All Forum Posts by: Nick Noon

I'm not sure if this is a "success story" or not, but I think I consider it my first successful move as a real estate investor.  It all started about 2 years ago when I decided I was going to buy a house.  For some reason, I had interest in buying a multi family, but knew nothing about real estate investment.  So I did what any millenial would do, I googled it.  Just so happens that the first thing that came up was BiggerPockets and a video by Brandon Turner on the 50% rule.  I was hooked from the start. 

Fast forward, I worked with my mortgage lender for 2 years building back my credit and working on getting approved for a house.  The middle of last year I was final in a position to buy a house.  I looked at a bunch of multi families and made offers on many of them.  I would look at a multi and put an offer in an hour later after looking at it, sometimes $40,000 over list price, and wouldn't even get a call back.  I'm glad I found BP when I did.  Using simple math, I knew exactly how much I could pay for a property, and I wasn't going to overpay like a lot of people were doing. 

So after a while of no offers getting accepted, and a baby on the way, my girlfriend and I decided to start looking at SFH. I told her the only way I would buy a SFH is if I could put sweat equity into it. I have been doing construction my whole life and I love fixing things and doing construction so I wasn't afraid of the work. So I called my real estate agent and told her to find me the smelliest, ugliest house you could find. We looked at a couple houses but most were asking too much for a house that needed too much work. Then we found this house...

It was originally listed for $307,000 and sat on the market for 90 days.  In that time there were a couple price drops.  It was now listed for $250,000.  We went and looked at it, and boy was it ugly.  Wallpaper EVERYWHERE, a lot of deferred maintenance, water damage, drop ceilings in living room, a toilet that obviously backed up recently telling by the walls below, a lot of ugly....It was love at first sight. 

My RE agent and I talked outside the house for a little bit and I did some simple math in my head and I came up with an offer:  $230,000.  We got a call back that night with a counteroffer of $240,000.  Boy were we excited that we finally got into the game! So I told my RE agent, "I guess this is the part where I say $235,000".  I offer was accepted. 

I did a 203(k) loan and rehabbed the property myself.  I did everything but the plumbing since you need a license for that.  A buddy of mind knew a plumber and he did a great job.  It sure took a lot out of me and the scope of work grew by the day.  I got into this pattern where I would say, "If I'm doing this, I might as well do that"  Grew and grew.  Mind you, I was going all this after work at nights and weekends.  I've been working 7 days a week 18 hour a day to get this house done all while having my son born 3 months prior.  Needless to say we had a lot going on. 

Work completed:

-Complete gut of living room dining room including removing dividing walls. 

-Removing 20' of bearing wall and heading off with LVL's to open up space

-Jacked up and leveled house and installed lally columns

-Poured new footing for lally columns

-New roof

-Complete gut and remodel of bathroom including removal of joists and reframing and a complete new layout including all new fixtures, tile, vanity, etc. 

-New electrical run through the house (the first guy was a hack.  There were junction boxes buried everywhere.  They even ran 220 up to the 2nd floor with a 3 wire then split it to run 2 different homeruns to the same circuit...scary stuff)

-New oak staircase

-New windows and trim, baseboard, crown moulding, etc. 

-New paint everywhere (obvisouly)

-New drywall in living room/dining room and one of the upstairs bedrooms

-New entryway tile after closet was removed and reframed to open up the siteline to the oak staircase

-Removed old oil fed radiator heat.  Put in new furnaces and central air system fed by gas.  

-Repainted kitchen and cabinets.

-And a whole lot of other stuff....

Now, the success story part:  

After 8 months of renovation work I am in the midst of refinancing to remove PMI. I have to show at least 20% equity in the house. We got the appraisal back last week and it is valued at $331,000! Very exciting! We are removing PMI and my payment is going down by $201/month!

The numbers:

Purchase price:  $235,000

Rehab:  $31,000

Downpayment 3.5% (Skin in the game):  $9,310

Total financed: $256,690

Appraised value:  $331,000

Total added value from purchase price:  $96,000

Total Equity:  $74,310 

I am very excited. I had a plan and executed it and it became better than I could have imagined. I believe this has set me up for success to become a RE investor. I now have equity to borrow against to purchase my next property. I looked at a local credit union that I belong to and they will do 95% LTV equity loans! So thats $50,000 I can borrow against my sweat equity to buy the next property. This is a very exciting time and I look forward to continuing my RE career. Below are some pictures of before, during, and some afters. I haven't taken any final pictures yet, the after ones are from the appraisal report.

