All Forum Posts by: Dean I.

Mostly financing charges from your lender like points as well as other requirements that your lender may have like appraisals, inspection fees, doc fees, credit report fees, and any insurance they require you to have while holding the property. Everything else like taxes and attorney fees you will have to pay for.

Around here, lead paint is not going to affect the value. In fact, if the house has been kept up with over the last 30 years then the lead paint has been covered and is typically not an issue unless someone is chewing on the walls. You will of course in many states have to give out a disclaimer stating that there is a possibility of lead paint, but that should not affect the value of the property.

In other words, all things being the same, a house that originally had lead paint (and now has several layers of non lead paint cover the walls and trim) should not appraise for any more or any less than a house built after lead paint was banned.

@Brian Cooke

You may find that this contractor is willing to get to these houses quickly. Houses move fast here too, but I will not buy if the numbers don't work and if I can't verify the numbers. Sure, things will come up and you will have some unexpected expenses, but you will save a lot more money if you can have a contractor verify the cost of renovations. Plus if you use them, you are holding them accountable to that price. It is an estimate, but it should be pretty dang close to the actual costs unless you find something majorly wrong that could not be determined upon initial inspection.

You are going to have to settle it within your self to walk away from deals that don't make sense. If the numbers don't work, then they don't work. 

Even if you got under contract first and then found out during the due diligence period (assuming that there is one) that your renovation estimate was way off, you would be better off backing out and losing your EMD then going forward and losing a ton of money on renovations. Just don't do this too often or you will get a reputation and you will find that even if your offers are good, they may be turned down.

@Brian Cooke

I am sure that you already thought of this, but in the future you may want to considering finding a contractor or two to go out and look at the houses before you put in an offer. If this contractor works out well for you, he may be your guy to do this.

With that being said, obviously, want to to do as much as you can to eliminate any properties that obviously will not be profitable before you go dragging your contractors around to every distressed property you find.

One thing I did when I first got started was ask a contractor to come out to see 5 or 6 properties and price out the rehab. I asked him all kinds of questions and I tried to get an idea as to how much rehabs would cost based on the numbers he was giving me. I then paid him for his time and I was now better equipped to look at properties and determine if they were worth even bringing him out.

If you go this route, let him know your intentions. Tell him you want to take him to a handful of distressed properties and get some prices so that you don't end up wasting his time in the future. Tell him that you want to pay him for his time on this trip and ask him what he feels would be fair. 

Generally speaking, as long as you are giving the contractor work, they should not mind doing a few free estimates. That said, if you keep asking him to price out houses that you never close on or even put an offer on, he will likely stop working with you, so learn what you can as quickly as you can and eliminate what you can before you call him.

Also, other than what I suggested above, I would not pay a contractor for estimates unless that is a common practice in that area. When I was a contractor, I would often times bid on a dozen jobs before getting one and I never charged a dime. It was the cost of doing business.

If it has been painted before, then you may have to have it skimmed, especially if anything other than flat paint (egg shell, semi gloss, etc) was used. If there is asbestos, then it may be cheaper to have a painter spray the ceilings with egg shell, let it cure and harden for a month and then come back to skim over the hardened popcorn.

I was a painter for for 10 years and a contractor for 3 of those years. Unless the paint is peeling, you can just paint over it. Chances are though, unless the house has never been painted in the last 30 years, the lead based paint is already covered. If you do have a lot of peeling paint (like full walls), then you may want to get a contractor who specializes in this area. Otherwise, if you are just talking about a few patches here and there, you can scrape it yourself and paint over it. Just make sure you at least use a dust mask and you may even want to open the windows and change the central air filters after your done scraping and painting. Keep kids and animals away from the house while scraping lead based paint.

Also, if the paint that is currently on the walls is oil based, then you will want to prime them first with an oil based Kilz before painting with latex. You will want to prime any spots you scrape too before painting, even if the walls already have latex.

@Jay Hinrichs

I do have a good income and great credit. I do admit, it would have been much harder to secure the line of credit without the income to support it. That said, if you have good credit and you don't mind doing the leg work, I would think you could go to multiple banks and get a few small lines of credit to get started. The only problem of course is that unless you already have an LLC with it's own credit history, you would have to get the lines of credit in your personal name. From an accounting perspective, it shouldn't matter so long as you use the lines of credit strictly for business. From a legal perspective, I don't know if there is a possibility of piercing the corporate veal. I suppose you could do owner deposits from the lines of credit to a business account in order to further separate the money, which is basically what I did, but I can't say for sure if that will legally protect you if there was a lawsuit. In either case, since the LLC I created for this flipping business was brand new, I didn't have a credit history for the LLC, so I had to put the line of credit in my personal name and then transfer the funds to a business account. After a year or two of doing this, I should be able to secure a line of credit in the name of the LLC. I know you weren't asking for all that, but maybe that will help someone.

Oh and one other side note. At least around here, most banks don't want to fund house flipping in any way, so don't tell them that you are getting the line of credit for that reason. Luckily for me, the bank where I secured the line of credit actually offered it to me because they could not fund my flips, but they were hungry for loans.

@Ray Lai

I used the bigger pockets advanced calculator. I rounded a few numbers for the sake of the post and added the amount I got from the early possession, which brings me to $22,100. Maybe you forgot to multiply the monthly expenses?

Hey @Jay Hinrichs the tag feature did not work on the last post, but the 20% down payment and holding costs were covered by the 17k credit line I acquired from the other bank.

@Jay Hinrichs

 The 20% down payment and holding costs were covered by the 17k credit line.

@Tony Wooldridge

Hey Tony, I'm sorry I should have been more detailed. That actually sounds funny after seeing how much I just wrote . . . :D

Anyways I don't do any of the work myself. I contract everything out. Even if I wanted to do some of the work myself, I don't have the time with running my other business. 

Also, no partners. 

As for the loan, the loan is 80% of the total purchase price and cost of renovations.

@Jay Hinrichs

I intentionally left some details out ;)

The $17k was a part of the loan. The loan covers 80% of the total purchase price and renovations. 

@Max Tanenbaum

Oh, I haven't forgotten. Towards the middle of the year after a couple more flips I will put all that aside. For now, I need to reinvest what I have.