All Forum Posts by: Katie Neason

Can you run through a rough outline of the numbers? What is the value of the house if they tried to sell it today? How much would you put in it and what is the ARV? What is their mortgage balance? I assume if they want to do this they do not have much equity in the house, because they are effectively splitting their equity with you and unless you are able to force a lot of appreciation I am a struggling with how they would be better off.

As far as protecting yourself, I would be a little leery and cautious without knowing the neighbor and their philosophy about money. 2 good people and have an ugly disagreement because they view the value of money differently. 

Make sure you are on the same page and write out eaxctly how “profits” would be defined and split. 

As a flipper your goal is typically to optimize profit on as short of a timeline as possible. A homeowners typical motivation is to list it as high as possible and wait for the best profit possible. Who is going to decide the sells price? Who decides whether or not you take a contract? What happens if you disagree? 

Are they financially stable? What happens if they stop paying the mortgage and get foreclosed on? 

I like the video. My belief is that it is rarely info that holds people back, it is execution. We live in a society that believes “it’s the thought that counts”. They reality is, thoughts are in abundance and and everybody has them. It is the execution of the thought that determines success. What is the marketing goal of the video?  Get more houses? Who (and how) do you plan to show it to?

Look at the comps, specifically, the days on market for a 2 bedroom vs a 3 bedroom.  Also, look at other houses in the neighborhood. You don't want to be the only house with a converted garage and if a lot of them have converted garages, you are probably ok.  In my market a 2 bedroom house is difficult to sale. Not many people are looking for them. While people prefer a garage, they "have to have" 3 bedrooms. As far as taking living space and converting it to non-living space, my experience has been, it is difficult to make the numbers work, if you paid for the square footage of the converted garage when you purchased it. For example, if it is a 1400 square foot house that you paid $50,000 for and the after repair value is $100/sf then you would be able to sell it for $140,000. If you want to make $25,000 in profit, and closing costs are 9% that gives you a rehab and financing budget of $52,400.  

As a comparison, if you paid $50,000 for a 1,400 sf house and you convert the 2 car garage (400 sf) back into a garage, the house that you are selling is $1,000. The after repair value is $100/sf.  You can sell the house for $100,000.  If you want to make a $25,000 profit and closing costs are 9%, that leaves your rehab and financing budget at $16,000.  Generally, that will kill the deal.

When we get houses that have a converted garage we do everything we can to make the garage look like part of the house.  We eliminate any step down, make the ceiling the same height as the rest of the house, sheet rock the walls, eliminate the door on to the driveway, etc. we generally make the garage a mastered room, with a walk in closet and master bathroom and add a utility room if there isn't on somewhere else. We also will add a small hall so that the bedroom door doesn't open directly into the living space (typically the kitchen). Hope that helps. 

I agree with the comment, the inspector is the opinion that matters, but I also belive they should live with in the code requirements. There are often times they do not. I would suggest gently asking the inspector (or his boss) to please direct you to the area of the building code that requires the housewrap, so that you can better learn the code for the future. When I use this techinque, I always reiterate that my goal is ultimately improve the city with well done rehabs and better understanding these issues help you to do that. I have had instances where they were able to provide the code reference and instances were it was “preferred” or “standard” and we were not required to do what was originally asked. 

I just realized you are in california. That creates more complexity because the bank can only take a guarantee OR the property as collateral. The comml banks will still do it, but the terms will be more conservative. 

Message me and I will give you the names of two local banks I use in BCS and the name of a local mortgage lender. As far as terms, my experience has been most comml portfolio loans are 20-25 years with 20-25% down. You can buy in the name of your LLC. The mortgage is much better terms but A LOT more pain and paperwork and you would have to tranfer into your LLC after you close the loan.

Couple of thoughts. If you have a good realtor they should be able to get recon/feedback on where the buyer and where they are at. 

For the 6 days it has been on the market, what has the activity been like? Have you or your realtor been getting feedback from the people looking? 

What is the average days on market of your comps? Also look back at the comps from this time last year. What was the price and days on market? Time of year can be a killer in some markets. 

With this info you should at least be able to make an educated decission. 

Dorian Gray is a good cabinet color for the interior and maybe an accent wall.  It is definitely a good exterior color.  For the most part, Black Fox is too dark for interior, we use it a lot as an exterior accent color.  

As far as "learning to pick colors", find colors you like and stick with them. No need to change them from house to house for the most part. Changing the layout, I think can be learned with practice. I would walk every rehabbed house on the market until you start to get a feel for it. 

Good luck!

Dorian Gray is a good color. It is a warm gray. Black Fox is a good dark accent color. Good luck. 

I agree with Ronald. Run the numbers and back into the price that works at the current occupancy. Knock a few thousand off to give you negotiating room and make an offer.