All Forum Posts by: Brandon Anderson

Great advice, esnuts. It hits home.

Originally posted by "fosters":

Is that what they told you when you posed that question? Or is that a hypothetical situation?

That's a hypothetical scenario. I apologize if that wasn't clear.

Originally posted by "fosters":

I had written in a previous post - but since deleted - that it seemed this law was unenforceable too. I agree with you. I just don't know how they would know if you hired a contractor to do all the work - ie painting, laying of sod, what have you.

You have to apply for a permit to do certain projects. In order to get the permit you have to present your contractor's license. I don't know what you can do to a house without a permit, but I certainly hope that at least you could paint, put down new carpeting/flooring, update the kitchen, and install new appliances. So maybe that's the way around this statute for light rehabs...just do the light work without a permit, just as if you were living in the house. After all, it is YOUR HOUSE! [::distant cries of "Hell no! We won't go!"::] :lol:

Originally posted by "fosters":

I posed a hypothetical situation - I bought a "fixer upper", renovated it while I lived in it, then resold it, and she said that was OK as long as I was living in it.

I will not be living in the homes I will be rehabbing. Fosters, is that what you plan to do?

Originally posted by "fosters":

But, in regards to rehabs, she specifically said "if it's your own home, you can do anything you want".

I asked her what the guidelines for reselling a rehab were, and she couldn't give me a specific answer, just that "if your intention is to resell quickly".

There must be some form of guidelines here. I would also appreciate some help, as I'm about 4-6 months away from jumping into the rehabbing thing here in Virginia.

Nothing I've read is very specific as to what a rehabber is, what he or she is allowed to do without a contractor license, nor what the seasoning requirement is to not be considered a property rehabbed for profit. IT'S ALL EXTREMELY VAGUE! A lot is left up to interpretation, and it seems as if definitions are based on intent, which is always a subjective determination. For instance, if a serviceman buys a home, replaces the carpeting with hardwood floors himself, and sells his house 3 months later because he is being deployed for a few grand more than he paid, he will not be considered an owner and could face some repercussions because he didn't have his hardwood floor installation managed by a licensed general contractor. His intent was never to flip the house, it just turned out that way given his deployment. How is it possible that this law stands to penalize him? The law does not take intent into consideration, so it's bound to be bunk.

Until I learn more I'm going to operate under the thought that if the law is not specific enough to tell me what I am classified as and does not let me know of the penalties I could face, then the law is unenforceable. The more I read about why the law was put on the books in the first place, the more I get the impression that it was never meant to be enforceable but rather as a pacifier to appease upset constituents after some shady rehabbing practices.

My home state of Virginia requires a rehabber to hold a contractor's license or employ the services of an appropriately licensed general contractor. This seems completely absurd for the light rehabs (paint, carpet, appliances, landscaping) I plan to start with, and it heavily favors the contracting industry. Does anyone, as a rehabber, have experience with similar state laws? How did you go about your rehabs?

An attorney associated with my local REIA explained the statute as follows:
"Anyone who builds a new house or who rehabilitates a home and then offers it for sale meets the definition of contractor and must have a license issued by the Board for Contractors. They may, however, qualify for the owner/developer exemption if they do two things:

1) Hire an appropriately licensed contractor to perform all of the work, AND
2) Place a provision in their sales contract that gives the individual who buys the house privity (a contractual relationship) with the contractor that was hired to perform the work.

They must do both of those things in order to be exempt from licensure. If they only do one, they DO NOT meet the criteria for exemption and, therefore, must have a license."

Your help is much appreciated.

It sounds pretty unanimous thus far. I'll plan to start with light rehab, but I'll continue to watch this post if anyone has additional feedback. Thanks Rehab and Parrot for your advice.

Originally posted by "r2d246":

I'm just curious as to what your biggest problem(s) is as someone who's just starting out in REI?

I guess my biggest problem is not knowing what I don't know. I want to learn as much as I can about the various elements of REI and rehabbing, as I feel I should be as prepared as possible before getting myself into what could be a huge risk with big negative consequences if not handled correctly. I just don't know where to draw the "this is enough knowledge to get started" line. Moreover, I've read that before networking with veteran investors you should know all of the basics, because they don't want you bothering them with questions you should easily know the answers to.

A) What are the basics I should know before networking with seasoned investors and potential members of my future team?

B) What additional information should I learn from seasoned investors before considering myself sufficiently prepared to begin building a team, rounding up quality contractors, and buying my first investment property?

Here's the list of things that I feel I need to learn about before making my first investment:

1. Finding Properties
- Where to look for properties
- What to look for in good rehab properties

2. Valuating Properties
- How/Where to find comps

3. Business Entity
- Sole Proprietorship (operating as self) or LLC

4. Financing
- Hard money
- Private lending
- Sub2
- REOs
- How does my choice in business entity impact my ability to obtain financing?

5. Expected Soft Expenses During Rehab
- Carrying costs (mortgage, interest, taxes, insurance)
- The necessary insurance needed to protect the property
- Do I get it personally or as my business entity?

6. Estimating Repairs
- How to estimate repairs

7. Working with Contractors
- Apparently in Virginia you are required to have a general contractor license to perform rehab construction, so I would need to hire a general contractor.
- What to look for in a quality general contractor
- What is my level of involvement with sub contractors if I have a general contractor. Does the general take care of hiring licensed subs and obtaining work within a budget I allocate him? Or am I responsible for obtaining estimates and hiring subs?

Does anyone have a suggestion of something I should add?

I'm considering purchasing Stephen Cook's latest version of Wholesaling for Quick Cash. What is your opinion of this book/course? Are there any suggestions for alternative books/courses perhaps more geared towards rehabbers?[/list]

Here's a link to Virginia REIA groups. There's one in Tidewater, and I'll be joining the Richmond REIA. Best of luck. http://www.nationalreia.com/states/Virginia.html

Welcome, Lee. See you around on the board.

What are the pros and cons of buying a larger, more expensive house as a rehab as opposed to a smaller, cheaper house? What about as a newby, first-time rehabber? The area I live in has a lot of mid- to upper-middle class homes. I can potentially invest in anything from a 3/1 rancher to a large 5/3 in a golf course community. The larger homes in my area are more in demand and would sell much faster. The way I see it on the surface, I'd be better off buying a $400k (ARV) house at 75-80% ARV than a $160k house at 70% (ARV); I'd have a more desirable house with a larger net profit, and if things went sour during the rehab I'd be able to get out from underneath it easier, being that that type of home is more in demand (therefore less risk in that respect). I would expect a higher profit, so I'd be more selective of the properties I purchase. This kind of falls in line with what Stephen Cook practices (any comments on his books and materials?).

Are there other things I need to take into consideration, such as differences in insurance?

I would also be interested in this info. Thanks.