All Forum Posts by: Ronny Crawford

Thank you Carl.  I have both HUDs for the Flip to provide my CPA.  Side bar, I cleared $80,000 on the Flip prior to taxes, after paying back the $108,000.  I've set aside 30% in case I owe that much for the Cap Gain for holding less than a year.

Does anyone have professional guidance regarding how taxes work regarding private lenders or hard money lenders?  I was on both sides of this question last year and have not yet filed my taxes.

Two scenarios to consider:

1.  I borrowed $100,000 @ 8% for 12 months, ending April 2017.  I've paid this in full when I sold the property.  Is the full $108,000 a deductible expense on the Flip?  Is there any required documents I'll need to provide my accountant?

2. I loaned $40,000 to another investor at 20% interest.  I was in 2nd position and they were desperate...  I received full payment in September 2017.  Do I have to claim the $8,000?  If so, how do I report it?  Ordinary income? Capital Gains?  What documents will I need to provide, if any, to my accountant?

Thanks in advance!

Ronny

flip 2 properties.

@mikedymski agreed. and yes I have contingency built in.

@ Jessica zolotorfe there is no built in Fee shifting agreement. I will pay for my own attorney if needed.  First we try to settle together, then through mediator, and court lastly.

Thanks Mike!  

This is a fairly large contractor, not new to the business, engineer is certified with stamp approval from the permitting office.

#3 may be required per code, but I should be able to get new bids to get a good price.  Having their in house crew complete the work then send a bill is unacceptable. Thus far they have refused to send me itemized invoices from this completed work to allow me to compare with other contractors.  I should add that I had to point out to the PM that they ever poured 2 additional footings that were not on the engineer's drawings, among other small mishaps that didn't match.  They are also 3 weeks behind schedule and seeing for 45 more days to be added to allow for these CO's.

#4 is suspect.  I can only imagine what additional CO's may look like once we settle these.  I imagine they will try to recoup whatever offsets they offer in future.  

The way the CEO has communicated to me thus far in rude, disrespectful, and demanding manner has already determined that I will never use them again or recommend them to anyone regardless of the outcome. 

Mike,

CO#3 $18,000 for Footings, joist/sisters, LVL beams, etc. $14,000 complete prior to submitting the CO. These are per their structural engineer and completed by their in house subs.

CO#4 $10,000 for various changes from original scope. $8,000 of which completed prior to submitting the CO to me.  The one that stands out the most here is for Plumbing Rough in.  Original Scope for entire new Rough in = $2,400. CO increased to $6,960.  Again, this is already completed by their in house sub.

William,

Thanks. No, there was nothing Spec'd out of code.  This property was a partial burn out with 1/2 complete gut, and 1/2 salvageable.

The CO's in question totaled $28,000, of which $22,000 was completed prior to submitting a CO to be approved.   The initial bid was for $111,000, which included partial structural repair.   (They were not sure if a new LVL beam may be required per code). I accepted the $111,000 bid expecting an additional $5,000 -$10,000 in potential CO's. 

I have been trying to work with the contractor and CEO on this for two weeks and giving them every opportunity to resolve our differences prior to taking legal action.  Per their contract I believe that they are liable for 100% of the Unapproved yet Completed CO's totalling $22,000  At this point their only offer is to reduce the cost by 10%, or $2,200 stating that the CO's are "Justified per Code".  

I'm confident an attorney would easily be able to win this if it goes to court.  I'm trying to allow the contractor to settle this amicably, however they have been argumentative and threatening opposed to apologetic. I'm not asking for 100% off here, but now I feel at least 50% is required.

Any other thoughts on how to settle?  

Wayne, 

Thanks. I am trying to avoid the legal route if possible.  Short response is this.  $111,000 compete gut on burned out property.  New construction would run roughly $140,000.  New change orders totalling $28,000, $22,000 of which have been completed prior to my approval and prior to even receiving the CO.  

I called this out to the PM immediately (2 weeks ago).  It took 12 days before he met me on site to discuss.  I explained that I was not asking for a free ride, but this was not acceptable.  I asked for a revised, reduced to best rate CO.  5 days later after many emails with PM and CEO and I finally received a revised (smoke and mirrors) CO moving items around, etc... Only to reduce the cost of their $22,000 mistake by $2,200, and I expect them to try to recoup that in later CO's

At this point I think they should eat at least half of the Unapproved CO's, but their lack on communication and delay tactics are making the legal route look ominous.

Any other advice or guidance on how to proceed?

Hello fellow BP community!

Does anyone have any experience and advice regarding Change Orders that were completed prior to and without approval from the Owner?

I recently received two rather large change orders on a flip project. I noticed via photos online that many of the change orders were already completed without my knowledge or approval.

I declined the change orders and have tried discussing with the contractor. They state that per code and engineer's drawings the work must be completed in order to pass inspection. While this may be true, my contract clearly reads that change orders must be approved by both Owner and Contractor in order to complete the work.

Am I liable to pay for Unapproved yet Completed work from change orders? If not, how should I proceed?

Thanks!

Hello fellow BP community!

Does anyone have any experience and advice regarding Change Orders that were completed prior to and without approval from the Owner?

I recently received two rather large change orders on a flip project.  I noticed via photos online that many of the change orders were already completed without my knowledge or approval.

I declined the change orders and have tried discussing with the contractor.  They state that per code and engineer's drawings the work must be completed in order to pass inspection.  While this may be true, my contract clearly reads that change orders must be approved by both Owner and Contractor in order to complete the work.

Am I liable to pay for Unapproved yet Completed work from change orders?  If not, how should I proceed?

Thanks!