All Forum Posts by: Ralph Stowe

When you have a flip property in a questionable part of town, are there security device options without having to call an internet provider out and set up a full blown wi-fi network?  If you just need a camera or 2 or a motion sensor to alert you on your phone, if someone breaks in, are there options? Thanks in advance. 

I've been working on my first Joint Venture with a realtor to find our first flip property. In following Brandon Turner's advice, "Don't protect something until you have something to protect." We haven't established an LLC but plan to do so once we have a property to put in it. Are there some general guidelines or maybe a simple agreement that is used to spell out who gets paid what for doing what in acquiring an selling the first property? We've discussed some basic expectations like, whoever finds the lead or brings it to the table should get a finders fee, whoever fronts personal holdings into the rehab should get a respectable return on their investment, managing contractors or performing work on the property deserves compensation, and we both assume with my partner being a realtor, he would receive the commissions as listing agent. We seem to be on the same page about everything and there is a respect and trust established, but they always say, "you don't need a contract ...until you need a contract." so we were wondering what others have done to protect themselves without establishing a full blown LLC before acquiring the first property together. Any advice is appreciated.

I went to a local gathering for a guru who is pretty successful and has developed a following.  His strategy when negotiating with a seller is to justify his low asking price by pointing out "The house needs this and the house needs that, and that could all add up so that's why I can't go much higher on my asking price..." 

Now I went to ANOTHER guru who is also successful and has a pretty big following in town, but HE says, "Don't tell a seller everything that's wrong with their house. It upsets them. You're insulting their most prized belonging. Let them give YOU a number first and work from that. If they absolutely won't give you a number, work it backwards from,  "Well I need to make __% on this, plus I have X costs involving ____, so by my calculations, I'm somewhere in the neighborhood of $____.  and don't deviate from that too much. If you go up $20k or more, the seller thinks, "This person just tried to rip me off for $20k or more!" and won't want to do business with you." 

In your experience, is it more successful to point out all the houses flaws to justify a lower offer, or simply sympathize with the sellers situation and leave the house flaws out of it?

I've been learning about RE Investing for about 8 months now. I'm primarily looking at rehabbing a distressed property and selling it outright as quickly as possible. I've just stumbled across this concept of a "Seasoning period". I've read other posts about it which makes me think it only applied to refinancing or cashing out of a property you just purchased. I'm planning to just list the property on the MLS as soon as its rehabbed. Does a seasoning period still apply? (I know on HGTV the gurus say, "I want this rehabbed in 12 days and relisted in 2 weeks!" Granted, HGTV is not known for being close to reality, but in reality, would you have to hold it longer even though the property is ready to sell?

@Leora Merrell

No one in my circles has been very excited about Petersburg. Yes the houses are dirt cheap. Mainly because not many people want to live there. Although there has been some success with the immigrant community. Most of them dont seem to care. One of the teachings I got from Biggerpockets is "Scary houses attract scary people." One of the local meetup hosts says his max offer for a house in Petersburg is $5,000. I hope this helps.

@Nathan Gesner

Thanks for the reply and you make some great points.  
The tile was just the elephant in the room. If that were the ONLY issue, then yes, the numbers would have worked fine. The kitchen and baths needed some upgrades, there was a water stain on the wall where the washer was, the same floor installer took the bull noses off each step going upstairs, the illegal screen porch would need to be demolished. we would need a few dumpsters for all the junk.  By my estimates, it would take $25-30k to bring it up to a value of $266,000. The median for that floor plan in the area. 

My realtor suggested bidding at $180k which would make the numbers work again. But as the listing agent was touting "Multiple offers", they wouldn't take it.  I wonder how many of those who put offers in saw the inside?

I thought I would share an experience I had yesterday in hopes of helping others out.  

Yesterday I'm browsing the local MLS scouting for deals (Why not, right?). I stumble across this house that looks really great from the outside. Maybe the shutters need painting and a little bit of railing work but nothing much. It was only built in 2005. Roof, windows and siding look great. The neighborhood ranges $245-280k. Why is it listed for $209k? Listing says "Cosmetic repairs only" so I'm thinking, "Carpet, paint, maybe a drywall patch here and there?" No inside pics. Hmm.. So I call my realtor friend to go check it out. Was it a full gut? Did someone run a puppy pound in there? No. It was something else. The ENTIRE downstairs was tiled like this (see photo). Kitchen, foyer, bath, bedroom, family.... EVERYTHING. There's nothing wrong with tile, its actually nice tile. Just the install job ruined the house! The tile wasn't even flat, or evenly spaced. No quarter round on exterior walls either. The house is 2400 sq. ft. How much to demolish? 1,200 sq. ft.? on a 3/4" particle board subfloor? Then even it out and put something respectable down? Probably $8-10k alone. There was also an illegal amateur screen porch built around the deck. Knowing the building codes, it would have to be demolished. The 2 car garage was also full of the previous owners junk. So the lesson, if there's a price too good to be true and no interior photos, there is a reason for it! I hope this helps someone else.

@Greg Dickerson  Its just south of the James River. That area seems to be "Up and coming".  I think its on the market because few investors have the stomach or the vision for an old building..  or it could be a big asbestos abatement money pit.  Thanks for the numbers. Definitely something to think about. 

@Jaysen Medhurst  Thank you that is very helpful information.  Most of the building is 1 story but there is the middle section which is 2 levels.  Maybe that could be central laundry/vending machines or some sort of common area. 

I took a detour to work this morning and rolled past an old run down building for sale and figured, "Hey, that could be a cool 16 plex!" I found out through my realtor friend, it was once valued at $1.1 million, it was purchased last year for $561,000. They are now asking $850,000. If I do this, I might start at $500,000 and haggle.

Lets assume I get it for $550,000-$600,000, Where does one begin calculating rehab costs? It was an old assisted living facility. The building is 100 years old, it is 18,000 square feet. It exterior doesn't look TOO bad.. The inside would need to be a full gut most likely to make 16 two bed 1 bath apts. In that area 2 bed 1 baths rent for $1100- 1200/mo. There is the risk of lead and asbestos. Does it make sense to try this?