Thank you BP community for helping me start out in this industry.

Existing Pictures:

Some Construction Photo's:

Finishes Product (Sorry haven't had time to take pictures, these are form the appraisal):

@Raj Kumar

I work for a large GC in Boston.  This is on a bigger scale ($50MM projects), but I deal with partial and final lien waivers all the time.  Every month I produce a requisition to the owner for payment which is usually through an AIA G702 form.  When I submit the requisition to the owner, it will include all the partial lien waivers from my subs as well as mine.  We have a standard form we send out to all our subcontractors that basically says they are waiving their right to put a lien on the property if they are paid X amount of dollars.  We WILL NOT pay any subcontractor until they submit a partial lien waiver to us. 

Now, when it comes time time to close out the project, we require final lien waivers from all of subcontractors and we submit them to the owner along with ours.  How do we get our subcontractors to make sure they submit their final lien waivers?  One word:  Retainage.  You should be holding retainage on your GC.  You should check with your local laws on how much you can hold (In Massachusetts we are allowed to hold 10% retainage on all requisitions, or 5% retainage if the prime contract value is over $3MM).  So basically if the project was worth $100,000 and he has billed the entire contract out, you should still be holding $10,000 of his money.  Retainage is important.  It's the owner's way of making sure you get punch list completed, final lien waivers in, O&M manuals, etc.  

You're going to want to get lien waivers from the subcontractors so you know they can't put a lien on the property.  It's a single piece of paper from each sub where they fill their name in, put in the contract price, and have it notarized...pretty simple. 

So to answer your question, the standard practice is:  

1.  I submit a requisition with partial lien waivers

2. Owner pays me, less retainage

3. I requisition for final payment, send final lien waivers

4. Owner releases payment and retainage

hahhah.  Wallpaper...EVERYWHERE.  It's been a nightmare.

House had a solid foundation and updated electrical (even though I ended up rewiring half the house).  Hopefully I can make a little money of this project and start getting some buy and holds!

@Shaun Reilly

Shaun, as always thanks for the sound advice!  I'll talk with him soon about the deal.  I think the assessed value of the land is definitely a good starting point.  That way he doesn't think I'm pulling a number out of my butt with no credible back-up just to make a buck.  

Some sneak peak pictures of the renovation.....It's become a life of it's own!  I have taking out almost every wall in the house hahah.  Apparently I love LVL's

I am in the middle of a "Live-in Flip" project.  I bought the house on March 1st and am doing some extensive rehab to the house (nights and weekends starting to wear on me, but a story for another day!)  I recently met my adjacent neighbor and after about a minute of talking he quickly came out and said, "are you interested in selling any of your land?"  I was a little caught off guard, but I told him we could talk about it.  

He wants about 800 - 1000 sf of my land that would make a straight line for his backyard.  My land kind of jogs in to his backyard, so it kind of makes sense.  I have 26,000sf so I have land to spare, and the piece he wants I probably wouldn't use much anyway.  Does anyone know what the going rate of land is in Chelmsford, MA?  Would I simply divide the $184,000 of land value that the town assessor says its worth and divide that by my total SF and get a SF cost?  It comes out to around $7.00/SF and that's kind of what I'm seeing for land for sale in the area.  

The other interesting part is that he wants to fence in his property.  I was planning on fencing in my property as well, so it would almost be a double win.  He would pay me to basically fence in my property...or at least about 40% of it.  I was thinking about making a deal where he would fence in my property along with his, which would be like an extra 275LF of fencing which would probably be in the $7,000 range.

I don't want to give my neighbor a price that would put a bad taste in his mouth, so I was wondering if anyone knew what would be a fair price for the land.  Some other things to note, he just paid $540,000 for his house a year ago, so I'm guessing he has money.  He really wants the land and is motivated as it would make his backyard make more sense.  

The town requires a $100 application fee along with a professional survey of the lot lines to be changed.  This is land transaction that the town calls a "Approval Not Required" or "ANR".  I would make my neighbor pay all lawyers fee's to change deeds, and to pay for survey since he is the one that wants the land.  

Would I be asking too much?

This is how I left it:

I am not going to pay for the oil, since I did not ask for it.  I will however, call you if I can get the oil sold and give you the money back.  They agreed.  They didn't seem too worried about it either.  I will call them and give them any money I can get for the oil to clean my conscience.

@Shanequa J.

