All Forum Posts by: Michael Hayworth

Finding good contractors is difficult, but exceedingly important. Several things you've said indicate you're on the right track, though.

First, some background. I run a remodeling company with 10 full-time crews. 7 are dedicated to client work, 2 to my own investment properties, and 1 floats back and forth. We no longer take work for other investors. Why not? To try to summarize what's really a lengthy answer: investors are often difficult clients. Many want top quality work, done fast, and they want it at Craigslist handyman prices. Many have also gotten themselves dazzled by a wholesaler who overestimated the ARV and underestimated the reno costs. When I explain to them that, no, the comps he used were lakefront properties and yours isn't, and it's really gonna sell for more like $215, not $240, and the reno you budgeted $30K for is really gonna cost more like $50K, and that's if we don't find anything weird while the project is underway....well, somehow that ends up being the contractor's fault.

Business is so good for good contractors right now that it just makes more sense to focus on higher-dollar retail work.

The contractor you're looking for is most likely going to look something like this:

• Good technically, but maybe not a ton of business or marketing experience. Working for investors and getting repeat business makes great sense for this kind of contractor, because he may not be interested in doing the kind of marketing it takes to be really successful working for homeowners.
• His English may be somewhat rough...but it needs to be good enough that you don't have a language barrier separating you.
• He may be newer in the business - recently out on his own, after working for someone else for awhile.
• He honestly may not have all his processes and procedures worked out, so you may have to be more understanding of that.
• But he can show you good quality work, and multiple references that will attest he's not going to take your money and run. OR, if he's really new and doesn't have as many references, but gives you a good vibe otherwise, give him a small project like a bathroom, and then another, and another, rather than giving him an entire house right away.

You indicated you're willing to pay a premium for a good contractor. That tells me you're a step ahead of the guys I see on several of my local investor boards, who are always posting about needing an "investor friendly" contractor who's available tomorrow but works really cheap. The contractor needs to be reasonably priced - it needs to be a win-win, but if he doesn't make money, he'll be out of business soon. 

To find them:

• Investor networking groups.
• References from other investors (this is iffy....many won't share their good subs, because they don't want them tied up on other people's projects).
• Craigslist. This has been my best source of sub crews when I need them. Just realize that you will have to sift through a LOT of chaff to get to the wheat. I usually find these guys by posting a job with limited scope - drywall and paint in a house, a bathroom remodel, something like that, and then see about expanding the relationship once they do good work. I'm willing to give a deposit, but I keep it reasonable for them to pay materials, and then do staged payments as work progresses. 

Overall, it's just a process of realizing that there are a lot of crappy contractors out there (and, as I mentioned above, a lot of crappy clients, too). If you're going to be one of the good clients, you'll eventually find good crews to work with, but you may have to go thru several to get there. 

I've started 7 successful businesses in my life. Starting a business with investment properties is still starting a business - it takes time to get everything right. You should look at this as a building process. Your first few houses that you do are your startup phase. You'll find the people you want to work with, and that'll take time. You'll also refine your internal processes. By the 2nd or 3rd year, you should be ready to really push the accelerator to the floor.

Good luck!

The good thing is, you actually ASKED QUESTIONS before you just plunked down the money. Your research may save you a lot of money and frustration. 

You've got good advice from two CPAs on here. I am neither a CPA nor a lawyer, just a guy with decades in business and full or part-owner of six LLCs.

@Linda Weygant is correct - if you go just moving money between the two LLCs, then in the event you are ever sued, any reasonably competent attorney will seek to pierce the veil between the LLCs to get at more income. The more successful you become, the more likely you are to become the target of a lawsuit. So in the early days, I didn't worry about this too much. Now I do.

If I'm moving cash among my LLCs, it's always documented as either a business loan or as a member distribution from one LLC to my personal finances, then a member contribution from my personal finances to the other LLC.

An attorney recently told me that we actually need to back any of these transfers with LLC meeting minutes....honestly, that's something we just don't do. Everything is well documented in our books, and I really think we're OK. I could be wrong. But there's a limit to how much extra work I'll go to in order to hopefully help in the event that I ever get sued, but your limits may be different than mine.

Well, first, you would present anything verbally until you have an agreement. Why waste time sending forms around.

But show me where on this form https://www.trec.texas.gov/sites/default/files/pdf... it says that if you present that form, the other party can not only reject your proposed amendment, but cancel the underlying contract. That simply isn't the case. Can you negotiate or reject the amendment? Sure. 

