All Forum Posts by: Michell Chase

Here are the actual numbers for this loan.  The original scope of work did include the addition of the studio and the 2nd bathroom in the remaining unit.  I guess a question to consider is it worth the time and money to bring in the architect to draw up those plans so we can follow through?  We are already 4 months into a 12 month loan and i don't know how long an architect would take and the cost.  We have already been told by these new contractors that work will take 3-4 months.  And again, we didn't anticipate a new roof being needed so that will be out of pocket for sure as we are told it is over 20 years old so we won't be able to get insurance on a roof that is that old, therefore no option there.  If we didn't have to do that we would be more willing to go the extra mile for the architect plans to keep the original plan.

The rents in this market are quite high due to the local military base and the current market value for tax purposes is at $142k currently. Most of the multi family units in this area are very run down and not maintained not to mention updated. Lots of slum lords just looking to earn a quick buck as opposed to offering quality rentals in a market where there is a need. Most of those properties are homes built in 1800/early 1900 and chopped up into units so most have weird layouts and doorways that don't make sense. Our renovations to this property will change the trajectory of the neighborhood that it is in as it will be the best on the block so I still feel good about a significant ARV without the studio and additional bathroom, but again just trying to make the smart decision for the long run as we don't wish to sell, we want to keep it as a long term rental.

Our loan was $100k purchase and $99k rehab funds. ARV was determined to be $275k I think with everything else that we are doing and now doing the roof we can still Come in at $250k and will cash flow at about $1k per month after expenses.

Kavi funding is my lender I've contacted them about the process to update the scope as the contractor bailed. They sent me the process and the steps to getting a new scope approved. I am hoping that adding the new roof (out of our pocket and not the rehab budget) will make a significant difference in the ARV to hopefully offset this unforeseen situation of not being able to add the unit and extra bathroom.

I just have a quick question on the post rehab ARV importance when refinancing into a DSCR. Basically the property we just purchased had a SOW that we've just been told, basically, cannot be done within our rehab budget. The contractor we had working with us on our SOW for the loan and was to do the project ghosted us and bailed and now we are being told by new contractors we are getting bids from that our initial plan requires way more work and finances than we were told. We were planning to convert an already existing tri plex into a 4 unit by splitting one of the units and then adding a 2nd bathroom in another unit. These current contractors that are giving us estimates are saying we need architectural plans to create the 4th unit and a sprinkler system…so that plan is shot. We went back with ‘ok lets not divide the unit but just add the extra bathroom in an already existing laundry room that already has plumbing" and again being told this requires architect plans. At this point this project has already been delayed almost 3 months and the rehab hasn't event started. My question is that is there going to be an issue when we the rehab is done and we refinance if we don't hit that rehab loan ARV? As we aren't going to be able to convert into a 4 unit or add an additional bathroom I don't see how we can hit that ARV now, other than now we do have to do a new roof, which wasn't included in the initial valuation.

Any assistance is appreciated, this whole project has me losing my mind….

David,

Thank you for your feedback on this. I get what you're saying and it for sure makes sense. We've just been hoping that eventually he will come through as I don't know what the process is to get a new contractor approved and if we can even find one that can deliver what was promised as we need to have that ARV as per the terms of the loan and obviously with the same budget. This contractor has a large team and would have turned this job over in about 8 weeks and doesn't have to subcontract out so he gave us this budget that we have to complete the job. It's just so frustrating as he came highly recommended and all was good until the delay. I guess also at this point I'm concerned he has some legal recourse against me as well thinking he is going to string me along until these other jobs are done.

I wish my lender was as hands on this was my first experience using HM and the lender was recommended from a family member.  They just haven’t been the best at communicating either or walking me through this process.  Therefore I am a little weary to have to reach out and tell them my contractor ghosted..but I am guessing that’s my only step if he doesn’t follow through in reaching out this weekend.

