All Forum Posts by: Michael Hayworth

 Justin, down here, we have shifting clay soil and foundation repair is very common. I've bought dozens of houses with foundation repair needs, and it just gets factored into the cost. However, I also realize from experience that if the foundation is really bad, it may not ever be repaired to 100% right. That's something to consider. I had one that was just never truly fixable - the original builder took shortcuts, didn't properly pour concrete beams in the foundation, and took shortcuts on rebar. It made a good rental, but I couldn't sell it retail when I was ready to move it - I had to sell it to another investor. I'd try to avoid ones like that.

I did a quick search on Google and Angie's List for your area, and found only a couple of foundation repair companies - Ram Jack being the primary one. That would tend to indicate that it's not as common in your area. That's going to mean a couple of things:

1. Down here, there are foundation repair companies that specialize in working for investors. A job that would cost a typical homeowner $10,000 costs me $5500-6000. In your market, it looks like you're going to be paying retail, and the retail companies don't have a lot of competition to drive down prices.

2. If something goes wrong, your options for a second opinion are limited.

It wouldn't make me pass on a house, but I'd certainly factor it into the cost. And if foundation problems are less common up there, the "Ohmigod, the house has foundation problems!" negotiating strategy should be more effective.

Good luck with it.

With respect to a previous poster, if you wait for properties in DFW that meet the 70% rule, you'll never buy a property.

Your profile shows you're in Euless. Is the property nearby there? I just sold a 3/1 in Haltom City for $110,000. Everything right now is going above market. If the property is in Hurst-Euless-Bedford,you should probably just buy it. That school district is so desirable that values there will continue to rise, and will recover quickly even if we have a small correction in the next couple years.

The potential problems are that you aren't experienced, so your estimate of $20-30K reno could be right on the money, or it could be way off. How did you arrive at those figures?

If you want to PM me the address, I'll run actual comps for you, or if you want to shoot me some photos and descriptions of what you think needs done, I'd be happy to give you a sanity check on your reno numbers.

In our market, you can look forever and watch deals get snapped up all around you, sometimes at prices that just seem insane. At some point, you just have to pull the trigger on a deal that looks good enough (or you decide to put you money in mutual funds or something else instead). This sounds like it might be a deal to jump on.

As a GC, I've seen dozens of investors who went to these guru seminars, got information that absolutely doesn't fit our market, but ended up getting motivated or pushed into a bad deal they were told was awesome.

Here's just a couple of threads to read before you invest any money in these seminars

Please help $41,000 paid to a guru company to be refunded

Taking a stand after a $50,000 lie

The main thing guru seminars are good for is transferring money from your bank account to the guru's.

Being a good wholesaler is a tough business. You have to really understand your market, have to be able to realistically (not optimistically) comp a house, have to have a solid understanding of reno costs. It's NOT an entry level position.

After several years as a remodeler and six years as a real estate investor, I finally thought I might have a good enough knowledge to be an effective wholesaler. Unfortunately, I ended up keeping all the good deals for myself!

Around here, I see three categories of wholesalers:

A. There are a couple of wholesalers in DFW who I buy from and consider worthwhile. I'm always happy to look at a deal they send me. Their ARV and reno costs are in line. Their deals are solid. There are a couple others who are "pretty good" and sometimes I see a deal I think is really worthwhile.

B. Then there are all the newbies who may have a good heart, but got told they could make money in real estate with no money down, and just don't have the experience or resources to really do it right. 

C. Then there are a couple of huge companies that I (and several other BP members - I know I've seen @Hattie Dizmond talk about this a lot) consider simply fraudulent - they're always flacking inflated ARVs and underestimated reno costs. They're big churn & burn operations. In my GC capacity, I've worked with their victims - the newbie investor who trusted them, and now has a house he can't make money on. Those guys are no better than Bernie Madoff - they're selling the same false promises and telling themselves it's OK.

Category A - I love working with them.

Category B - I feel sympathy for them, but they're really not doing the world any good.

Category C - I hope they get syphilis.

Actually, even if he IS a member of a protected class, you can tell him to take a flying leap - as long as you're refusing to rent to him because he's a tool, not because he's blackispaniclesbigendered. He could file a complaint against you, but it wouldn't get far.

I'm gonna respectfully disagree with most of the people telling you to chill out. Some people just need to be told to F off.

Aaaand....this is why my company stopped taking investor work, except for my own houses.

Reno costs what it costs. Labor  + materials + overhead + a fair profit for the contractor. It doesn't matter what you "need" it to be.

If two or three different plumbers tell you $10K, the cost is $10K. If two plumbers tell you $10K and one says he'll do it for your $6K, you'll probably regret it in the end. He's either planning to cheat you, or he doesn't know how to run his business and will either change order you to death or bail o the project.

I can't tell you how may conversations I've had with investors who've bought a house where ARV & rehab costs were based on hope & prayer, then get frustrated with the contractor because he can't stuff $50,000 worth of reno into a $30,000 budget.

The remodeling market is booming all over the country. Most good contractors have a backlog of work from homeowners paying retail. If you want work done from a quality contractor, you're going to have to have your ARV and reno costs in line, so you've allocated a realistic reno budget.

Annette, respectfully, I don't think this is a great idea.

