected. And since our small but reasonable stipend ($500/week) doesn't pay all his bills, he still needs to work. So that means, my rehab will not be done in 6-8 weeks but more like 8-10. Someone has to pay the loan, electricity, gas, heat, water, in the mean time. Those are more expenses that are costing me money. But when you have more time than money, it beats contractor rates. 

Our deal is: he gets paid a percentage, which we hope will be "contractor rate reasonable" at the table, which we factored in about 25% of what we profit. We used a percentage as opposed to flat rate. Percentage can fluctuate with whatever we profit, cuz the market never goes as I want it to. We are also paying for materials and helpers out of the loan which includes rehab costs.

We chose the route of hiring my brother as our contractor with a delay in full pay as opposed to a partnership. Here was the problem of the partnership:

during some early talks, I realized my brother expected to be paid for his work....which is amazing btw. ...in addition to a split of the profit as a partner. So let's talk real numbers. lets say our rehab has potential to get 100k profit after loan payoff (just playing with numbers here, though I'd love a deal like this). The rehab costs were 15k in materials and helpers (which he paid for)= 85k. He never paid himself, but his labor should've been about 15k... say this is the homeboy discount. That's now 70k left. You split now that number: 35 & 35k. He will get ultimately 65k, and me, 35k. Make sense? 

At first I was like, whoa. But it was right. I don't think I could imagine myself handing him 65k of a 100k deal and getting so little. I would think, who's deal was this anyways??

This may not sound right, but I'm only going off of what you said. Also, I'm just making up numbers for the rehab, it may not be that much...or maybe it could be more. My rehab costs are listed at about 17k without paying my brother. And you said your partner would be paying for materials and helpers. I'm just throwing numbers around so that you can get the concept. For us, it made more sense to hire my brother outright instead of partnering. I get it, I need him or there's no rehab. But he needs me or there's no house.

Let's look at Same numbers but we pay for materials and helpers out of the loan and get creative with our funding and we take on the risk of funding the rehab. Here's where the barter evened out a little more. We have a higher loan and used savings but at closing, using the same 100k profit example, I only need to pay my contractor and repayment myself. By paying 500/week , he has motivation to stay committed to the job the whole 8 weeks or so. So say I've already given him $500*8weeks=$4000 pre-closing. At closing, he gets 25% or 25k, me= 75k. He walks away with $29k total, which is better than contractor rates. But I don't have to split the remaining profit 50/50.

and we $75k - (4k labor - 17k rehab - 2 loan payments of $700 each or 1400 total, 2 gas & elec pmts of 200 each or 400)= $18,800 but let's round to an even $20k for expenses...that's 75-20= 55k total profit to me. 

So, 35k without the rehab headache could be worth it to you. However, don't underestimate him and his labor. Managing a rehab is hard work and he should be compensated for it. I just wanted you to see in detail the things which sounds like you may be overlooking. If these numbers sounding fine to you, go for it. But always write it down what is expected. 

My advice, go on zillow, grab the first house you find and analyze it. Look at the profit and guesstimate rehab costs. 100k is A LOT. Try the numbers at a 40k profit, 25k. 50k. Obviously the rehab can change everything but it shows you what your portion will be. I think the hardest part will be at closing, when you get that fatty 40k check and then ......you have to hand over 30,000 big ones to your partner because he did all the work. It may make you feel some type of way after that. But if it's legit, then I want you to understand why you're only getting $10,000 of a $40k deal. No one wants to feel cheated. Not you and certainly not him. The last thing you want is for him to get three weeks into it and get ticked off over the expectation of compensation and leave you with a half done house in your name. That wouldn't be nice. Then you'd have to get contractors at those nice rates and there goes your profit. He needs to feel like he's winning too. 

Got it?

Sorry to write so much but I needed this to make sense, even for myself. Hopefully that helps  

Thank you everyone. This is has been so educational and very informative. There seems to be so many options. The thing I take away most from everyone's comments is not to say to myself "there's no way to do this" because of XYZ reason, but to be creative while asking, "how can I get this done?" I will update on the combination that we will be using and how it works.

Thank you. I heard about 7-11 but wasn't sure what the program was called. Do you give them options, more than one? What other options do you offer?. How did you transfer over to electronic payments, was it gradual or did you make a memo that at the beginning of the next month?

Hello BiggerPockets family.

We are working with a landlord, managing one of her tenants as a way to gain experience  for when we finish renovating our property.  I remember in Brandon Turner's book, he said one way to get experience is to work with  a  landlord . So I was wondering if anyone had any really good apps or ways of collecting rent electronically. Right now the landlord goes to each tenant collects in person and I surely don't want to do that. Gas and time is too precious to waste.

Any helpful tips would be much appreciated.

Oh yeah, So the property is in Baltimore City, Maryland, in the Bel Air/Edison area. It's a Cmarket with C -type tenants. In addition, she is renting out rooms in the property and most of the tenants are more on the low income side. We are hoping to get late payers paying on time and for people who haven't been paying, to get them out.

Any help or thoughts? Thanks in advance. Let me know if you need more info.