But no, simply proposing an amendment to the contract doesn't make the underlying executed contract voidable. That's simple nonsense, both under general contract law and specifically under the TREC contract. Options for terminating the contract are specified in paragraphs 15 and 23 of the 1-4 Family Residential Contract, and paragraphs B1 and B2 of the 3P financing addendum. There is no language anywhere in there that says "if you propose an amendment I don't like, I can cancel the underlying executed contract."

No, it's really not. That's the problem when people try to answer questions about states where they're not familiar with the laws. 

I've negotiated many sort of contracts in most states and several countries, and I'm truthfully not familiar with any where a simple request for modification opens up a validly enforceable contract for termination. But I'm willing to accept that it might be the case in some areas. It is certainly not the case in Texas in the scenario described, though.

You're getting some bad advice in this thread from people in other states.

First, if you used the standard TREC contract, you do not have to agree to a delay. The TREC 3rd party financing addendum should specify a date by which they should have approval of their financing. If you're past that date, then they cannot terminate without penalty.

Second, your agent can give you advice, but yours sounds like someone who's waaay too milquetoast for this industry. The whole "you getting a bad reputation" thing, really means "I'm afraid the other realtors won't like me." Tough. His/her job is to represent you as the seller.

I'm in Fort Worth, so I don't know the Lubbock market. If it's a seller's market like ours here, then there's another buyer right around the corner. 

I've trained my agent properly. When we first started working together, I told her, "I used to work for a mortgage company. I know that most lenders are basically lazy. They work on big-company bureaucratic timelines, not hustling-hard, get-it-done timelines like we do. They'll blame TRID, they'll blame FHA or VA, they'll tell you all kinds of things about why the deal is running late. Mostly, it's because they let things sit too long and then are making an excuse so they don't have to tell you they dropped the ball. Your job as my realtor is to tell the buyer "my seller will accept your offer, but he's kind of a hardass, so you need to stay on top of your lender."

When they come to me later and say they need a delay, I tell them all the same thing. I'll agree to one extension, of no more than a week. After that, I'll cancel the contract and keep the earnest money.

She thought I was unreasonable. She argued with me like your realtor is arguing with you. I told her to do it my way. She reluctantly did. I don't mind being the bad guy. I'm really pretty nice, but I didn't get where I am by always deferring to what everyone else wants.

Somewhere around 100 sales later with this agent, she now understands. Magically, when the buyer hears that I'll keep their EM and they'll have to start all over again on finding a house, they climb their lender's frame, and the deal gets done. I've only had to follow thru on canceling the contract a couple of times. But I will absolutely do it when I have to. It's worth losing a deal occasionally to set a precedent. (Of course, that depends on your not being desperate for the cash from the sale.)

I have no idea whether that strategy works in Maryland or Tennesee or anyplace else you're getting advice from, but it works in Texas.

Good luck.

I've never had a really epic failure. But I've cost myself a lot of money over the years because I sometimes can't stop myself from treating an investment house like I'm going to live there.

There are so many things we can do to houses that, yeah, are really nice touches. But if they don't make the house sell faster, or sell for more money, we're just costing ourselves money when we indulge that urge to do them.

That is incorrect. You are a realtor, so the law applies to you. I am not, and it does not when I'm renting my own single-family homes. However, it does when I am renting units in my apartment complex. 

Actually knowing the law is a good start. Here is a decent summary. There's a citation to the complete law embedded in there.

This is most applicable for landlords renting their own single-family houses when someone tells you that you have to accommodate their "service animal" under the Fair Housing Act. (Though you may have to accommodate it under other state or local laws.)

That only matters if she's using a Realtor. Fair Housing Act does not apply to an individual landlord renting his/her own property without use of a Realtor. (Although locals laws may be more restrictive.)

This is really a very local question - most of us elsewhere in the country can't answer it for you.

In most areas of Texas, except for Dallas, Austin and Houston, nobody would care. 

In many blue states, they go bugnuts over stuff done without permits. (Unlike those great projects like the Big Dig in Boston, which had permits out the ears, and was inspected a million times, and still turned out to be crap work.)

I think of Georgia as a relatively free state, but then I think that about Arizona, too and found out recently that you need a license there to be a painter. So glad the government is using tax money to save homeowners from the scourge of a bad paint job. (Except I'm guessing you can be licensed and still do crappy work - that's how it is in most professions.)

In any event, you'll need to talk to other investors local to you and get that answer. Internet strangers from all over the country may have opinions, but few real answers.