First, it's very hard to find a rental in Fort Worth in the $50,000 range. A few years ago, you could buy houses for that price in Haltom City, Richland Hills, White Settlement, parts of Meadowbrook, and other areas of the city. Now, those same houses - still needing repair in most cases - go for $70-80,000.

You can still find the occasional deal like that in Alvarado. I own two rentals down there - but I close on the sale of one of them next week, and the property I paid $55K for 2 years ago and put $20,000 into is now selling for $111.

Second, even if you've paid cash, you're looking at very low cash flow in return. Let's say you find some magical property you can buy for $50,000 all-in, and rent for $800/mo. (If you find that, it's probably going to be in Stop 6 or some other war-zone area.) You'll have no mortgage, but about $100/mo in insurance, about $100/mo in property taxes, and you should set aside a $100-200/mo repair allowance, because a house at that level is going to have stuff break - much more stuff, probably, than a $100,000 house. So overall, you've spent $50,000 and you're cash-flowing $400-500/mo unless something big breaks and you have to go out of pocket on it. Can you live on the $400-500/mo you'd be cash-flowing, plus your teaching earnings? 

Welcome to investing in 2016. DFW is exactly the same way.

It's honestly a very difficult time to make money in investing. Too many investors chasing too few properties and bidding up prices to levels where there's no money to be made. When conditions get like this, in any type of market, it's a signal that a significant number of people are going to lose money - whether it's from buying stocks that look like they'll just keep going up, or buying houses that are in a bubble. 

It's great for BiggerPockets that there are now 500,000 members on here, but it isn't really good for investing as a whole - if you figure that fully half the investors in America have joined the site (and that's probably overestimating), that means that in a country of 100 million single family homes, there are a million real estate investors chasing deals. Not really supportable over the long term.

To your main point, I haven't found a real deal on MLS in our area in quite some time. I buy properties using

• My own marketing to homeowners. (Even there, they've often called four or five folks advertising cash for houses.)
• A couple of good wholesalers I've found amongst all the frauds and wannabees in the wholesaling game.
• The Trustee Auction - buying on the courthouse steps. Even there, people are often bidding up houses they haven't been inside to 80 or 90% of ARV, with no guarantee what reno costs are going to be. But since it requires cash in hand - if you want to bid $100K for a property, you have to hand the cashier's checks over right after you buy it - that does somewhat lessen the number of bidders.
• Offering to purchase houses when homeowners call me out for a remodel estimate. If they say they're getting the house ready to sell, I'll make 'em an offer right there. Had two of those accepted in February, haven't had another one since.

Good luck out there.

It doesn't have to be on the 1st of the month.

I do SFR rentals for middle-class tenants. My rents are all paid electronically through ACH or through eRentPayment.com. Most are on the 1st or 15th, but some others are based on the date they move in.

Even with good-credit folks, some of them have trouble managing their cash flow, so we've occasionally broken rent into bi-monthly or even weekly payments, so we suck it out of their bank account right after their direct deposit puts it in. Since I'm not having to chase checks, I don't care whether we do 1, 2 or 4 payments a month. 

If someone does have an NSF, my bookkeeper and I immediately get email letting us know, so we can deal with it. In our scenario, there's really nothing special about the 1st of the month that makes it any different than any other. And since I typically turn over my rentals after a year or two, it's nice to have leases ending on different dates rather than all at once.

(I keep 15-20 rentals at any given time but turn over a lot - I mainly rent them because selling a house I've renovated without keeping it a year is a huge tax hit for short-term vs. long-term capital gains.)

You're doing cosmetic stuff, not rebuilding the house. It sounds like the guy you've picked is a good fit. Good contractors are hard to find. Don't run him off asking for requirements like you were having him rebuild the house from the foundation up.

Oregon is a blue state, so I assume y'all are heavy on licensing out there. You could check his licenses, but that honestly does nothing to insure quality. You've had him do work before, so you know what you're getting. There shouldn't be any permits involved in paint or flooring, so that's not really an issue. (Maybe in the window, but who really wants to do the paperwork (and added cost) to pull a permit to replace one window?)

Think of the contract as being a written agreement so each of you is clear what you agreed to, because verbal conversations get remembered differently. You don't need pages of legalese - if you end up suing each other, at this level of project, it would be in small claims court, which is more like mediation than a huge lawsuit.

I use a plain-English agreement with all my clients. It has a work order that clearly describes the work to be completed, a terms sheet that indicates general agreement terms, and a payment schedule.

It's good to be named on his insurance, if he has insurance. But I honestly wouldn't worry too much if he doesn't. (Again, we're talking cosmetic stuff here. The chances of someone falling to his death are remote. And you should have a liability policy on your rentals, regardless.)

Agree on a payment schedule. For a small job like this, I would just insist on 50/50 - it's not worth my time to generate more admin work on a small project. But for someone newer like him, maybe you front enough money for materials, but tie payments to completion stages. It does happen that contractors get a big deposit and then don't show up, so I'd dole out money carefully.

There are all kinds of things that sound like good ideas, but can make it very difficult for a young, starting-out contractor to comply with them. He's probably doing the work during the day and handling the business side at night. (That kinda sucks for him, but if he's good at it, he'll be successful and grow.) Right now, you need a good contractor who'll do the work at a fair price and do a good job so you can get the house making money for you.