All Forum Posts by: Bryce Fairburn

Yeah that makes sense. After talking with a few contractors I think the $50k is high, but for the sake of being a beginner I am going to keep it at that amount for my pricing analysis. So if I do the 70% rule, and i pad the numbers in my favour I price the ARV at 250, 70% = 175, then subtract 50k I am in the 125 range.

Bryce

@Christopher Phillips Oh okay, that makes sense now.

Bryce

@Christopher Phillips  I am not sure I understand what you are getting at.  All the insurance conversation, title...etc happened between the previous buyer and seller.  I would be coming in and buying this distressed property from a VERY motivated seller

The unknown part is, "am I underestimating the extent of repairs that are needed?  Or if I take care of what was on that list, will I end up with a re-sellable place.

Bryce

@Christopher Phillips The current owner bought the house within the last year, and discovered the above deficiencies after the purchase.  I could be wrong about the age of the house.  My Realtor did not mention the age, the 10 years is what is listed on the listing, but have not verified yet.  

Wrong with the house:  Occupancy permit will not be issued until the above deficiencies are taken care of.  Once those issues are taken care of the house is fully liveable.  My realtor describes this place as a 'fake rolex'  Looks beautiful on the outside.

Bryce

Hey BP folks

As I am still very new to this, and have a level of nervousness attached to this deal, I am looking for some thoughts and feedback.  

The property: 2bed 1 bath, 5acre.  Detached 2 car garage.  Age 10 years old, located in Canada.

The market: if ‘turnkey’ valued at 275-300.  The house is currently listed at $165,000.  This is a market where people are moving to from the Toronto area so prices are increasing slowely right now.

The story:  individual cut many corners doing the renovation work on the property, and so it ‘looks really nice’ but has a list of deficiencies.  The current owner privately bought the house and is now trying to sell it after discovering all the deficiencies.  They are working with their title insurance, and my understanding is whatever they sell it for the title insurance will cover the remaining.

deficiencies:  repair work quoted at $50,000.  All deficiencies are things that I have experience doing.  Here is the list:

Engineer proposes the following changes in order to permit correctly (residence). Inspector has reviewed and soon to be an open permit.
1. Install a Dricore R+ Insulated subfloor throughout the first floor of the residence (R value of 3).
2. Repair vinyl siding on the exterior if deficient (ie. “J” channel, drip edge, corner posts and loose vinyl). Window and door framing to be built out and capped as required to ensure a water-tight condition.
3. Complete stairs with new handrail compliant with SB-7.
4. Remove the ceiling and wall finishes from the second floor and repair deficient insulation, vapour barrier and ventilation. Knee walls will either be insulated with 3” of 2 lb, closed cell spray foam insulation or R-24 batt insulation, 6 mil vapour barrier and 1⁄2” drywall.
5. Install a continuous ridge vent on the peak of the roof to promote airflow through the ceiling space and to prevent possible ice damming.
6. The existing skylights will be either removed or have appropriate insulation added.
7. The rear exterior balcony will either be replaced with a new balcony complete with guards compliant with SB-7 or removed entirely

Exit strategy: sell first for 5-10% below market value in order get the capital to move into the next property.  2nd exit is to brrrr it, however rental market there is not as ideal.

My questions:What price would you offer?  With the information I have provided would you purchase?.  Any other advice would be great.

Bryce

I have wondered the same thing as a fellow canadian.
Happy Canada Day.

@Kim Wu...Its a family member

Thank you @Chris Habets, and @Antonio Yong for your thoughtout and quick responses.  

I did not go into detail on the 'why's' behind wanted to pay back the Private lender, but at this point removing the family related dynamic from this investment is worth about 5% interest rate to me. 

Looks like my next step is a Investment focus Mortage Broker, then a CPA

We already have a JV agreement on the property so based on what a CPA recommends we will decide about the property title part

Next is to find a good Mortgage Broker and a good CPA

On a side note, as this is my first property I have been invested into I have been learning a lot, and know the things I will do differently in the future.

Bryce

Hey,  this is my first post, and after many hours of listening to podcasts, and reading these forums i am looking for some feedback on my plan.

The details:

Single Door Property Purchased 2019: 325,000

Property appraised at 345,000 at time of purchase.

Renovated property into 2 doors.

Longterm renter in one unit, second unit we used for Airbnb

2 Partners invested in property

Private lender at $200,000, at a 2% interest rate but set to a low amortization period so monthly payments are $2100

The remaining amount is out of pocket by the two investors

The Issue:

Currently the property does not cashflow due to the high loan repayment plan, and the inconsistency/expense of the airbnb rentals (and COVID of course).  Cashflows at about a -$800 a month.

The plan:

Convert the second door into a long term rental.  Get a new appraisal:  Expecting a conservative $375000 appraisal.  Refinance with a fixed-term mortgage from a bank (this would be 80% of appraisal value), and use that money to pay off the private lender, and pay off the other Partner who would be happy to be out of the house deal.

Questions:

Does that plan sound like it will work?

Are there complications with the house being in the other partners name and I want to take on the risk burden moving forward?

Are their complications because I live in BC, and the property is in Ontario, for tax purposes..etc?

Thank you for the feedback