I think the better question is to ask the seller....Is it worth losing a $235,000 deal over $600 for a house that's been sitting on the market for 100 days and couldn't sell.

So I am closing on my first property tomorrow.  I got a good deal on it and am hoping to get some sweat equity when I'm done rehabbing it.  I bought the house "as-is".  When I did the final walkthrough today, my RE agent said I should bring my checkbook to closing, mostly because I am to pay for the heating oil in the oil tank they just filled up.  Unfortunately, one of the first things I'm doing to the house is ripping out the oil tank and putting in a gas furnace.  I don't feel as though as I should have to pay for the oil as I did not ask for this and I bought the house as-is.  

It's a nice gesture on the sellers part but I don't think I should have to pick up the $600+/- Bill for something I did not ask for.  My RE agent said this is "typical" for the seller to fill the oil tank before closing and the buyer paying for it.  Both my RE agent and seller knew I was rehabbing the property as I am doing a 203k loan.

What should I do at closing tomorrow?  I don't want to pay for the oil 

@Dawn Anastasi

Thankfully!

A little more info:

I have since wrote a letter to my RE agent so she could forward to their listing agent and in that letter I offered to accommodate them in any way to be able for them to make the closing.  I even offered to pay for a power of attorney. 

The listing agent got back to my RE agent and filled me in on what is going on.  Apparently its a 3rd generation house.  The family built the house in 1920 and their family has lived there ever since.  The mother died and left the house to both the son and daughter (and apparently left one of the sons out...).  The daughter is willing to close whenever, but apparently it's the son that's the problem.  Apparently the daughter had rented him an apartment and paid for it for months in order to try and get him out of the house.  He finally has left recently, but apparently there must be some sentimental value towards the property.  He is not willing to move up the closing date as he WANTS to be at the closing and he "already took the day off of work and is unwilling to change it". 

I don't know why he wants to be at the closing so bad.  I hope he doesn't plan on lecturing me about the house...this could get real awkward.

So I pretty much just came on here to vent about my frustrations.  Here is the timeline of events:

December 30th - P&S Signed with closing date of February 8th for a 203(k) loan. The sellers explained to the listing agent that they are looking for a quick close. (The house is vacant)

December 31st - Mortgage lender said to ask for an extension on the closing until February 29th because she doesn't think we will have enough time to close on a 203(k) loan this quickly.  She said that it is wise to do this earlier than later

January 3rd - We execute a closing extension to February 29th

January 3rd - January 15th - I scramble like crazy to get all my paperwork in

January 22 - I am informed that the loan is fully approved and that we have a tentative close date of February 9th.  Both my lender and real estate agent explain to me that they've never seen a 203(k) loan close this quickly.

January 22 (later that day) - I am told that the seller may not be able to close that early.  I tell my RE agent to tell the seller that I will pay to have any remaining items removed from the house and pay for a U-Haul if they close on the 9th.

February 2 - RE agent calls me and tells me that they want to keep the February 29th close date because it would be too hard to "alter their schedule".  

I really don't understand how someone could want to close a loan quickly then want to stall for an extra 3 weeks.  I am not sure why they are so persistent that they NEED to be at the closing.  I am just so confused and so frustrated at the whole thing.  This is after I went up $5,000 from my asking price and my lender and RE agent said that this will "help the process along" and that the sellers will be more helpful during the process.  

I had contractors lined up to start working, and we were ready to move into the house so that we didn't have to pay ANOTHER rental payment for March 1.  Now we are going to have to.

End rant.

These things happen in real estate and you can't let it get to you because its going to happen over and over again, but I'm just at a loss for words for what happened.

I work for a large general contractor.  We don't give our subcontractors deposits/start-up money and we don't ask that from our clients either.  We requisition costs every month according to the agreed upon schedule of values of the percent of work that has been completed.  For example:

If you had $10,000 for a scheduled value for drywall and the work is 50% complete, they bill me for $5,000.  We also hold 10% retainage (5% in MA for multi million $ contracts) so we would end up actually paying them $4,500.  The retainage is held until punch list is complete and we have all of our closeout information.

If someone is asking you for a deposit, you should ask them what it's for.  A reputable GC should have accounts with all vendors so there shouldn't be any upfront money needed.  They don't need any money to "secure" the contract either.  That's what the contract is for.......I agree to pay you 'x' for the following scope of work:

I have never and will never pay anyone for work that isn't completed.  I wouldn't ask my boss for a few extra paychecks ahead of time so I can get my work done in the office.