All Forum Posts by: Michael Hayworth

It looks like you have a full-time job in addition to real estate investing. So is $5000-6000 enough of a claim to make it worth you taking up time to pursue it? Especially knowing that arbitrators and small claims court both have a tendency to "split the difference" if claims aren't 100% crystal clear? (And on top of that, if he's a typical hand-to-mouth contractor with debt up to his eyeballs, he may not have assets enough to satisfy a judgment even if you get one.)

It would probably be better for you to chalk it up to an expensive learning experience (unfortunately, there are lots of those in this business), try to analyze how you ended up in this situation and how you can prevent it for the future, and drive forward with getting the house done and on the market while you still have time before the holiday slowdown.

I wouldn't let him get off unscathed, though. BBB complaint, bad review on Angie's List and HomeAdvisor, similar things like that should do him some damage and warn future prospects away.

You have my sympathy. My last one before we made the change below was a pink toy phone. The one before that was a tenant that dumped about a gallon of kitchen grease down the pipes.

FWIW, I have adopted an idea I saw from someone else on here. We put an addendum on our leases now - and we put it in big type and make 'em sign it:

PLUMBING DRAINS ARE OPERATING PROPERLY AS OF YOUR MOVE-IN. BABY WIPES (EVEN "FLUSHABLE WIPES"), FEMININE HYGIENE PRODUCTS, HAIR, KITCHEN GREASE, AND A WIDE VARIETY OF OTHER THINGS WILL CAUSE DRAIN BLOCKAGES. ANY PLUMBING BLOCKAGE THAT OCCURS IS ASSUMED TO BE CAUSED BY THE TENANT. IT IS TENANT'S RESPONSIBILITY TO CALL A PLUMBER AND HAVE BLOCKAGE CLEARED, AT TENANT'S EXPENSE. THE ONLY CAUSE OF A PLUMBING BACKUP THAT  WOULD BE LANDLORD'S RESPONSIBILITY WOULD BE BROKEN DRAIN PIPES (which would include actual breaks, tree roots in the drains, and similar items). IN THE EVENT THAT A LICENSED PLUMBER BELIEVES THE PROBLEM IS BROKEN PIPES, WE WILL RUN A CAMERA TO VERIFY, AND IF THAT IS THE CASE, WILL REIMBURSE TENANT FOR PLUMBING EXPENSES.

Not sure I understand the question. "Get access to spray foam"? You can buy kits to do it yourself - Google "spray foam kit" - but they're going to be relatively expensive per board foot. There should be contractors in your area that do it - they'll spend $40K and up on a professional truck-mounted rig. 

In my area, they typically charge around $1.20/board foot. You're in a blue state, so I assume a contractor has to have 187 different licenses to spray some foam in a house, and cost is probably higher. But it's still likely to be best to hire a contractor than try to DIY it without proper equipment.

Originally posted by @Don Konipol:

If you have a personal guarantee and the borrower has assets that are not exempt, then there is a market for the note; albeit at a large discount.  Many debt collection companies have funds set up or just this purpose.

 Yes, it is a personal guarantee. It is not secured by the business, which is a very specialized franchise (no guarantee a foreclosing entity would be approved as a franchisee by the franchisor, among other complications). The borrower's main assets, I believe, would be his income stream from and partnership in another successful business.

How would I go about exploring this option? It's an area I just don't know anything about.

I own several businesses. I sold one of them for $400K a couple of years ago, took half down and seller-financed the rest. The buyer made payments for a few months, ran the business into the ground, and stopped paying. The buyer is a partner in another successful business, and does have income, but is refusing to use his other income to pay the debt.

Current debt is about $180,000 with interest as calculated if the note was performing; however, there are provisions in the note that it goes to maximum legal interest if it's in default, so with that plus late fees, it comes to more like $220,000.

I've had my attorney review the note. I can sue him and almost certainly win, but it takes time and effort. And honestly, while it's a big dollar amount, it's only a few months' worth of income for me. I'm in the middle of launching another venture, so my time seems better spent there than in court. Does anyone know if there are buyers who buy this kind of note and are set up to be able to collect on it? Obviously, I understand I'd be looking at selling at a steep discount.

Aaand, this is why we see a "Help, my contractor is 5 weeks overdue!" or "Help, my contractor did ****** work!" thread every single day on BP.

Good contractors are busy. Remodeling is at its highest volume in over a decade.

Really good contractors know not just the technical side, but how to run a business, which means we collect deposits up front. Why should I fund your job out of my own pocket and hope you pay me in a timely manner? (And do you know how often that client who was all looking over your shoulder every day suddenly disappears when it's time for payment?)

Good contractors don't let clients supply materials. We do this every day. You don't. We know to order transitions with flooring, to make sure shower trim also has a shower valve, that new texture requires primer before paint, and a host of other things that come up every day for us, but aren't an everyday thing for you. 

But to save money, or get someone to not require a deposit, or to get someone who'll tell them their timeline works (even if they know it doesn't) a lot of investors will pick the lowest bid, or the most compliant contractor, or the guy who makes the biggest promises. Then they regret it later.

Will a good contractor work with you on terms? Sure, after a relationship has been established. But a brand new investor working on his first project? That's the highest risk client we deal with, outside of trophy wives with excessive jewelry and lots of small dogs.

Good investors understand that the cheapest contractor isn't likely to do the best job, and that the contractor who always tells you what you want to hear isn't really the one who's going to deliver your project on time.

