All Forum Posts by: Steven Skinner

@Jim Piety Bit late here, but I hope you didn't end up paying that much for the trenching. As much as your contractor might seem like your "friend," or as much as you might believe he's really had your back on this one, that's a blatant money grab on his part. Straight out of your pocket despite knowing this caught you off-guard and put you in a poor financial situation related to the property. At the end of the day, he's only looking out for himself, so you've got to remember to do the same. Best of luck.

@Noah Joseph Armstrong My suggestion would be to hop off of the BRRRR strategy hype-train. In order to make something like that work you'd already need very strong financials in place, as well as a stellar credit history, which are the "strict" guidelines you're seeking to avoid. Considering you have roughly $15k liquid available, I would aim to simplify the entire process and focus on small flips for the time being. This will allow you to grow your capital considerably, while simultaneously making yourself a better candidate for conventional long-term financing. As for this particular property and with me not knowing where you're located, I would guesstimate the renovation costs to be $50,000+ at least. Your best bet would be to find a hard money lender and utilize your currently available capital, assuming you will have enough money left over to live on and cover your holding costs (primarily the HMLs monthly interest). Before you purchase anything with a hard money lender, however, I would absolutely suggest you have a GC in place who can handle the entire renovation for you unless you are absolutely confident in your ability to seamlessly manage many sub-contractors at once. Best of luck.

@Bryan M. - Just did something similar on a renovation not too long ago. This home was built in the 40s as well, and was originally a 5/2. Since the home had no master, we converted one of the bedrooms into a master bath with a shower, freestanding tub, and his & hers closets. In the process, we also added square footage to the master bedroom by moving a wall. It shouldn't cost you an arm and a leg to have plumbing bumped over, electrical would presumably be minimal given it's already in place and wouldn't require extensive updating/shifting to accommodate the new layout/use near water, and moving a wall isn't that costly. If you're uncomfortable or unsure about any of the finer details, review each of these items with the respective subs or your GC beforehand. I would venture to say that a 3/2 would be sufficient in most markets, including your own. Again, lend to the expertise of the pros. Ask your agent if this will be sufficient, and I suppose at this point, if it's even necessary or worthwhile to do at all. If they believe you won't raise the value enough to offset your costs, and that they can market the property as it stands, leave it be. If they agree it's a necessity, begin ironing out the details and proceed accordingly. Good luck with this one. I'm sure it'll be fine either way.

@Tyler Bougie - You're on the right track with the FHA 203(k), and you could also check out the Fannie Mae HomeStyle loan as it's similar, but with a slightly larger down-payment, I believe. What @Dan Beaulieu suggested seems like a well-enough idea, but I think you're wanting to ultimately sell the home you're moving into? If you go that route, either be confident beforehand that you'll be able to secure the institutional financing needed, or be ready to sell (meaning you'll never end up living there at all, obviously). Some hard money lenders have terms that exceed 1-3+ years, so it depends on your specific situation, however with it being owner-occupied the majority would likely opt-out. With private lenders, there are no "set" terms, so you can negotiate until your head spins. There are a handful of approaches here. Just keep doing your research and balancing out what best suits your individual situation. Good luck!

@Chantal Routhier - Hard to make a worthwhile assessment without knowing how large the living space is going to be, and without pictures for reference of what currently stands. How close is this quote to the others you've gathered?

@Mark Leonard - Make 100% sure a Deed of Trust is written up and recorded outlining however much you end up lending. Don't rely solely on the Promissory Note.

@Scott Brewster - Who owns the LLC that will hold the property? I'm assuming that would be you and the contractor. If that is the case, it is essential you have an Operating Agreement in place that outlines exactly how this will be handled. Well worth the money to a credible attorney.

From what I gather, there are two ways of looking at this:

1) The contractor is flipping the house. You as the lender have absolutely nothing to do with the direct management of the project, you are paid in a fashion similar to what @Greg Bond pointed out above, and you do not own the house. Your interests are protected via mortgage/DoT. This would be a project undertaken solely by the contractor and you are simply a 3rd-party professional serving a specific purpose, nothing further. In which case, yes, earning 50/50 as a lender is exceptional in comparison to what is considered standard.

