All Forum Posts by: Derreck Wells

I don't have a lot of time, so I'll give you the short version.

You can't do it yourself without getting licensed. You're in MA, they're tough about that. Here's the link to the Construction Supervisors info. This only qualifies you to work on one and two family. Then you need to upgrade to the commercial side of things for a three or four family. It would be cheaper to hire someone. ...

http://www.mass.gov/eopss/consumer-prot-and-bus-lic/license-type/csl/construction-supervisor-license.html

I tend to agree on the repair cost. If the roof is leaking and the shingles need to be replaced, you'll end up in the $5,000 range just on the roof. Then comes the floors, plumbing, electrical, paint, appliances, the beam could be structural on the porch, demolition of basement ceiling, repairing any rot in the attic, etc., etc., and I'd say you're in the $15-$20k range on repairs. Always assume high and call it $20,000. You have to consider electricians charge about $100 per hour, plumbers are close to that, and construction crews go about $65 PER MAN on the job. You not just paying for materials, you have to pay for the labor too.
Repair Costs = $20,000

Next consider the fixed costs. Those would be title fees, RE sales taxes, agent commissions (times 2, when they buy and again when they sell), etc., etc., and you add about another $10,000.
Fixed Costs = $10,000

Then comes the variable holding costs. That's the amount it costs to hold the property till it sells. How's the market in the area of the house in question? Do they sell quick or take 2-3 months. Consider mortgage payments, insurance payments, maintenance costs (lawn mowing, cleaning, etc.) and multiply them by the number of months the buyer can expect to hold the property for. I can't really estimate those without some serious research into your area, so I'll just keep that one high and say it takes 3 months to sell. That's $300 in lawn care ($25 per week to mow), $900 in mortgage, 1/4 of the annual tax bill (guessing here) $300.
Holding Costs = $1,500

You're now up to $31,500 in associated costs to the buyer. Add your fee to that, and lets call it $35,000 in total costs to the buyer/flipper.

Now to me, $15,000 sounds reasonable. That's a total investment of $50,000 to the buyer, only leaving a $16,000 profit margin for their investment. If there are any unexpected issues (property liens, etc.) then that number will shrink. There's not much room there for shrinkage.

If you were to market it to a homeowner as a "Handyman's Special" for $40,000 or even $50,000 you might make a quick sale, but to an investor, it's not a deal. Sorry.

Welcome Scott.
I'm surprised no one pointed you towards the podcasts yet. Go get 'em and listen to 'em. There's some great info on them and it makes for better listening on the way to the job than morning radio around here! I've been too busy this spring to sit and read a lot on here, so the podcasts help me to keep learning. I've listened to them all several times.

Here in NH, during the probate process on my Grandfather's house, the town came to us and said that he hadn't pulled a permit for the addition 25 years prior. We believe he had, he was in construction and it was a major addition and couldn't be hidden from view, he knew what he was doing. Anyway, we couldn't find the paperwork from the addition and the town charged us $500 in retroactive permit fees and went away.

You're welcome.

Another great place for cheap new cabinets is a Kitchen and Bath showroom.

Yeah, I know you said cheap, but wait, there's more.

Every year or two, the showroom has to rotate out the displays. These displays are often given to the showroom by the manufacturer, or at the very least, they're very cheap. The showroom will sell you the display's for short money to cover the cost of the new ones. I've scored several cheap kitchens this way. Just go in and ask if they're planning to sell off any displays anytime soon.

Anyone use Every Door Direct Mail from the post office yet?
https://www.usps.com/business/every-door-direct-mail.htm
I looked into it for postcard mailings for one of my businesses, but haven't done it yet. It gets postage down to $.16 a piece. You mail to specific mail routes, entire neighborhoods, or entire cities.

Maybe it might help if you took your father's records to the bank to show what the bar is capable of. It's a long shot, but if you said something like "This is what the bar took in when we ran it before, we can get back to these number in a year." or however long you think it'll take.

Carl,

First, every contractor that works in the state of MA is supposed to be a certified "Lead Safe Renovator" and follow RRP rules. (By law, a copy of the certificate is supposed to be on every job.) Which means basically assume every house built before 78 is full of lead paint and follow the RRP rule, or test for lead and if negative, no rule required. Basically the RRP rule is plastic off work areas and contain and clean the dust to state regulations. It adds about 30% to the job. Even every painter is supposed to be a lead safe renovator as of 2010.

If you're doing the work yourself, you can take an 8 hour "Owner/Agent" course and be able to do "moderate risk" deleading on your own property. But where I'm a contractor I had to take a 8 hour Lead Safe Renovator Supervisor course, then a 4 hour Moderate Risk Deleader Option. The next step is a Class 1 Deleader. The difference is the volume of lead I can remove. A Moderate Risk Deleader is allowed to demo 6 square feet of wall per room. Basically to repair small holes from doorknobs and the like. We can also cover and make safe as much as needed, but to demolish takes a Class 1.

Now here's the big loophole and where that site becomes critical.
If the house has been inspected and violations were found, the work HAS to be done by a Moderate Risk or a Class 1 Deleader (or owner/agent). If the house is on that site and violations haven't been addressed and you gut the house, you'll get nailed for illegal deleading and it will be on that record that there was illegal deleading done in the house. You'd probably have issues getting federal money after that. No HUD or Fannie money.

If the house isn't on that site, then you're free to gut away. A contractor is still supposed to follow RRP rules, but a homeowner can do anything. The thing is, even a contractor can gut the house and it's legal. As long as it hasn't been inspected before, it's legal to do anything. If it's been inspected, a licensed deleader needs to do it adding around 30% to the job cost.

I just got my Moderate Risk Deleading License and learned a few things that may have already been shared, but I'll share them again.

There's a database of all MA homes that have been inspected for lead and tells if there are violations and if the violations have been fixed.

http://webapps.ehs.state.ma.us/Leadsafehomes/default.aspx

Just use the drop down and enter your city, then enter the street name. Just the name, not St or Ave. At my instructor's direction, I don't even put a number in, I just scroll through the results. There's 10 results per page (not always in numerical order), look for the little page numbers at the bottom of the chart and check all pages for your house.

If your house isn't in the list, it has never had an inspection. If it's in the list and has violations and no re-inspection listed, there are still violations and you need to hire a Moderate Risk or Class 1 Deleader, depending on the violation. If no violation, any RRP contractor can gut the house, including all lead (my instructor said with a wink and nod) and remodel legally.

This site should be in everyone's due diligence toolbox that buys in Ma.