All Forum Posts by: Michael Seeker

@Scott Hesseltine - it really depends on what areas you're trying to flip in and what areas you'd like to buy rental property in.  My initial focus was around the $200K range for both.  Every transaction is different, but you'll probably need at least $30-40K out of pocket to complete a purchase and renovation in this price range.  That is if you are scraping by and constantly calling your lender for draws...ideally you'd have plenty of working capital so you don't have to delay things while waiting for draws.

On the rental side, you should be able to get into pretty much any property with 20% down, so you'd also be looking at around $40K out of pocket.

If you're thinking about an area where properties are in the $100K range, then you'd be looking at cutting these numbers in half.

Even if you find a good hard money lender for a flip, they are not going to lend you 100% of the capital and will want to make sure you have some skin in the game (especially if it's your first flip).  You'll have to have money up front for purchase and closing costs and you'll need working capital to carry you through all of the construction.

I was in your shoes and wanted to grow quickly, but I spent a lot of time, money and effort learning a business that I didn't ultimately end up sticking with.

The only other comment I have is that I would not suggest learning property management from a property management company.  There might be one or two good ones around Louisville, but most of them are very bad.  If you lean on them for tricks of the trade you won't make it very far if you plan to self-manage!

Hey Scott, welcome to the BP community!  It's commendable that you want to dive in and learn as much as you can about flipping, however it sounds like your long-term plan is to be in rentals and possibly own multifamily property.  I've dabbled in each of these and would say that the first few times flipping a house is at least as complex and capital intensive as the first stab at owning multifamily rental property.  If your end goal is to own rentals, why not start there?

@Garrett A. Van Allen - the owner cannot force you to break the lease because they want to do renovations so you have every right to stay until the lease ends in January.  I would suggest letting them know that you like the area and plan on staying in the building until your lease is up in January and maybe suggest you'd be open to breaking the lease for a fee.  Afterall, they would probably charge you a fee if you broke the lease early (and they weren't planning to remodel).

I've purchased several buildings where I wanted tenants to leave so I could begin work.  I'm always very cordial and try to offer to help them in any way I can.  You're in control of the situation and can accept or refuse any offer you like to move our early.

@Charles Campbell - Typically when you finish out an attic you do not get the same square footage as the lower levels.  Usually you will lose space due to slope of the roof and head clearance.  There's no way to easily guess what your additional square footage would be without a lot more information about the pitch of the roof and proposed finishes.

That being said, you should be able to estimate what that number is and use it to try to determine the value added.  Be careful here, because a finished attic is likely not worth as much as the rest of your house, particularly if it does not include bedrooms/bathrooms.  If comps in your area sell for $100/sf, finishing the attic as a game/rec room may only add as little $25-$50/sf in value.

I've got a scenario I would like to run by somebody who has experience working as a claims adjuster/reviewer.  I'd prefer not to post the scenario to this thread but would be happy to write out in PM or email/call.

Please let me know if you've worked on the claims side of P&C insurance and may be able to help.

Thanks!
Michael

@Jonathan Klemm - I instituted a policy recently that when friends/family inquire about financials, whether it be cost of a property, cost of a rehab, my income, net worth, etc...I'll tell them they can have one guess and I will tell them whether the true amount is higher or lower.

It keeps things light and interesting without divulging too much info.

When it comes to how much you paid for a property, I've found that information to be very easily accessible online everywhere I've owned.  Not sure if Chicago is the same way, but I would not try to hide a purchase price from a friend/family member when any random person could spend 15 minutes or less figuring it out on their own.

@Lakshay G. - you can get a pre-approval from any lending institution and you do not need to use that lender to finance the transaction, even if you provide that letter as part of your offer.

As for a pre-approval letter...it does not mean anything.  Sellers and their agents ask for it, and many buyers get one, but all it indicates is that the buyer has at least talked to a lender and they gave the right information for the lender to assume a loan was feasible.

Many loan originators are very free with handing out pre-approval letters because there is no commitment involved.  Just because you are pre-approved it does not mean you can actually get a loan.  Once you actually have a contract and apply for a loan, the banks underwriting department will review it and look at your assets/liabilities and debt/income.  If you didn't disclose something initially, you could be turned down for a loan even if the officer gave you a pre-approval.

So just go and get one and save it for when you're ready to make an offer...

In addition to the great feedback provided by others, I'll also point out that most insurance claims are at a much higher rate than it would actually cost you to resolve the matter on your own.  Case in point is $5K for an AC condenser.  Even somebody completely ignorant to HVAC equipment/costs and only getting one bid for this work should not pay $5K.  Depending on the size of the unit and the type of property, I'd pay as much as $2500 for a new condenser or possibly $500-$1000 for a used one.  Had you called around to 5 or 10 HVAC contractors, you could have gotten that resolved for about what your deductible is (or less) and left it off the insurance company radar.  I suspect all of these claims could have been handled out of your own pocket for around $10K versus the $39K that your insurance company paid to resolve them.  As somebody else mentioned, I might have utilized insurance on the $26K claim but that would be it.

You are not a "good risk" from an insurance company standpoint, so there is no reason for them to give you preferential pricing/treatment.

Changing the insurance from your personal name to an LLC does not change the claim history or your likelihood to file a claim.

@Henley H. - I would try to set the tone early that you're firm, but fair.  The best way to do this would be to require the tenant to pay half the cost.  You can tell them you'd normally require them to pay the full amount, but you are willing to cover half of the cost since the old disposal was several years old.

Whatever you decide to do, I'd make sure the tenant does not get the impression they can get a free ride and/or walk all over you!

@Silvia Barber - I don't see any red flags here at all.  You've got somebody who is from the area originally (as evidenced by their knowledge of the school systems).  They have legitimate reasons for leaving the area and returning and are wanting to meet in person to view the property.

It looks like they left off the phone number, but if that is a concern of yours, you can always email back and request it by suggesting you would like to call them to schedule a time to view the property.

Red flags for me for somebody moving from out of town would be some combination of the following:
-Not familiar with the area at all
-Does not have stable work lined up in the area
-Does not know anybody in the area and/or has never visited
-Wants to wire money to you or not willing to pay app fee and complete a credit/background check
-Has a rich Egyptian uncle who has fallen on hard times :)