2) You're flipping the house. It's your money, and you're going to own it outright. Hiring a GC for a job by no means gives them any financial position above and beyond the agreed upon amount they are paid for managing and overseeing the necessary repairs. They manage the rehab, yet you remain top dog and make the lion's share. If you take on this perspective, then your contractor is now the one in an exceptional position to be making 50/50, minus the risk, compared to what is considered standard.

It sounds like your agent and contractor are both new to their professions, or at least that's what I interpreted from "... at the same time I'm kind of kick starting everyone's business too." This sounds incredibly dangerous to me. Not so much as it pertains to the agent, but more so to the contractor. I understand they're your friend, but don't let that cloud your judgment and cause you to make a financially irresponsible/unsound decision. If they bite off more than they can chew, and another contractor has to be brought in, they still get 50% of the profit? Lots of precarious assumptions being made here. Emotion and money should always remain separate, lest you turn an otherwise stellar friendship into a batch of sour grapes. It's all about your level of risk tolerance, and I assume with you being new to this, you want to keep that as low as possible.

Don't get me wrong. I think friends grouping up and tackling new tasks/projects in a mutually beneficial way is incredible and should be strived for. But bear in mind, you're already aiding the inception of their businesses by simply being a repeat client. Your agent gets a front-side and back-side commission from each individual property, and your contractor is brought consistent business (all a startup could ever ask for). At the end of the day, 100% of the risk is yours, not 50/50. This detail can't be shaken off or forgotten. If things go south, you take it on the chin alone, and hopefully have enough funds to take on another project and off-set some of that loss. If your tank happens to be empty, that's all she wrote, which is obviously a risky and perceivably bad business model for any novice (or lifelong pro, for that matter) to follow. I say treat the agent and the contractor simply as they are, 3rd-party professionals. Remain in each other's corner and rip through houses like there's no tomorrow. Then as the trust, understanding, comfort and overall fluidity develop throughout that process, then you can, at your leisure, structure deals as you so see fit.

Hope this helps! Any questions, I'm here.

@Mark Leonard - Assuming the contract can pass muster, you'll want to find out if your partner is utilizing any other lenders above and beyond what you're contributing. Your position is the only one you should care about, and you want to be first. What exactly is the contract you were sent for this deal? Was it a Promissory Note? Was it a Deed of Trust (which I believe is the appropriate instrument for Utah, rather than a mortgage)? Beyond that, you should be aware of what he's purchasing the property for, how much it needs in repairs and what those repairs are, as well as what it will sell for. Fetch contractor quotes yourself, and be sure to find your own comps. Ensure the property is fully protected with an appropriate insurance policy, probably builder's risk, as well as making sure title insurance is purchased at closing. Verify all of this information. Be aware, acquaintance or not, you might have to get tough if he doesn't hold up his end of the bargain. Know your options, as there are lots of elements to this. Good luck!

@Scott Brewster - I'm a little confused on who's taking ownership of the property, as well as the terms you're using to describe those involved. You mentioned teaming up with two others, totaling three people, but then asked about a 50/50 split between the lender and the contractor. Also, where the terminology comes in, if you're serving as a private lender that would typically imply that your name is not on the deed, rather in lieu of that your interests would be protected via a mortgage or Deed of Trust, depending on your state. So firstly, who is going to take ownership of the property?

I just used BrandsMartUSA for the first time on a property I'm renovating currently. Bought a 4-piece all-electric Samsung set, which includes the French door refrigerator with bottom freezer, range, OTR microwave, and dishwasher. All very sleek, and brand-new. I haven't received the appliances, they're customer-will-call at one of their locations (I used the one at the Peachtree Pavilion shopping center), but they're set to deliver them to the property as soon as I call. If there's any issues with anything, such as appearance, functionality, or otherwise, they have a return window for refund or replacement that doesn't begin until they're in my possession. Think the whole set plus some additional hook-ups and add-ons ran me about $2.1k after taxes. You or your colleagues have any experiences with them?