All Forum Posts by: Michael Garofalo

@Andrew Katz I have assisted in this capacity before. Feel free to PM me to discuss more. I obviously am not local to your market so wouldn't be able to assist with a physical in-person inspection. But if you have pictures and can provide more context, I believe I'd be able to lend a hand.

@Pete Harper Ok well that's certainly positive news if you have the experience. As painful as it is, if I were you I probably would step in at this point to ensure things don't drag out any longer. Best of luck to you and your wife in seeing this to completion. If there is anything else I can do or you need someone to bounce ideas or thoughts off of, please don't hesitate to PM me.

@Pete Harper understood, and sorry to hear you have to deal with all this but glad to hear you do have a written contract. I think stepping in to become the GC is viable solution, but are you comfortable you have the construction knowledge and skillset to manage the subs directly? There is a lot that people don't realize/appreciate in terms of sequencing, inspecting work, permitting and ensuring things are up to code etc. Also, do you have direct lines of communications to each of the subs, and if they prove to be unreliable could you easily line up replacements to fill in? If the answer to those questions is yes, and you feel confident stepping in would allow you to finish the project and stay relatively close to what you budgeted, I say go for it. But before you do anything, I'd probably consult an attorney just to make sure that stepping in yourself would not jeopardize your chances at winning a judgement or anything like that. 

Everyone has a personal preference, but I believe the common theme to anyone who has built real wealth and achieved financial independence, has done it slowly and methodically via buy-and-hold. Tax benefits/situation is more advantageous and it is steady income. Fix and flipping is a job.

No problem at all! Happy to help, feel free to PM me if you have any further questions. 

@Thomas Moran I have been in this boat before, purchased a value-add property knowing that in additional to physical distress, there were also issues with pre-existing tenants. Speaking from personal experience, I would not try to be cordial with them and sort anything else out at this point. You could go over there and confront them in person however sounds like you don't know much about these people or what they are capable of.

If it was me, I wouldn't waste any more time and would simply make a cash for keys offer, with the caveat that if they are not out by a certain date, you will proceed with an eviction and that cash for keys offer will be off the table forever. Emphasize that if the eviction moves forward, they will have a very hard time finding future housing, their credit will be further tarnished, wages could be garnished etc. 

In parallel, talk to an attorney to optimize the timing for notice to quit and what the entire process is going to look like. If they don't accept your cash for keys offer, you will want to post a notice on their door as soon as possible to get the legal process going. You also will have to be cognizant of local and federal regulations concerning evictions in the midst of this pandemic. Rather than evicting for non-payment of rent, you likely will have to find another reason to remove them to be heard by a magistrate or judge.

@Pete Harper the last thing you should do right now is give this guy more money. His personal health problems are separate from his obligations to you as he is running a business. Dealing with any contractor is never headache-free however I can tell you from personal experience you do not have the right person for the job. 

If you had a contract or signed scope of work then you could talk to an attorney and potentially threaten legal recourse. If this was done under a handshake agreement and you have no paper trail, then your best bet is to refuse to send him another dollar until he progresses to the point at which you would be considered 2/3 complete (if I am understanding correctly, you have paid him 2/3 already for the entire bid). You should hold the remaining 20-25% over his head until every single thing is done to your liking. That is just my standard rule of thumb with all jobs. 

You say he has heart problems, so who is his next in line? God forbid something catastrophic happens and he can't come back to work, who would you call to ensure the project gets closed out? For that reason alone, I would not risk paying a cent more to him.

For future jobs, I also would not use this guy. You live and you learn but the best GCs I have dealt with are thorough and do not need to be babysat to this extent. It's one thing if he is messing up vanitys/paint colors, but not following through on the bones of the rehab is a red flag.

@Jasper Sawyer I am not a lawyer so would definitely consult with one before you make a final decision. That being said, series LLC are not recognized in every state. They are relatively new from what I understand. The best (and cleanest) way to do things would be to create a multi-member LLC taxed as a partnership. You file returns separately for the business, keep separate bank accounts/credit cards. I hear a lot of people on the forums and outside BP stating you need one LLC per property. In my opinion that is complete BS. It should be based on how much equity you have and what your tolerance for risk is. For example, if you have a mix of B, C, D class properties, it would be wise to keep those all separate entities, in the event of a lawsuit.

@Emily Smith just food for thought, but have you considered converting the commercial/retail space to another apartment? Based on limited information, it seems as if this would already be considered a commercial property (and is zoned accordingly). There would likely be hoops to jump through to get it re-zoned but in theory, if it was zoned 4-family residential, that would unlock more favorable loan products and actually might make resale down the line easier.

Just thinking about what I would do with this deal if it was presented to me. Everyone will have a different opinion but my niche is small-midsized multifamily so I would most likely pursue this route assuming the numbers work and I understood what would be needed prior to closing.

If she already moved out and is not living in the unit, I'm not sure I would pro-rate anything. You are doing everything you can to remedy the issue in a timely fashion. Even if she was still planning to stay for another 6 months, I would not pro-rate anything. Now if it took several weeks to get the hot water heater installed, that's a different story. IMO 3 days is not a big deal.