All Forum Posts by: Shawn Clark

I am still not 100% clear on the offer and inspection process and was hoping to get some clarification. I suppose the easiest way to have any misinformation addressed would be to lay out what I think the process is:

Property XYZ is listed on the MLS
I am interested in the property, so I go ahead and contact the listing agent and make an offer, stating that the offer is contingent upon inspection and attorney review
Once a price is reached, I get the standard 3-7 days (whatever is agreed upon) to do my inspection, etc. This blocks other people from making offers and puts me in the driver's seat to getting the property.
If my inspection turns up something catastrophic (eg termites, mold, etc), then I am able to rescind my offer and get 100% of my earnest money

I guess my biggest concerns are:

When is my earnest money at risk? My understanding is only when I, the buyer, go beyond my permitted window to conduct an inspection and try to walk away from the deal? Or if the inspection is done and nothing major is discovered to justify walking away?
I see a lot of terms like "as-is". Is that synonymous to no inspection allowed? Is the buyer always granted the right to inspection (unless otherwise explicitly stated) for all MLS listings (foreclosures included)? I know Sheriff Sales are an exception, but wasn't sure about other bank-owned stuff.

You pretty much have it right.

As for the EMD you said "Or if the inspection is done and nothing major is discovered to justify walking away?" That's not quite right. If the seller agrees to fix whatever you ask for (even if it's major) then you are still in the contract no matter how "major" it is. UNLESS you have terms otherwise. Our contract in MD has a box in the inspection addendum that allows the buyer to get out for simply not liking the inspection. They can walk away without requesting repairs. We almost never use it though, because sellers won't usually agree to it, but it's there.

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Yeah the only reason residential is tough is because people are living there. Commercial has no such protection.

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Sounds like the Federal lien is the problem. Not the 5 year balloon. I had 7 year balloons on two of mine that were just refinanced last year to a single 5 yr balloon at a lower interest rate. It’s not a big deal. My goal was to have them paid off before having to refi, but my situation changed.

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I actually worry more about the tenant that mails me money orders than the one that makes me pick up cash in person. The USPS is not perfect. I've had lost mail before. Who is to say whether the money order got to me or not?

In both cases, I keep a written record. The money order tenant gets an immediate excel sheet mailed back to her whenever I receive any rent. And the cash tenants pay on time and get a receipt.

Someday when I'm working in better neighborhoods I'll set it all up electronically. But for now, money is money. I've never ever had a problem with cash paying tenants. But maybe I'm just lucky. And going there in person, while a pain, also lets me keep tabs on the property.

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Originally posted by @Melissa Weller:

@Brian Pulaski, Thank you for sharing your experience. It's helpful to know that this is a common renovation. We do plan to investigate what is above that opening. Thanks!

@Shawn Clark, I would be the buyer. The inspection was done for me. I was surprised the inspector didn't elaborate, but the inspection report was full of disclaimers and legalese re: what he could and could not say. Given he's not an engineer, it appears he wasn't allowed to say more than he did. Thanks for your insights!

Since you are the buyer, I don't think you necessarily need an engineer. You at least need someone who can look at it with the right eyes. A good GC would be fine if you have one. If you were selling it to someone else as it sits now, I would say you might need to have an engineer just so you can have a more official "sign off". But I've signed off on structural stuff as a contractor for other agent's real estate transactions. It should be simple enough to figure out.

If the beams above are sitting on that wall in such a way that they can't stay there without any walls below them, then it was load bearing. It's a matter of whether they are spanning the entire ceiling, or only spanning from outside wall to inside wall. The only other question, IF it is load bearing, is whether anything was left in place above the ceiling to support it.

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Ditto to what everyone else said. You can also just use a dehumidifier if you want. You may want to turn it off during high dust periods though, like drywall sanding.

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Are you the buyer or the seller? Who was the Inspection done for? It looks like the inspector is just guessing. Someone with a little structural understanding needs to look in the attic. Simple as that.