My company no longer does investor work, except for my own projects, so I'm not looking for business from anyone on here. Just being real. If you want your project to succeed, you need a good contractor, and good contractors have basic requirements for how they do business.

Best wishes.

I don't get some of these responses. Yeah, I get that they're from California, which is basically insane about everything, but nearly every state has a standard real estate contract form.

I submit offers without an agent all the time. Now, I'm fairly experienced, but I wasn't in the beginning. I did have a good title company (similar to you having a good attorney) that I knew could help me if I really didn't understand some legality somewhere.

However, here's the thing....in my state, agents can represent both buyer and seller, and fees come out of the sales price, so there's no real incentive to not use a buyer's agent unless you get some discount out of it. (It looks like Missouri has dual agency as well, but that's just based on a quick web search.) So what I typically do is call the listing agent and tell them I'm an experienced investor, that I'll be submitting an offer, and that I'll do all the work on my side, but if they want to technically work both sides, I want a 2% kickback on the (typically 3%) buyer's agent commission. If they don't want to do that, I'll run it thru some other agent. Most listing agents would rather get 4% on a deal than 3% for basically the same work, so agents typically agree. However, you'll also find that there are lots of really lazy listing agents out there who don't even return calls, so I do also have a friendly agent who'll kick me back 2% at closing if I do all the work and she just has to submit the offer for me. 

@Benjamin Voorhis, many local chains of banks will do this. You're looking for a portfolio lender that holds their own loans, rather than selling them. @Duane Kidman, you're thinking about residential loans that will be resold on the secondary markets. Rules are different for commercial lending. So are rates, though. You'll typically be looking at 25% down on a 5/15 or a 5/20 ARM, rates around 6% to start, and you can negotiate the opening rate down as you do more business with them.

Benjamin, I work with Worthington Bank and will regularly buy properties at the trustee auction, then close on a refi within 30 days to get my cash out. But they really only want to do Tarrant County. I was recently talking to a LO from Prosperity Bank, which has branches all over DFW, and he said they'd do exactly the same thing, so they might be a good one to try.

Originally posted by @Roland Widmann:

As a GC for the past 13 years I concur with @Manolo D. above about materials bought by clients, but for different reasons:  I've lost enough money over the years because of cheap materials. Surplus store doors can be such lousy quality they take twice as long to install and paint. Second quality tile can be so far off on size that would look like the installer was drunk.  $10/gal paint that takes 4 coats to almost cover.  And of course: my plumber shows up to install a shower mixer and is handed a box that has all the trim....but no mixer valve, because the customer didn't know what they were buying, they just knew it was the cheapest option!  Bottom line - Being cheap can cost more in the long run.    Now back to your original question - It must be costing a lot of money being "stuck in the mud".  Factoring that in, maybe you could offer another (more reliable) contractor a nice premium if he can get your job completed on time. Sometimes money talks. 

Exactly. No good contractor wants to deal with client-supplied materials. If you don't buy this stuff everyday, you're not going to get it right. And dealing with the cheapest materials takes more labor. 

Investors, if you think you're saving money by supplying your own materials, you're not. I spend $80,000 a year at Sherwin Williams. Do you really think you're getting a better price on paint than me? And we know which paint is the sweet spot for price vs. number of coats needed - if you paid $10/gallon less, but need an extra coat, you're not saving money.

The only contractors who'll agree to this kind of arrangement are small, hand-to-mouth guys who are just barely making ends meet. And when investors use those guys because they seem cheap, they're often frustrated with timelines, poor quality work, and everything else we see in the, "Help, my contractor is doing XYZ!" threads on here.

(Plus....if you're dealing with one of those contractors and he says he needs 50 sheets of drywall, 20 sheets of Hardie backer, 40 boxes of mud, 20 bags of floor leveler, and 30 bags of thinset, then once you've paid for those items, how do you really know how much of that got used on your job and how much went into his truck for a weekend gig?)

Any good contractor is going to need to make $X on a job. Doesn't matter whether he marks up materials and labor both, or passes through materials at cost and charges more for labor....get fixed price bids and compare them. 

First, why vinyl? Is that the predominant siding in your area? Vinyl is only on low-end homes in our area, though I know it's more common in other areas of the country. Supposedly, vinyl is cheaper, but I've seen some really high prices quoted on it down here. Maybe that's different in your area.

The best, most cost-effective siding I've found to use is the 4x8 panel siding from Hardie or LP Smartside. It lasts forever (Hardie has a 30year warranty, Smartside a 50 year), comes pre-primed for paint, and is very quick to install. If you install it properly, it should be cheaper than either vinyl or lap siding, and gives a great look.

Then a couple notes on windows:

1) You should be able to find a decent contractor in most areas of the country to do replacement windows for $350-400/window average. That would be energy star rated, double pane, white vinyl windows. Ignore any sales BS about why you should buy more expensive windows. The worst double pane vinyl windows of today are pretty damn good, and way better than any windows from 20 years ago. The installer is actually more important than the window. There's one installer in our area known for cheap prices - well, he pays his install crews about half the going rate, so he gets the drunkest guys who can't get work from anyone else, and they just slap those things in with hardly any caulk or weather sealing. For $20 more/window, there are 8 other companies that do an excellent job.

2) Beware spending money on windows. Do they really need to be replaced? You will NEVER get your money back spending on windows. Unless they're falling out, I leave the original windows in, clean 'em up to make 'em look good -even if they're old aluminum or wood single pane windows - and spend as little as I can. People spend for pretty, not for infrastructure.