I began working with a contractor while I was looking for an investment property in upstate NY in August 2024.  He visited several properties with my realtor to give me feedback on renovations and costs as we asked him to work with us on a project.  Finally in September we decided on a property which would be funded through a hard money rehab loan therefore requiring a licensed and insured contractor and an approved scope of work because it is a major rehab project with a $100k budget and converting a tri plex into 4 units.  This contractor prepared the scope of work and the budget so that we could get our loan and he is the contractor of record with the finance company.  Throughout the offer and purchase process we were in regular contact discussing the project and how we would proceed once we closed on the property, discussing options and furnishings he could do…basically conversations about his work on the project.  Unfortunately our closing was delayed a couple of times due to seller repairs on the property so our closing got pushed from mid December to mid January.  In the interim the contractor took on another jobs and contracts (major government contracts both local and federal), which I understood but it was also the understanding between us that he would still do the work on our project. The delayed closing was out of all of our hands and I didn’t expect that I was his only project.

Fast forward to almost the end of march and renovations have not even started.  It is excuse after excuse why construction hasn’t started, other obligations, other projects, communications are basically non existent.  I have kept him updated and in the loop with emails and text messages at least twice per week, also asking weekly for a contract to sign and I hear some excuse from him basically one of every ten messages that I send him, the rest he ghosts me on.  A couple of weeks ago I kind of met my limit and sent him an email expressing my frustration on his lack of communication on where this project stood and his consistent broken promises of “I am having a meeting this week with my team about pending projects” or “we will start demo soon” etc….nothing has been followed through on.  I have retained all messages and communications to show that despite a signed contract there was a full verbal/email agreement on both our parts that he would be the contractor on this project.  Basically my question is what are my legal rights at this point with the clear breach of contract.  I am unable to move forward on this renovation and get this property on the market because he has not followed through.  Do I have any legal recourse to hold him accountable?  At this stage of the game I am 3 months into my HM loan with no construction started and it was to be completed by now.  This is in a pretty small town so the chance that I could even find another legitimate contractor that can do a project of this size is slim to none and also I have to get the lender involved again and jump through the hoops to get another contractor approved.  

Is there any legal standing that I have that I can bring to his attention on this for him to at least respond on what he is doing..he is just stringing things along, I just need him to give me an answer one way or another.

It isn't a large amount but my concern is that if I remove the tenant in July I have no deposit in the event that there are damages to the unit.  We already signed the purchase agreement several months ago...it has been on hold while they mitigated a pest control issue that has taken 2 months.

So a bit of a weird situation.  I am about to close on a multi family property that currently just has 1 tenant in place.  I just received the information on the tenant from the listing agent/property manager.  In the lease it states that a security deposit of 1 months rent was collected.  But I was also sent a document stating that a county housing assistance program was guaranteeing the tenants security deposit (which was accepted by the current landlord) but not for the full lease term because the tenant is no longer receiving assistance and that the guarantee would only be until 2/2025.  The letter also stated that the current landlord should have begun collecting payments toward to the security deposit upon receipt of the letter they provided me, which they did not.  Couple of questions on this one, as I have not closed on the property yet, but it is scheduled for next week.  1.  As the lease the current landlord signed with the tenant stated that they collected one months rent as a security deposit can my attorney require the owner to provide those funds?  They stated they collected them and as per the letter from the housing assistance program they should have started collecting those funds from the tenant back in October. (and on the flip side the tenant can surely say they paid it as per the lease and even though I didn't receive it on purchase he has the lease stating he paid).  2.  If I cannot recoup the funds from the current owner can I do a full inspection of that unit during my pre closing inspection to bill the assistance program for any visible damages before 2/2025 when the guarantee expires?  3. Is there legal recourse for me to now collect the required security deposit from the tenant even though he is in place (his lease does not expire until 7/2025), can i do a lease amendment requiring payment?

Thanks...

I am working with a hard lender on a purchase/reno and they require a builders risk policy even though 1 unit of the 3/4 will have a tenant.  Can anyone recommend a company that offers a builders risk policy to cover the construction period but then will also allow a cancellation and refund after work is finished to convert into a standard landlord policy.  The insurance agency I work with is having trouble finding a company that understands that type of policy and also offers it.