All Forum Posts by: Nicholas W.

Since it is your first deal I don't recommend doing this deal. It is never a good idea to completely exhaust your savings, especially if the home needs work. Be patient and something better will come along.

When you consider capex a monthly expense you aren't considering the time value of money. I'm not saying capex doesn't have a cost, but it does not have a monthly cost. If you do a BRRRR you aren't going to have any significant capex for the first 10 years which is why I ran the model with the first $12,960 capital expenditure on the 10th year. I realize that you wouldn't necessarily do $12,960 worth of work in that one year but some assumptions and estimations must be made.

The problem is you're considering CapEx a monthly expense when it isn't. Capital expenditures are individual cashflow events. If you want to underwrite for a 30 year hold then you have to factor in everything. I ran a very conservative sample deal of a single family through my spreadsheet using the following info.

Value post rehab $200k 

$150k 30 year loan at 5%

Rent: $1700

Vacancy: 8% (1 month)

Insurance: $600

Property Management: $200 (8% per month and one lease fee every 24 months)

Repairs and Maintenance: $50

Property tax: $3000

Your $180 CapEx budget works out to $64,800 over the 30 year hold. So I figured on a hypothetical $12,960 Capital Expense on year 10, 15, 20, 25 and 30. Rent growth and all expense growth were modeled at 3% annually.

After year 10 when you make your first capital expense your cumulative cash flow has already added up to $29,905 which works out to an average monthly cash flow of $249 over the first 10 years. 

The average monthly cashflow over the full 30 years works out to $622. Now on year 31 the house is paid off and the monthly cashflow is over $2,400 and the house is worth almost a half million dollars (again using 3% for appreciation.) Now you can argue with some of my assumptions, but if you're going to forecast a 30 year hold assumptions are a necessity.

Now if you were able to purchase the house and rehab it for less than the $150k refinance amount it would be tough to pass this deal up.

How did he pay? Is there a record of his payment? If he mailed the payment it typically goes by the post marked date, so if you got it on the 6th he probably did indeed pay before the 6th. If he paid by some sort of ACH transfer or online somehow the date should be pretty clear. If he dropped off a payment it would be tough to prove one way or another. Ultimately what proof do you have that he didn't pay by the 5th?

If it were me and this was an otherwise ideal tenant I probably would let it slide but make it clear that it would be a one time exception.

I have to echo many of the previous posts and say that in virtually all cases the boxes and wiring go up (rough electrical), then the electrician gets out of the way until the very end of the rehab when he returns to make all terminations, install fixtures, outlets, switches and breakers.

@Peace Lily I really feel for you because at this point it is going to be difficult to salvage the job with your current GC and make all of this work out. Hopefully your GC doesn't leave you high and dry and is able to work it out with city hall.

The reason the sheetrockers don't want outlets in the boxes is because rotozipping is an easier and industry standard way of locating and cutting boxes out. Although it could be seen as lazy the fact is it is a much easier, faster and more precise way of cutting out boxes. See the following video: https://www.youtube.com/watch?v=0morOM2PGJg

Honestly, you need to talk to a CPA to make sure you get this right. If you track all the expenses incorrectly based on a forum post your tax prep could cost significantly more than doing a consultation up front.

@William S. I'll email you a copy of a "tenant orientation" that I give tenants when they move in.

Work with her. Tell her she is responsible for the rent payment until you find a new tenant, then start looking for a new tenant. The fact of the matter is if she can't afford the place you don't really want her any way as it will only end badly for you.

Maybe have her sign a waiver that any damage caused by her fridge will be her responsibility and make sure she has renters insurance. I'm not sure it would take care of that but I believe it would if it was in fact her fridge. Also require that she pay to have the water line installed by a licensed plumber in a manner you approve. 

The bigger problem I see with this is what are you going to do with your fridge until she moves out?

If your subs aren't familiar with the permitting process then I would suspect that they wouldn't have the necessary licenses to pull the permits to begin with. Also although you can pull a permit for projects on your own home in most area's you must be a license contractor to pull a permit on a property you aren't living in, even if you are the owner. That being said you will almost certainly need some sort of contractor to pull the general building permit and each trade (electrical, plumbing, HVAC) will pull a permit (or at least fill it out and provide it to you to submit) on their own.