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Originally posted by @Dalton Smith:

Jose Schneider, it’s nice to meet you Sir. To be honest, I haven’t been to Houston to see the flooding. Quite a few of my buddies have gone though, they say it’s pretty rough. Ive done some fire and flood restoration. I restored a house that sat under 4’ of water for over a week. I think I’ve already touched on that in another conversation here. Anyway, repairing flood damage is not a big deal. It’s really just the same old thing. Tear out the old rock. Pray that the house has a fire break in the walls. Dry and remove mold. Rebuild. The hard thing about flood properties is the dreaded “mold remediation companies”. I do believe they are in cahoots with the “mold inspectors”. The mold remediation guys hire the best salesman to scare you into getting them in there with no price on the bill. Then the mold tester finds mold!!! It’s comical really. If I was going to Houston, I would skip the mold remediation and inspection companies and just put in the sales contract that the home was flooded (obviously if it’s Houston). It was restored and tested for mold by a third party company and wipe my hands of it there. The mold and insurance companies will tell you you can’t do that....but actually you can. They just don’t like it. That’s where the GC experience comes in. I’ve done it enough to know when they’re trying to bully me. When I have a new customer I always ask to be there when the inspectors there. 90% of the time they try to scare the customer into signing something making them use a remediation company. It’s sad really. As far as becoming a GC. Man it’s all about what you know. I’m second generation in this line of work. I eat, sleep and drink residential remodeling. I read city code in my spare time and do a ton of product research. If you can go into any situation, in any home, after all the other contractors have left it behind and say “I can do this, on time and under budget and make it better than it was before”. Then you may be on your way. I just wear so many hats...for example...I do the advertising, selling, hiring, firing, scheduling, payroll, taxes, product research, price negotiation, inspections, insurance meetings, insurance write ups, bank meetings, draw requests, and when I need to I can pick up any tool on any project and do the work better than the lead guy on the crew. That’s how I know I’m not being taken advantage of, or am not about to have bad work done. I know what all of the processes are for every step of residential building. And I know them well. I’ve spent my entire life going from crew to crew learning all of the trades, and my father taught me the business side of it in his company. I guess the point is. The GC is the guy everyone points at when everyone is freaking out, and the GC stays cool and has it back on track and makes it look easy. Man...what a rant...sorry about that!

What do you do about mold that has gotten into the structure? Replace that part of the structure?

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I don't believe so, as long as the lease is actually ending on it's original end date and not sooner. It's a previously agreed to end date, unless something extends it, or it's allowed to extend into month to month.

Baltimore city does require first right of refusal to a tenant though, if you are selling before the lease end date. Which I think is crazy, by the way. And it's also rarely enforced, from what I've heard (and experienced once).

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Originally posted by @Kiley N.:

Originally posted by @Joe Villeneuve:

Originally posted by @Greg Downey:

I'll keep my 15 vs 30 yr opinion to my self, but in regards to one of the arguments for the 30 year note that you get to reinvest the extra income into more and more properties. Realistically, how rapidly are you able to redeploy $146/month (or whatever it is) into other investments. Someone mentioned taking the extra cashflow and investing it at 4% interest to show the arbitrage of the 30 yr note. I just have a hard time seeing how you invest such a small amount into real estate.

Your not reinvesting just 146/month. That money accumulates to the amount you can, and it isn't just 146/month...it's an additional 146/month...that adds up over time.

There's really no price tag on the feeling of being debt free with all that cash flow.

"There's really no price tag on the feeling of being debt free with all that cash flow." - EXACTLY!

Not everyone wants to leverage their a$$ to the hilt. Not everyone can deploy their free cash flow straight into 20%+ opportunities. Some just want to create "dividend plays" one by one and very safely. That's how I started. Full cash into my first rental so I could learn the biz, create some cash flow, create some write-offs, etc. Not the highest ROI, but you can be damn sure no bank will ever take that one from me either. And it's still better than cash in the bank.

It's all about the specific goals and the overall plan/portfolio. Everyone has to do their own math, which can be tricky in this business because there are so many variables as someone just said. And it's not all math. Some of it is about risk tolerance.

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All Forum Posts by: Shawn Clark

Shawn Clark has started 1 posts and replied 183 times.

Post: Newbie Question on Offers, Earnest, etc.

Post: Is evicting from commercial different than residential ?

Post: 5 Year Loan with a Balloon? Too Risky?

Post: is receiving monthly rent in cash bad?

Post: How do I know if this is a load bearing wall?

Post: Do you leave a/c on in flips when it's vacant?

Post: How do I know if this is a load bearing wall?

Post: Ask a General Contractor (me) anything!

Post: Do I need to give a reason for not renewing lease in Baltimore?

Post: Those who finance investment properties