All Forum Posts by: Paul Smythe

@Account Closed Correct me if I'm wrong, but it seems like you are asking if you can pay yourself a salary while flipping a property? That sort of practice can be justified in real estate development, but I highly doubt you'll find someone willing to do that sort of thing while lending you money to flip a house.

@Rong Liu you will get a million recommendations here, but I'll throw mine in, as well. I would keep it and get a line of credit on it. That way you can continue to get the rental income and have funds to pull out when you've got something to invest in.

@Nick Brubaker I don't think you have an option other than to move on. I highly doubt they'll be paying you rent anytime soon if you did try to force them to honor the lease agreement. You'd be creating a nightmare.

@Daniel Johnson Continuing that discussion, a good strategy I've debated using myself is to budget ~$30k in available funds per house (not including monthly interest payments during the flip). You end up spending about 20k at the beginning, and then you have another 10k to fund the contractors to keep the process quick and smooth.

With proper timing and planning you can pay the contractors, receive the funds from the HML after a few items have been completed, and then fund your contractor for the next round of items with what you just received. If everything goes as planned you'll be able to repeat that through the entire process and keep your contractor happy.

This strategy would also work if you want to act as the GC on your deal. You pay your subcontractors and then Hard Money sends you the funds for the completed items.

Side note: The numbers I'm using come from a 100k purchase & rehab, 150k sales price flip, which is my most common project. The numbers can vary significantly depending on the deal.

@Adam Shaddy The only thing you lose by writing the owner a letter is some time and 50 cents. I might recommend asking neighbors if they have a phone number. Mailer response rates are always low (1-5%), so it is a high probability that the owner never responds to your letter. If you can figure out a way to get the owner on the phone or talk to them in person (ask neighbors if they ever visit the house) that is going to be your best bet.

Don't give up, though. Just keep sending them letters once a month. Eventually they'll either call you to tell you to stop sending them mail or call you about selling it. It might also be worth leaving a note on the front door in case they come around.

Last note, if they say they aren't interested in selling just make sure they keep your name and number in mind for whenever they change their mind.

 I've got two active projects I'm working on right now that I am financing with two separate hard money lenders. I'll keep this short, but if you want more details I'd be happy to discuss further if you want to message me.

In my mind, hard money does two main things for an investor who is flipping houses:

1. It makes flipping a house more affordable. A flip that would cost ~100-110k out of pocket will cost 15-20k out of pocket instead. That can be huge for investors.
2. It adds another layer of complication that can slow your project down and add more stress, specifically on the contractor front. Every hard money lender I've worked with will only release rehab funds once work has been completed. If you've got $4000 for framing and demo in your budget, the lender won't give you that 4k to give to your contractor until they've been able to verify that the framing and demo have been completed, which requires scheduling an inspection at the house. It's hard to find contractors who are truly willing to work with the Hard Money "payment upon completion" process because they have to come out of pocket to complete tasks and trust you to pay them. You also have to pay every time you schedule an inspection to receive the funds for completed work. I've had contractors walk off the job and never respond to me again because of the way the payments work (and this was after they seemed completely willing to work with the process). The amount of stress you experience will vary depending on your contractor, so be very careful to make sure that your contractor fully understands how it works.

Long story short, it makes getting into real estate investing easier but it makes the actual process of renovating the house harder. There are plenty more things that are good to know going in, but that is the gist of it.

@Kenya Curtis

@Nino Alfano while I do appreciate the transparency by the contractor, I'm more curious about whether it is a normal line item. I was under the impression that a contractor will add a little padding to each line item so they can get their check. I'm just trying to figure out if them also adding a management fee is excessive or if it just the standard.

I'm working on a deal and a quote from one of my contractors has a project management fee included in there. In the BP community's experience, is that a standard line item for most contractors? I've seen budgets with and without it.

@Tim Angevine I'm also seeing it in RPR, so it's not just a Zillow thing. I would assume RPR is more reliable.

When I'm running comps on properties I will come across random properties that have sold for prices in the millions, and I was wanting to see where the heck those numbers are coming from. For example, I'm seeing an area with prices around 75-125k and there's a random $2.1 million property that looks just like all of the others.

What is causing this? Is it just that there wasn't a price recorded so it defaults to some crazy number? I see this in almost all of the areas I'm looking at.