All Forum Posts by: Malte Lange

Thanks Nathan! I appreciate the info.
I can see how my question was poorly worded. I meant after 12 months of paying rent, they then didn't pay for the next month or two.

Bettina - Invoices every month sounds time consuming, but if it can be done automatically, that's a great idea as well.

Thanks for the feedback! I'm really impressed with your system!
Unfortunately in my state I need to give at least 30 days notice and eviction can take much longer, sometimes spanning 120 days. But I like your general scheme, I will implement as much of that as I can.

Hello Bigger Pockets community,

I'm very interested in rental properties, spanning both more traditional rental properties, but also low-income housing properties. I did my best to find a thread with this information, but couldn't find anything. Should a thread already exist for this, please feel free to just forward me. Thanks!

I'm wondering what sort of rent default rates people work with or have heard others work with? By rent default rate, I mean number of months defaulted over the total number of months rented out. So if you have a property that you rented out for 12 months and then your tenant didn't pay rent for a month or two and then you had to evict them, the default rate would be 1/13 or 2/14 depending on the circumstance. You can either state this for a single property or aggregated over all of your properties or what you've heard from others. And please specify if this is for non-low-income or low-income properties.

I know this information can be personal, so I appreciate any input! Thank you!

Best,

Malte

@Crystal Smith: 

A construction lien would definitely be something to add to the contract. The point of the contract isn't simply to delineate the sharing of profits, but to strongly deter either party (both homeowner and flipper) from failing to fulfill the contract. 
A quitdeed claim is a really good idea! Thank you for the advice!

@Alex Bok: 

Yes, basically a flip and list. Although I have a few other ideas of how to possibly make other arrangements work as well.
I would hope that the contract would eliminate almost all need for trust, in the sense that should either party not fulfill their side, the other will be adequately compensated. So both parties can go through with the deal, knowing that if they hold true, they will come out ahead. Thus there is no true need for trust, since you get something either way, as long as you uphold your side. The true interest to me is how to reduce any need for trust, because that'll hopefully also eliminate the possibility of emotions getting the best of people.

I'd be super happy to talk about this more in detail, feel free to PM me.

@Brian Pulaski

Those are good questions!

In short:
Either or works. The idea here being that sometimes owners aren't super willing to move out yet, but with additional incentive can often be persuaded. This incentive coming in the form of selling their home for more, but in order to avoid increasing costs for flippers, I thought it would be better to pair them, and skip the middle sale then.

And this isn't just targeting super distressed properties, so sometimes renovations wouldn't require the homeowner to necessarily move out. And even if it does, since flips are usually optimized processes, it wouldn't be for that long.

Longer:
Before moving to Chicago, I lived in Seattle, which was doing very well with respect to the real estate market. So what happened to a number of people, is that they had old properties that had suddenly shot up in value. They weren't necessarily dumps, but could have used a lot of upgrades before being sold. However, these homeowners often didn't have money, since the home had only recently appreciated a lot. Thus there was interest in rehabbing/flipping, but they didn't have the cash, resources, or skills required to do so. However, they were also not necessarily willing to sell the place to someone who wanted to flip it. So I thought it might be worth partnering the two rather than having them play a stalemate.

The way I see it, is this would increase the potential volume for flips by opening up opportunities for flipping homes that aren't just distressed. But by cutting out the middle sale and simply entering a contract, one would still realize good returns. To me, this also came with other benefits, for example, faster flipping jobs (if not as distressed), easier time starting (lack of buy/sell procedure, less/no upfront capital) and since the original owners are still responsible for selling the home, the flippers can just move to the next project. So to me, overall the projects would take less time, require less capital, and open new opportunities. Sure, this isn't the optimal solution for all situations, but I was hoping it could just be an alternative way to fund/make projects happen.

Furthermore, I thought this would also be an opportunity for flippers to tackle bigger projects, since the upfront capital costs would be significantly reduced.

Hopefully that answers your question and also gives more insight into what I was thinking. Again, as Will has pointed out, this may just be a naive idea that works well on paper, but I'm still going to see what I can figure out.

Thank you for your questions!

-Malte

@Will Barnard

Yeah, that was a poor word choice. I should have probably said, "deal with legalities", by which I mean finding alternative solutions that might just not be the norm. I have no intention of doing anything illegal. And I agree, getting all the licenses will be good. 
I have an experienced real estate attorney that I will be working with throughout the process to make sure everything is in order legally. And I certainly won't be going this alone, in general, so hopefully I'll have many people who can weigh in on legalities and solutions.

Hello Flippers,

I am looking to start flipping houses, but rather than start with no experience and getting screwed a few times, I was hoping to tag along with established flippers in the area and effectively shadow them.

I was wondering if any flippers in the Chicago area would be willing to let me tag along on their project. I'd be happy to help you with the labor as well. Mainly interested in getting a feeling for what flippers look for, how they go about the process, how to deal with unexpected problems, and just the day to day before I get into this myself.

Thanks!
Malte

@Mike Flora,

That's also a good point, I can definitely see the issues with liens and such. 

Outright purchasing is the traditional and certainly safest way to do things. But I'd like to try and change how homeownership is viewed, especially with respect to investing. The way things are done now seem bogged down by tradition and inefficiencies that are certainly not a must. Some countries, especially those in Europe, have done a much better job addressing these issues.

For sure one more thing to include in some legal document though. Thanks for the tip!

-Malte

@Will Barnard:
Thank you so much for the long answer. This actually helps a lot, that is something I hadn't considered. And I totally understand what you mean in terms of having people understand something unique. This is the part that I've spent the most time thinking about, how to pitch it well.

There should be a few ways to get around the legalities, but I'm glad that you mentioned that issue.

Regarding the issue of not selling. That would most certainly be put into the contract and the homeowner would be liable for paying the flippers their fair share based on some post flipping valuation. Once signed, the homeowner would agree to sell, and in the case they don't, they would be liable for paying the flippers their expected portion. This is also why it would be important to have an arbitrator that could settle these sorts of disputes.

Thank you again for your reply, it was super helpful! If you don't mind, I'd like to try to message you personally to inquire about the previous successes you've had with this sort of method.

-Malte

@ Doug W. The idea is definitely similar to a seller finance situation in spirit. However, the intent is not any sort of ownership transfer. It's simply to make flipping affordable to both sides, but in the end, the idea is that the original owner does the selling.
I'll try to create a visual of some sort to clear this up. I'll upload it when I make it.
Thank you for your help and hopefully helping others with some good clarification.

-Malte