All Forum Posts by: Kenneth Garrett

@Daniele Kouassi

Welcome Daniel.  As a wholesaler you need to understand how to analyze properties and calculate rehabs.  There is a tremendous amount of information here, but consider learning from other sources as well.  You can never consume enough as everyday is a learning experience. 

Work with tool calculators for fix n flip and rentals/Brrr. This will help you analyze. Physically looking at property is a must to learn from. Watch other properties that are sold at discounted prices, most likely an investor purchase and see what they do to the property and see what it sells for. Attend local REIA groups and attend meetups.

My first year I just tried to absorb everything and after my first purchase everything became much clearer. You will have an opportunity to see other wholesalers at REIA meetings and see how they present them.

If you need help let me know.

Good Luck.        

@Anwar Shabazz If your architect drew things on the plan that are not necessary (no code requirements) and are not related to the violations have him remove them.  Unfortunately if he drew it on the drawing the inspector is going to make sure you follow the design.  He will need to revise the drawings.  Just be clear they are not required items.

@Anwar Shabazz The only way anything would show up on the title report is if you were fined and they recorded a lien on the property.  There could have been a fine assessed, but it would be vacated if the items were resolved within a certain time frame.  I am assuming you had been notified but were not able to cure the violations until the citation was issued.  I am a building inspector and typically the issue is because there was no response to the initial notices or you made a commitment but you were unable to honor it for whatever reason. 

I am assuming this is in the City of Chicago.  I would try the following:

1. Secure a letter from the City on an agreement to resolve the issues and submit this to the bank.  
2. Resolve the issues and secure written approval from the city.  I would think the bank then would be able to proceed with the closing.     
3. You could file an appeal with the City to resolve the matter.
4. Hire an attorney to legally remove the item that has shown up on the title report.

Good Luck.  If I can help message me.

If you want tp protect your assets than they should be inside an LLC. In the event there is a law suit that goes beyond your insurance coverage they could go after your properties including your personal assets. It is an additional insurance policy.

If your properties do not have much equity then its probably not much of an issue unless you are concerned about your personal assets. Asset protection is a large topic of debate. I own all of my properties in an LLC. Trust me in Illinois its the second highest fee next to California.

@Christopher Winkler  I borrow the money for 120 days at 12% annual.  Rehab 6 weeks or so and usually takes a couple weeks to select a tenant.  Actually I usually have the tenant in the unit for a month or two prior to closing.  The advantage is you have a preforming asset instead of potential rent.  I typically am able to rent on the high end of the market due to the level of rehabs I perform.   

@Christopher Winkler I use a local bank who does commercial loans on residential properties.  Below are the steps

1. Buy with Private Funds mostly IRA funds (Self Directed Retirement Funds)
2. Rehab Project
3. Place a tenant in the unit
4. Refinance   with local bank

Not all banks will issue commercial loans on residential properties.  Typically smaller/local banks.  I just closed 5.10% amortized over 25 years, 5 Year Balloon.  I had three thousand stuck in at closing. I will be able to recoup that by the of the first quarter.  Essentially no money in.  Infinite return.     

If it meets the zoning requirements of the district it could be ok.  The lack of a permit could be a challenge.  They will want to issue a permit to document the paper work.   It is a little tricky.  They could ask you to open walls to verify the electrical, plumbing, etc was installed correctly.  The zoning is the first hurdle, if correct then you can decide on how to proceed.  If you have photos or videos of the project as it was being remodeled that would help.

Removing the stove does not make any sense.  I am assuming each unit has its own kitchen.  The stove would not effect anything.  A cooking appliance is necessary to meet the definition of a dwelling unit.  The appraiser is out to determine value of a 3 or 4 unit building.  Removing the stove has nothing to do with it.

If it meets the zoing and complies with the life safety and code requirements you should be ok.  I know its a pain to deal with government regulation, but I have seen investors try to get around requirement and it cost them in the long run.   I would say understand the rules and the consequences if you get caught now or in the future. 

I do not like dealing with the government when I conduct a flip or rental property either.  Some of the requirements do not make sense, but it is part of the process.  Just like when we drive our car if we choose to speed there are consequences if we get caught.  Just be informed and make an informed decision.   

2017 should be a great year for investing.  Keep networking to find people who are looking for better returns on their money.  When reaching out to people prepare a prospectus on your projects.  Describe the project, why it is a great project, the numbers and how their money is protected.  I also include information about the area big employers and/or new companies locating in the area, school information (rating of schools) go to greatschools.org for information.  It is important to provide a bio about yourself so they know who they will be investing with. 

The financial details should be very detailed so that there are very few questions on the details of the project.  It should be self explanatory.  If you need a sample of financials message me.  There are plenty of sample bios google and you'll be flooded.  Bios, business plans etc.

Remember at the end of the day they are investing in you.  It"s your reputation so make it a great one.  

@Patti Robertson I like the way you think.  I'm usually the one that is lagging on responses.  The hunt and peck method is slow but effective.

Ivan,

On the appraisal report, the appraiser acknowledges the zoning and the use of the property.  If they run into a zoning issue where the district only allows two flats and you have a three or four flat it would be considered a legal non-conforming and no problem.  Legal non-conforming means the property was in conformance with the zoning regulations but they changed the regulations over the years and you were legal when it was built or converted.

Two issues that could arise.  If the appraiser runs into a questions about three or four units and whether its legal they will call the government entity. I have spent over 25 years as a building and zoning official and I receive calls all of the time from appraisers.  If no building permits were issued and inspection approvals were not conducted then you potentially have an illegal non-conforming use where they could demand you de-convert. The other potential issues is insurance.  If its illegal and there is a claim they will reject your claim.  Look at your policy (Aunt) there is usually a qualifying statement about a legal property in compliance local requirements.

This Information is not intended to be negative, but it is important to know all of the facts so you can make an informed decision.      

Good Luck.  If you need zoning advice message me.