All Forum Posts by: Douglas Larson

Great thread! @J Scott 

Just 3 months ago I bought a home through a wholesaler and the owner on title "needed a few weeks to move out." I asked for and got a written agreement that the owner would be out in 3 weeks after closing. She was out in less than 3 weeks as promised but her ex-boyfriend who was living in the basement felt that didn't apply to him. He was not on title and I didn't think to ask about others living in the home. He didn't move out for another 2 months! He did pay rent but my project was delayed by 2 months because I didn't get all parties living in the residence to sign the agreement to vacate! 

IKEA has some easy options that work in most settings and look good ($300-$900 and take a couple hours). If you need a custom-sized closet or want a truly integrated look, sheetrock and 2x4's are cheap but the doors, base and case moldings, and time can add up quickly. It can take a couple days to frame, rock, tape, mud, texture, trim out and paint a new closet and might cost $400 or more in materials. I have done this several times though to add value to a property. If you can go from a 2 bedroom to a 3 bedroom home just by adding a closet, you can add 10K to 50K to your ARV, depending on your area of the world. Most areas also require that a "bedroom" has a closet AND a window, so don't advertise another bedroom unless you tick both boxes.

Below is a closet I recently added to a master bedroom that was really lacking in closet space. The cost was about $500 in materials and about 2 full days of work.

Have Fun and Make Your Own Luck!

No question is dumb, but some have been answered a few hundred times on the forums already. "Reasonable Terms" for hard money or private money vary across the U.S. I use money from local sources in Utah at 2 points origination and 12% APR, and the lender will loan up to 70% of purchase price. Some lenders loan 65%LTV on ARV in my area and will actually write you a check for rehab costs if you get the property cheap enough.

The reason I use my particular lender is that he defers the 2 points (2% Orig fee) to the payoff date as well as all the interest, so there are no monthly interest-only payments like most lenders require. He also does a 9-month term with a negotiable 3-month term for another 1% if needed. If you are flipping, you should never go that long but I deal in higher-end homes and it's nice to have some extra time for a cushion.

With loans under 100K you might find that the origination fee and APR are higher, especially as you get under 50K. There is a lot of time, paperwork and research involved in a loan and lenders need to be compensated.

Experienced HM lenders will have all the contracts and paperwork ready to go but make sure to have a trusted title guy, mortgage guy or attorney look at the docs before you sign. The lender will want to be in first position on title and will absolutely record the lien. There are the usual title fees, closing costs and often an application fee with each loan but you shouldn't have to pay a dime until they approve the deal.

If you've never borrowed HM before the lender will need as much info as you can give to convince them that you are the right guy to take a risk on. Spell out what you've done in the past and why this property is such a great investment. Also, outline your renovation plan, costs and timeline. 

Have Fun and Make Your Own Luck!

I often tell people that "almost any property can be a great deal at the right price and/or terms." Your offer simply must factor in the price and time required to repair or replace the additions. I might put the home under contract at 60% of retail, minus my estimated repair costs and then get some contractors out quickly to get a more accurate evaluation. 

Let's say I estimate repairs (including mitigation for the foundation issues) are 35K. My offer would be 46K cash ($135K x .60 = 81K - 35K = 46K). I would ask for a week or so for due diligence and if the contractors gave me a really ugly number I would show the repair estimates to the seller and try to negotiate the price lower. 

Because the home is reported as "free and clear," I would possibly present an alternate offer of 5K cash down and monthly payments of $700 per month for 6 years for a total of $55,400 to the seller. If the offer was accepted I would verify that there truly are no liens or loans with a title company. 

Either of these deals could make a great wholesale deal or a good fix&flip or even a good rehab to rent, assuming your 135K ARV is accurate and that monthly rents would cashflow $100 per month or more.

I hope that gives you some ideas that help. By the way, everything is negotiable and flexible according to yours and your sellers needs. The recent BP podcasts #75 and #77 are fantastic for ideas on negotiating with sellers.

Have Fun and Make Your Own Luck!

Scott, I didn't see a specific question. What kind of advice are you looking for?  I will ask you a few questions if you don't mind:

What do you want to do? Do you really want to buy it? Do you really want to stay in the area? Do you want to be a landlord?

Are you looking for a way out or ideas to make the deal work?

Do you have renovation skills or access to good subcontractors for the repairs? You said your neighbor is a finish carpenter but is he affordable and does he also do flooring and plumbing that you mentioned the place needs?

Sometimes a bad deal only gets worse, especially if you need to invest more cash and then might be leaving the area. We call that "throwing good money after bad." Walking away from 25K is painful but it's already gone. What will be your upside if you buy the place and invest even more money?

If you acquire a loan, repair the home and then sell, will you recoup your investment in the next few years? If you don't buy and repair the home but instead use the same amount of money  for something else would you be happier?

Being an absentee landlord can be difficult but perhaps it could be a good home for you now and maybe selling by lease option could work later. 

Once you decide what you really want to do, it is essential to write up an agreement on paper and work through the details with the seller. 

I hope answering these questions helps with your planning.

 - Douglas

Creativity is King!  Great deal!

Wow!... best flip ever!

Perhaps I am not effective at delegation but after 25+ rentals over 15 years I have not found a PM that I can truly rely on. I have tried out 4 different companies and 2 of them were recommended by investors I trust. PMs promise to take away your headaches but it has been my experience that they take their percentage and other headaches keep popping up like whack-a-mole (vacancies, HOA or neighbor complaints, big-ticket repairs, etc.)

I self-manage my rentals now and my strict, initial screening seems to be the biggest deterrent to problems down the road. Properties out of state or you being out of the country sounds like another layer of difficulty. Sorry I don't have a magic bullet but I do have equity! If you hang in there, you will have a very nice retirement someday!

If your cabinet boxes are in good shape there are some great ways to re-face your cabinets. Just google "cabinet refacing" and your city and see what pops up. Many companies are now replacing just the cabinet doors and drawer fronts and painting or applying a veneer to your old boxes. It can cost less than half of replacement and save lots of time. I just priced out a large kitchen with a big island, 20 doors and 18 drawer fronts at $2,400. All new cabinets would be about six grand.

Hope that helps!

@Andrew Briones

HD and Lowe's have some specials and some ability to match pricing. When I am doing a big, long project I like using their no-interest for 6 months credit. It's important to note however that with one more layer between you and the subcontractor, your install will likely take a week longer than using a local guy.

Both you and @Greg Wilson mentioned black granite and I think Greg was referring to the company named "Black Granite" in Salt Lake. "Steve" is my contact there and they are very good and affordable. I have used them several times.

It's also important to note that not all installers measure the same. Some insist that they charge only $25 - $30 per sq. ft. but they use the thinner 2cm product and they include the whole slab, even the waste. HD and Lowe's only charge for the actual sq. ft. measurements of your countertop and their pricing usually includes the pre-sealed 3cm thickness and the 4" backsplash.

Have fun on your project and post some pictures when you are done!