All Forum Posts by: Richard Cook

Thanks all for the advice, this helps. Probably will try and keep it at Private money at this point as it will be cheaper and more flexible. Sounds like it will be feasible, I just didn't want to run into any weird rules with HUD or FHA or someone making a mortgage without doing all the necessary underwriting and investigation that goes along with a conventional loan.

Hey all, haven't been able to find the answer so hoping some people out here would help. 

Here's the story - we're moving to Panama City, FL at the end of the year. I own our home here in TX and will be renting it out when we move, also own another rental I flipped here in TX that is now occupied with tenants. 

One strategy I'm considering for our stay in FL since we will likely be there for such a short time (9-12 months, possible 3 years if my military orders are extended) is to buy a nice home that needs a little bit of work and prettying up - nothing too extensive of a rehab since we will need to live in it in a few months. Getting the repairs done and moving in. When we go to move we will have a freshly 'flipped' home that we can sell so the tax burden won't be so bad since we occupied it and it was a long term hold. 

My question is with financing - since I want to close fast to get repairs started and a 'cash offer' will also help me get a lower price, does anyone know if it is possible to use a private lender or capital company if we'll be occupying the house while we're in FL? Is it illegal since there are so many laws for FHA and other owner occupied loans that they have to follow with underwriting, appraisals, etc...? I imagine best option would be to get a private loan at 8-10% amortized for 30 years on the repayments for the purchase. I would cover the rehab and closing costs, and would sell it in a year. If we're extended, we'd just cash out refinance to pay off the private seller and either use my VA or get an FHA loan on it.

What are peoples thoughts on the possibility of this or any private lenders that would be interested in a deal like this? Thanks in advance!

Hi BP world, 

So I finally took the leap and bought my first property. It was a nice 3/2/2 on slab. It was a FNMA foreclosure and had a wicked pet smell. I was going to turn it into a rental or sell if I found a buyer at the right price. Everything was going swimmingly and I was wrapping it up. I was having a plumber come over to do the finishing touches - hook up dishwasher and fridge, install new sink and faucets, and replace some valves. Nothing significant as the major plumbing work had already been taken care of. 

My normal plumber had an emergency and couldn't do the job. Since I wanted to get it done over the weekend, I hired a guy that had done work on my personal home through a local plumbing company. When we met, I asked and he said he did work on the side. So I gave him a call and he came over and showed him what needed to be done. Since it was so minor with no permits and would only take a few hours, I failed to get a contract signed or even ask about his insurance status or anything to that effect. 

Thursday he worked a bit and texted me that he wouldn't be able to get back to the property until Monday. I said that was fine and thought everything was okay, until I went over Sunday to install garage openers and take pictures for the listing. I walk in and the laminate was pushed up at the seams and first thing I thought was a heat issue and humidity caused floor to bow up. Then I was walking around and the carpets were soaked and squishy. I find the culprit is water leaking out of a cut off valve by a toilet. It soaked everything, water was even coming out from under the laminate into the kitchen! I went to check the water shut off (he used the meter) and it was in the off position, but still saw that water was flowing! 

I called the plumber, long story short, he said it wasn't leaking when he left and since it was on the side he had no liability or insurance coverage for the job. Tried to scare me by saying we 'had an illegal arrangement from the beginning' and that if he knew he had any liability he wouldn't have taken the job. He said it was standard practice to leave a house with valves cut off and shut off at the master... seems strange...

I take efforts to mitigate the damage - call ServPro for water cleanup. They were able to dry out the house and save the new carpeting, and maybe half the padding. The floor is toast and will need to be replaced. Still waiting to hear from insurance and claims adjuster for rest of repair costs and what the next steps will be. The plumber that came out to put on valves stated that it was absolutely not common practice to leave valves cut off (for this very reason...) and said that he shouldn't have been doing the work on the side to begin with (apparently not legal in TX, I didn't know as I am from out of state). Any other plumbers know if this would be negligence? It sounded like he had to leave in a hurry for personal matters, I wouldn't have minded if he would have told me he had to leave with water shut off. Can't say I would have hired a plumber to come out and put on valves but I would have checked more frequently and it would have shifted his liability by informing me of status! 

So I guess the biggest questions for BP nation now are:

-Do I have a case against the plumber and should I be thinking about suing him in small claims for my losses (essentially my insurance deductible)? 

-Will this be affected if I notify the state that he worked without a 'master plumber' license and that negatively affects him? 

-Will it affect my insurance's ability to go after him (if they choose to) for damages too?  

- Is this something I should be concerned about my insurance denying my claim for this?

- Should I be looking at getting a lawyer and going after him or is there some truth to the fact that because I didn't do my due diligence, the neglect falls on me?

They said your first flip would be a learning experience... I am pretty mad at myself for letting this happen. I guess lessons learned are even for work that is superficial and not 'risky' make sure you have a signed contract and don't get in a hurry and not thoroughly vet your contractors in a project. Hopefully all goes smoothly with claims and can get this place rented out! Sounds like just the water cleanup is $7000 plus the new flooring and carpet pad replacement... Ouch! that changes my numbers on this project! 

Sorry for the novel and thanks in advance for your help! 

Yeah, while tax assessment for most of the area seems to be on, it seems to be a bit behind on this one. As repaired, I'm tagging this at $110K and I comped it with local sales and listings provided by realtor as well as my research. HVAC looks still serviceable but will find out in inspection! Will have it cleaned and have budgeted for that. 

How much were you thinking for repairs? I am planning on doing mostly cosmetic to it, bones look good (but again will find out now that inspection period is underway). 

Looking at getting my first flip under my belt. This one is a FNMA foreclosure in the Wichita Falls, TX Market. 

