All Forum Posts by: Mark Bosworth

We are in the middle of a refinance on a rehab for a single family property.  Just FYI, the bank would only finance up to 95% of what we had invested in the property (initial purchase price plus rehab cost).  Even though an appraisal of the property would have given us a loan where we got all our cash out of the deal plus extra cash, the bank was unwilling to do this.  They wanted us to have "skin in the game".  We understand that if you keep the property for two years, then the banks will make loans based on appraised value of the property instead of your investment.  So check with your bank about their policy. :)

Don't assume you will lose your earnest money.  There are lots of ways to get out of a contract.  Get some advice from your realtor or a lawyer.  Perhaps your financing will fall through, once your lender knows what the property needs?  If it has asbestos and the seller did not disclose then that should let you out of the contract as well.  (Selling "as is" is one thing, knowingly not disclosing something is fraud).  Get creative and contest the contract.  At a minimum, you can settle for a percentage of your earnest money.

Hi All,

Some friends and I are 99% through with flipping a house and putting it up for rental.  When you flip a house for rental, do you put window coverings/blinds in it?  If so, which ones do you choose?  I'm thinking simple/cheap cordless accordion shades would be best.  But I thought there would be people with lots of experience on Bigger Pockets!  

Thanks for the help!

Mark

I'd set up the business as an LLC, which would define the capital each party would put into the partnership the work each party will do and the ownership each party will have of the partnership. The ownership shares should reflect how you want decisions to be made. If one person will be making the decisions then they should have over 50% share. It is really dangerous to have a family business where everyone has to agree, in order to get something done. Someone needs to manage the business and be in charge.

Then, I would write up an operating agreement that puts down on paper how each player gets compensated for their work.  (Dollars per hour, competitive quote before work begins... whatever you want).  This does not need to really be a legal document, just an agreement that everyone signs that sets the ground rules.  Then when there is a disagreement you can all go back to the original agreement that everyone has. 

Then just run the LLC as a business and pay people based on what you've all agreed to.

Hi Young,  I live right next to Lewisville.  You do have to be careful of foundations moving in TX.  Your building inspection will use a machine that measures how level the house is.  If it is out of level, then there are lots of contractors available to correct the situation.  For slab homes, they will install piers at different spots around the foundation.  For pier and beam (older homes), they will jack up the piers and adjust their height so they are level.  Just get the estimate for foundation corrections before you get out of your option period, so you know the cost before you seal the deal.  

Be careful.  Houses appreciate and mobile homes depreciate.  So factor in depreciation for the mobile home into your calculations.  (There is "depreciation" on houses, but it is strictly a tax concept.  Most houses really go up in value over time.)

We are 50/50 in three houses with some young guys and we love it (and looking for more). They do the work and we provide the cash. We stay out of the way as much as possible. We formed an LLC to hold the properties and they are the managing partners with 52% of the ownership to our 48%. Key for us is to have the financials online so that we can always see what is happening. We put the numbers into a free online accounting software (Wave) so that everyone can see them at any time. To make decisions, we have a yearly shareholders meeting over coffee. We don't try and pick out any colors or decide on what type of flooring goes into the property. For bigger decisions, we have a phone call or a text. Our partners have the real estate contacts (contractors, wholesalers, etc) and we want to invest some of our portfolio in real estate. When we do a deal, we try and write down the agreement and have everyone sign it, just so we all remember it. :) I'd highly recommend a partnership.

So when you are doing a rehab, how do you handle categorization of expenses into capital accounts verses expense accounts?  Do you even try to keep track of the difference?  Any significant renovation to the house could be capitalized, then taken as depreciation because it increases the value of the property.  However, treating everything as an expense would reduce income and taxation right now.  Just wondering how everyone does it?  I can see an argument for both ways.  There is probably an accounting rule that tells us the proper way to do this.

- Treat everything as an expense.

- Treat everything as a capital addition to the property

- Categorize expenses into the two categories

This is an estate sale, so the sellers are out of town and will not be stopping by to pick up anything.  

We just went under contract for a vacant home with lots of "stuff" in it.  The "stuff" looks pretty valuable (seems as if a band lived there and left expensive sound equipment).  We would like to move quickly to turn the property and get it rented. What to do with the property?  I don't want to just sell it and have the old tenants come knocking on my door looking for it.  I also don't want to track them down or pay to store it somewhere.  (They also left a motorcycle.... sigh).  What does everyone do in a situation like this to maximize the speed but minimize liability?