All Forum Posts by: Rob Harris

Tons of variables to consider.  Geographical location to cost of labor, permitting, code requirements,  and so on. Each have their pluses and minuses. 

I personally lean more towards new construction since I can build for cost and have instant equity. Plus everything is NEW, so less Cap Ex and repair costs.  Ex. I can build a  new 1 bed duplex for $50-$55k. I  can buy a $35k older home and sink another $20-$25k into it to flip and make a little money or hold as a rental. Even with spending the rehab money I still have a 50+ year old house. 

Now again, depending location and desire of buyers,,, that's going to drive the market and your decision making. 

@Dawn Anastasi - is this property still available... I am starting to hunt around the 53216 area for investment units...

@Matt Morgan

Have these units already been sold?

To be concise..... what @j scott said! 

@Jacob Pereira - sounds super cool! I've considered the same idea in another town... When I started out earlier this last year I learned during my due diligence period that all these dulexes were in a flood zone! The ROI with the increased insurance cost want worth it to me as I evaluated this project against others I had going so I dropped it.

Might entertain making a similar run as you in the future but right now I'm dumping most my time right in other directions trying to capitalized on the higher price points for retail sales of the homes and multi units I'm building and selling.  Trying to stay focused on building even more cash to be an even stronger buyer when market prices soften more and primarily a buyer's market.  That's when I plan to make a move to put more units in my portfolio.  

@Anwar Shabazz - Trying to keep this short as possible; If they have the money to perform you should not have to pay anything up front. If they are a "broke" contractor, they really have nothing for you to obtain if you have to take recourse against them.  Also obtain a standardized contract and add specifics to performance task and exactly how payments will be made.  At each stage make the contractor and EVERY subcontractor sign a "Conditional Lien Release" for each progress payment made.  This way if they try and file a lien after the fact you have easy legal recourse against them and to support the immediate removal of any liens on the property in question. 

I would  I do this until I have a solid history with a contractor.  Once they have proven themselves reliable, I give them a bit more rope.... That's just how "I" work things....

Get all their license, bonding, and insurance information up front and have yourself added as an additionally insured to their policy to cover yourself.

Break the job down into "chunks"....  Each stage of completion must meet inspection standards and again, they receive payment and sign the proper lien release.....  At the end of the job, when final payouts are due... all work, again, must meet muster and then EVERY SINGLE CONTRACTOR on the job must sign an "Unconditional Lien Release" to be paid...... If you don't get one from every single sub as well as the prime contractor, you are leaving yourself open to a problem.... The trigger for lien releases to take affect is when the check is negotiated.  If they cash the check, they have no legal right to file a lien... All the lien releases I have seen have a section to write in any disputed or outstanding payment amounts.

Not, every state works the same, but should have a similar process available to consumers and contractors to have mutual protection from the other.  

Lastly, if you are using a new contractor you have no history with, ask for references.  Ask to view other work he has in progress and then 'make your way' over to the owner during that visit or later to do a simple interview with them to get the real scoop in regards to the contractors performance.  How is he managing resources, payments, problems with inspections, punctuality, etc....  Also check on their license and the licenses of any subcontractor and see if they have had any complaints against them...

Hope some of this helps! - Rob H 

Corey D. & Steven McPherson -- Sorry; Had to run to some meetings and prior commitments... In short,,,. I believe in a general sense there is a "course correction" coming,,, and in some markets, already occurring. I've watched some central Texas communities where NICE $250k house's are having price CUTS of $45-50k,,,, with spec builders trying to dump them. I'VE READ A TON of publications and listened to a number of podcast where folks that are looked to for guidance etc ..... saying they are adjusting their portfolios as needed to weather the market changes to come. Having been one of the many that got "porked" in the prior crash,,, I'm much more conservative now,,,, and much more educated than before. I believe "most" markets have topped out and anyone buying now needs to be buying well below market value. Depending on your geographic location and rent competition,, some will be in better shape than others re cash follow and the ability to maintain staying in the black. Also, those that have bought multi units with commercial financing that have ARMs that were barley able to make the numbers work with the lower rates are going to be in trouble when rates start adjusting UP. "A" type properties will take the biggest hit (from what I've learned). Low "B" and "C" type properties usually have a stronger market to survive within as long as they came in solid and not overly leveraged. Those with solid credit and CASH will have an advantage to buy properties in the near future as those that have been in the "black" without enough cushion will have to start dumping properties and banks/sellers will start making more concessions to close deals. Just my thoughts..... !

It will be VERY interesting how prices "adjust" this year and the next...... 

All I can say is be VERY careful at your purchase price..... Personally I would only buy absolute "steals" well below current value as values will be adjusting.....  #JustSayin     :-)  

@Maggie Vineyard - re "your" bank,, I wouldn't advise them unless you wanna chance killing the deal. The 1031 co won't care about these issues as they must comply with the IRS CODE which to my knowledge have no provisions for such issues. 

What I was referring to re the bank is the BUILDERS / DEVELOPERS financing institution/entity. If there is issue with a property they have financed, they would push on the borrower to properly perform. Until it's off their books, they are still tied to it. Depending on the institution, they may jump in with both feet or simply say, "Hey, they're paying their note so we don't care.".... But you don't know until you ask/inquire. 

Hopefully that makes sense. 

@Maggie Vineyard , @Dave Foster is on point. One thing I would do is find out if there's a bank or other financing entity involved and get them involved. I say this as they have a vested interest AND you also can leverage "full disclosure",,, in that if the sale doesnt go through that the listing entity/broker would have to disclose pertinent (non-cosmetic)/workmanship) issues with structure or pertinent systems If they still won't cooperate advise their buyer might sue them when they 'eventually' find out about significant"issues".... With all this in mind, the items you have in question need to be "significant" and non cosmetic or a simple workmanship issue. 

Lastly; you could also set if you could get them to agree to an impartial third party inspection....? 

Just some  thoughts to ponder...... Good luck!