Pictures Here

It reeks of pet urine, which I don't mind cleaning up, but curious of how much additional costs that would factor in. I've accounted for that in my paint figure. 

Bank has essentially countered my offer (of $68K with no closing costs and $100 Earnest) with an offer of $68K and $750 EM, so curious on thoughts before I pull the trigger (response due tomorrow afternoon). I will be doing a walkthrough with a GC to see if there's anything big I am missing and of course I would be getting a professional inspection too. 

I intend to do a good "rental quality" rehab on this one (it is near a military base with lots of tenant pools and good rents, est rent: $1000/mo, I will refi to get my cash out, then likely sell in a year to avoid taxing it as active income, and instead as LT capital gains. 

It's a 3/2 and 1400 Sq Ft. ARV of 110K

Estimated Repairs (mostly estimated via Homewyse):

Carpet in BR and vinyl laminate in living area: 5000

Drywall (has paneling in 3 bedrooms, would replace): 1500

Paint: 5000

Landscaping and Fence: 1000

Garage (fix drywalling and install door openers): 1000

Kitchen (would install new cabinets and better lighting): 4000

Appliances: 2000

Total Repair: 19,500

I know I'm at 80% (not 70% rule) but 70% is hard to find here in WF unless you get something that needs complete gutting. The bones appear to be good on this home and will just need some help with cat pee with a combination of a few tactics I found on the forums here. Will be contracting out the work due to my time commitments. 

Thoughts? Anyone see anything big I've missed? Thanks in advance for your help!

Hey all, 

Know it's been a while but wanted to give an update and advise everyone on our first deal. 

The original house in this post didn't pan out - they buyer was in upside down and while house would have been great to live in, would not have made sense to rent out so I didn't buy. 

Our agent did a good hustle though and found a FSBO. A guy that had done a lot of work on the house himself (he was a civil engineer on base) and wanted to sell quick so priced it $3K under appraised. House is move in ready and will rent quite nicely. Here's the analysis - BLUF should cash for $100/mo. It's a cap rate of 6%, but we're going to be getting some nice equity in it and think it will be a good first home! Glad to have the first 'deal' done, be homeowners, not be renting and paying another's investment, and have some equity!

Now we're looking at a flip before my training starts and going to either flip it or BRRR it, depending on our exit. Thanks everyone for all the advice and if you see any distressed properties in WF, let me know!

Hi James, 

I'm stationed here at SAFB now and just bought here and will be following same pattern as you. Let me know if there's anything I can do to help you out if you need a set of boots on the ground. Happy to help out a fellow AF member. I plan on self managing as well when I leave - I figure if I can keep military couples in there it would be easy enough to take care of it myself. If it ever went to an eviction or needed legal help, the PM would be passing along the cost of that anyways so it isn't like you'd be saving yourself that money... 

I read a lot at www.reluctantlandlord.net which is the blog of @Elizabeth Colegrove. She is a USN spouse and has done all self managing and her blog has a lot of tips for military REI. There is also a Military Landlords Facebook group you can peruse.

Without much money, it is difficult to grow starting out but you can look at using the equity in your SAFB home to get cash towards an investment property, but we're in a great position to take out multiple VA loans at each duty station. It can be tricky using so much leverage so make sure the numbers and market works at each place you buy. Also be thinking about taxes when you sell. The IRS gives us 10 year window for the capital gains exclusion if we're transferred for military duty so that can really help your strategy.

You're in the right place and there's a lot of knowledge here - welcome! 

@Kerry Baird - mind if I ask which AF base you're near? 

Hey all, thanks for the great info - think I'll be going with our local lender. It's about .5% higher APR than if I competitively shopped and perhaps a few hundred in extra CC but if it closes, and closes quicker, it will be worth it.

@Albert Bui - that's a great idea that I hadn't considered the possibility of that tactic using the IRRRL and the .5%. I knew that VAFF went up for subsequent uses, so would just have to plan to have a good enough down payment to lower that. We have enough to put down we might even just pay the VAFF out of pocket, help avoid a situation getting us upside down.

I appreciate all the advice from people on banks to use - it's nice to have so many choices but also so overwhelming - it got me thinking how the internet has changed how we do business. If this were 20+ years ago, I'd just go to my local bank that I did all my business went, take their loans, and never think twice about if I got a good rate or closing costs!

Thanks for all the great information everyone - it's been a lot to consider. After thinking it over, think I'll probably pass on the property, @Christina Carey, you're right - it is just one bad tenant away from losing money. Even with conservative numbers it should flow better. As @Cori Bryan alluded to, the owner is just in it upside down and can't let it go for a price that would make it make sense, we're really close, and I hate to see the deal go south over literally a couple thousand but if the numbers don't work, they don't work... It would have to rent for at least $1500, which might happen if the rents continue to increase, but I don't want to speculate. 

@Darrin Carey - Good catch on vacancy, had the number left in from when I was considering 1500 rent and didn't multiply it by 12! made a big difference, I think the 5% would be a good number because it is close by base, backdoor to an elementary school, and is a 4BR (and I am finding how rare 4 BRs are... might be a nice niche...). I would PM as Cori suggested from afar, especially if we got military tenants I don't see it worth paying $150 a month for a PM to forward a check to me. For that price we can take a "vacation" to check it out 1-2x a year lol. 

The town as a whole had lots of good options, but we're just too specific in what we need to live in. Hoping if I have some down time for a flip, I will be able to do that - can be a lot more flexible if I don't have to ask the wife to live in it! 

@Mary lou L. - That's great that you've been able to hang onto it for so long, when I get there if you need some boots on the ground let me know!