All Forum Posts by: Eric Swope

@Orlando Davis shoot me a message. I would like to help out and answer any specific questions

@Matthew Paul I agree 100%. The investor and contractor both need their ducks in a row. I just wanted to bring up a point that both large and small owners need leverage for work to be complete on time and on schedule. At that the same time, the contractor needs to be paid timely and needs to have enough meat on the bone to make it worth their while.

@Alex Varner

Food for thought:

I work for a large scale commercial GC/CM managing their smaller projects (under $10mil). Our local office manages projects in the Pittsburgh area from as little as 100k up to $250mil + hospitals. Typically our clients make qualification based selections based on references and past experience (ie RFP). Once they shortlist the pool to 2-4 GCs... they interview us for the project to learn more than what can be found on paper. Based on these interviews, they make a selection off of the proposal, interview, and a GCs and fee number. GCs are the staffing costs, computers, software, etc (things not required to do the work but required to manage the work).

After an award is made, the GC and client enter into a contract to establish terms and conditions. The contract is almost always provided by the owner using an AIA template contract with owner requested modifications. After a contract is executed the GC typically requests proof of funds for the project especially if it’s a new client.

Depending on the contract type and project delivery type we may have a preconstruction agreement or get started right away bidding to our subcontractors. Our subcontractors terms are always “paid when paid from owner.” Our owners never (at least from what I heard) allow ANY upfront deposits. Work is billed on a monthly term and paid anywhere from 30 to sometimes 90 days later. Then after we are paid our subcontractors are paid 5 to 10 days after that with 10% retention held throughout the process until punch list completion. Labor and material is billed as the “work is put in place” meaning it has been installed or delivered to the project site. If it’s not on site... the subcontractor has to provide a bill of sale, photos, and proof they are storing the material off site with insurance. This is still paid for 30 to 90 days after invoiced.

To make a long story short commercial construction is a whole different beast. However, we spend millions of dollars on material and labor and get paid sometimes up to 90+ days later and never get paid upfront. Just imagine the conversation... “we want $3mil upfront on our $6mil contract to buy material.” Owners in the big leagues would laugh this off all day long. However in the residential sector some people think it’s reasonable to give a contractor 30k upfront on a 60k contract. It’s the same concept just less zeros. If the contractor is so dam concerned about getting paid prove to him or her you have the funds/credit and establish a contract/billing cycle or buy the material for him or her yourself. To me what separates residential from commercial contractors is access and management of capital. Residential contractors sometimes rely on these down payments just to float their other projects costs. If you can’t float costs for 30 days your not a stable business and highly likely to default in my opinion.

@Jason Chen since I found the property in April... I negotiated to delay selling until late July (needed to wait for college diploma and 30 days of pay stubs) , and cover the maximum allowable seller assist for closing costs by FHA (6%). As a result the seller was paid her list price of 155k.

The seller also let me into the property a month early to paint/move furniture before we closed on 7/28. The interior photo is from the unit we renovated (paint,new floors). The other unit was leased when I purchased and is more dated. 

@Federico Gutierrez well since I just started living there two weeks ago ...so far it hasn't been an issue. I have a google voice account to keep my business and personal calls separate and have a service account set up with a HVAC/plumbing/electrical business to take care of emergencies that might come up. Other than limited parking it hasn't been an issue. 

Jonathan Roper the property is under a standard homeowners policy ( Since I will be living in one of the units) with a 500k liability plus loss of use and full replacement cost. For an extra 140 bucks a year I get an extra 1mil umbrella to account for tenants slipping down my steep driveway, deck collapsing etc.. . For the market rents.. there is a 64 unit complex that is booked solid at 1150-1350 a month across the street. They are a little newer but similar style/footprint. The inside picture is from the unit I will be living in and the tenants side is a little more dated. Once I believe I can gradually push the envelope closer to the 1100 range over time.

Any recommendations for a great REI focused CPA in the Pittsburgh area?

Brock, I just purchased a duplex using FHA financing after graduating college in May. Shoot me a message and I will explain to you how I made it work. See my blog post on my profile as well.

From finding BiggerPockets during my junior year (Dec 2015) .... until collecting my first rent check two weeks ago ... it has definitely been an long journey to acquire my first property. First off, I would like to give a shout out to @Anthony Angotti for his advice on house hacking and financing my first deal as a recent college grad. Second off, I would like to thank BP for providing me with a wealth of information over the past 18 months.   

So here is a brief overview of what has happened from 2015 until now:

2015

-April of 2015, attended a Urban Land Institute (ULI) event in Chicago and met Sam Zell. After hearing Zell's personal story on business and real estate.. I was motivated to take the next steps

-April-Dec 2015- paid off as much student loan debt as possible and researched RE investing

-December 2015- found BiggerPockets. 

2016

-Continued pursuing my civil engineering degree while working three jobs. Listened to podcasts whenever I could.

-December 2016- Paid off all my student loan debt

2017

JAN-March- Searched for small multifamily properties in the Pittsburgh Area for my first house hack. Became pre-qualified for FHA financing. Walked through properties on the MLS.

-April-found an off-market duplex when mentioning my goals to friends/family. Analyzed the deal and visited the property

-May- Became pre-approved for the property. Worked with an attorney to draft up and sign sale agreement.

-June-July- Due diligence phase, renegotiate with seller. 

-July 31st- Closed on first property 

Property

-Side by duplex (2400 SF total, 2bds 1.5 bath each unit) built in 1979.

-Roof 8 years old, furnace 10 years, water heaters (A-1 year old, B-3 years old), AC units 5 years old, appliances less than three years old in both units.

-Purchase Price $155k

-FHA 30 year fixed at 3.5% down payment

-Seller covered all closing costs.

-Unit B rented at $850 a month (inherited tenants), tenants pay for ALL utilities, tenants mow lawn per inherited lease.

-Unit A vacant and now current residence.

-P&I $715 $80 month PMI

-$1mil umbrella liability insurance at $140 a year on top of homeowners policy

Thoughts on my first purchase BP?

@Samuel Pascal that's on my audible list as well. Shoot me a private message and we could set up a time to talk. Even though you have students loans I would keep searching on BP because this topic comes up quite a bit. From what I read it really comes down to interest on your debt and your ability to qualify for a loan on a property. There is also the private money and partnership route if "traditional" financing is an issue now.