All Forum Posts by: Russell Gronsky

@Ben M., not all of them use those things. And even if they do, all they will tell you is you should have a specialist look at it since they are not licensed. So you can just buy your own thermal imaging or infrared device for a one-time cost and save yourself the repeat expense of a guy/gal who will just tell you to have a specialist look at anything that looks suspicious. 

@Zachary Sexton, it is clear from your post that you've never flipped before. Have you ever worked in he construction industry at all? You have some very lofty goals for this duplex and you might be moving too fast here.

First, does the rent-o-meter numbers match what you are seeing advertised on craig's list for comparable units for rent? 

Second, if you plan to sell the duplex as individual condos, you'll probably have to split the parcel of land. Better call your zoning department and building department to verify this can actually be done and what it will take to accomplish it.

Third, you'll have to look long and hard to see what exactly you need to do to those 2/1's to get an ARV of $700,000. If the building is only selling for mid $400's, you'll have to do some major renovations to get that $700k ARV. This isn't going to be just a paint/carpet/new light fixtures type of renovation. You're probably talking about removing walls, probably adding a 2nd bathroom, maybe digging out and finishing a basement? I don't know the Houston market but from my experience being a flipper, I haven't been able to get an ARV that high without tearing apart the house to the studs and floor joists. This kind of remodel is going to need more than just your sweat equity to finish. This kind of renovation will need A LOT of skilled and licensed professionals. Plus, living in a house that is being renovated is an experience I simply cannot describe to you. When I was single, I used to do it and I learned A TON but my dad was a GC for 40 years so I grew up around construction and knew what I was getting into. You might have the best intentions but be prepared to move into an extended stay motel for a month or two, in case you and your wife realize it is too much to handle. If you have kids, I strongly caution you to NOT live in the property while you are renovating it.

Next, if you are going to expand the units to 3/2, you'll need to again, talk to the city to see if they will allow you to do it and find out what you need to do to accomplish that. If you are allowed to do it, you'll probably need to add foundation to your existing house and build from the ground up. This will be even more licensed professionals you will need to hire. 

Any way you look at it, you are about to set yourself up for A LOT of pain. I didn't even touch on how much energy you will spend on finding good contractors and dealing with them. This pain will be well worth it in the long run but you are in for A LOT of it. I'd also strongly caution you about doing additions for your first time out unless you have a trusted friend with lots of rehab experience you can call up any time you have issues come up.

Is this multi-family building 4 units or less? OR is it 5+ units? If 4 or less, you should buy initially through the LLC, if the LLC has the cash. Otherwise, you'll pay extra charges later to transfer it. However, if your LLC doesn't have the cash, you'll have to take a loan out and banks balk at loaning to LLCs. They will want your name on the note.

So, you can take a loan out in your name and then notify the bank after the transaction is complete that you plan to transfer the building to your LLC. Your main concern here is to make sure the bank doesn't get spooked and exercise the "Due on Sale" clause that is included in every loan that says if title is transferred, the bank can call your loan immediately. Normally, the bank will be okay with it as long as you tell them ahead of time and the payments keep coming in each month. However, as a precaution, when you are initially setting up your loan, tell the loan officer that you may want to move title to an LLC in the future and see what they say. You don't want to get through the process of getting the loan, only to have the bank deny your request to move title.

Also, if you put the property into an LLC and then want to refi, you'll have to pull it our of the LLC, refi in your name, then put it back into the LLC. Huge pain and as everything else, comes with costs. So, if you plan on doing a refi and putting the property into an LLC, buy it under your name, do the refi, then move it to an LLC to minimize fees.

I am not sure what your concern is with tenants finding your address? I suppose they can find your name in county records and then skip trace you, but I have no idea why they would want to do that? In my 15 years of being a landlord, I've never had a tenant search for me, at least not to my knowledge. But, if you are worried about it, you can put the property in a trust. Moving the property into an LLC should also get your name off the county records, I think.

On the flip side, if the building is 5+ units, you can do a commercial loan on it. Some commercial loans require you to put the property into an LLC so the commercial space approaches this topic in a different way than residential. I'm not smart enough in this space to give you any advice other than talking to a commercial lender about it.

Contact a title company. A title company should be involved no matter if the deal is on or off market. They will calculate closing costs, do title search, take care of recording and transfer taxes all that stuff.

Great question. I have no idea but it's probably the same reasons that people don't floss their teeth or go to the gym. In any case, this could be a potentially lucrative purchase for you.

Either an Architect or a structural engineering company can do it. Often times, a structural engineering company will have an architect on staff or contract an architect. In any case, a GC shouldn't do it because they are not licensed to handle structural questions. 

A GC is like your primary care doctor. They can refer you to the expert you need for your eye surgery but you wouldn't want your primary care doctor performing your eye surgery, would you?

@Matt Millard, I literally just wrote out the below response to your question in another thread. Here is a copy/paste:

The bottom line is: no one knows. Sure you can keep track of treasury note yields to give you indicators but that's really all they are, indicators. They may suggest that the environment is ripe for a recession but a recession needs a trigger to start it, so until that happens, there won't be a recession. And, even when it does start, it's not apparent right away.

If you look at GDP from '07-'09, you'll see it start to fall and then then it comes back up for a while, then it starts to tumble. You see, no one knows if a reduction in price is just a correction or a recession so when prices dip 5, 10, 15%, money that was on the sidelines, jumps in thinking they are about to scoop up some investments at a discount. And who knows, maybe they are right. Because maybe the government will do something like...oh, I don't know....maybe take Fannie and Freddie out of conservatorship....that would probably re-energize the stock and RE market and all the money turnover that happens from it will push the economy even higher. OR, we could have a mild correction. OR, we could have a deep recession as I think we are coming due for one of those bad "every 75-years recessions" or something like that.

The best precautions I think are to watch housing statistics in your local market (your agent can provide you that stuff from previous years) and pay attention to days on market and prices listed vs prices sold for houses in your target areas. Those will be your best indicators of where your local market is going but overall, in the end, no one really knows, BUT..... the risk of not investing is even bigger.

@William C., people in here have given good advice and I agree with doing the right thing. Whatever you end up doing for the buyers, make sure you get them to sign a liability release. It basically states that you remedied the issue the buyer identified and are no longer responsible for any further issues with the house. Otherwise, this buyer will keep coming back to you every time the faucet drips.

Call up the title company you want to use to handle title search and closing and ask their attorney to draft up the contract. Or, find another Real Estate attorney you like in your area and have them draft up the contract. This should run you $300-$500. Once you get the contract signed, the rest of the process is very similar to purchasing a house that you find on the MLS. The catch is, you'll have to keep track of all the inspections and contract deadlines yourself, instead of having an agent do all that for you.

You can finance off-market deals the same way as MLS deals. Assuming the house is inhabitable, you can get conventional, FHA, take out a HELOC and use it to buy the house, whatever.

@Mai Barnes, I know as a newbie, you want a straight answer on a question like this but the bottom line is: no one knows. Sure you can keep track of treasury note yields to give you indicators but that's really all they are, indicators. They may suggest that the environment is ripe for a recession but a recession needs a trigger to start it, so until that happens, there won't be a recession. And, even when it does start, it's not apparent right away. 

If you look at GDP from '07-'09, you'll see it start to fall and then then it comes back up for a while, then it starts to tumble. You see, no one knows if a reduction in price is just a correction or a recession so when prices dip 5, 10, 15%, money that was on the sidelines, jumps in thinking they are about to scoop up some investments at a discount. And who knows, maybe they are right. Because maybe the government will do something like...oh, I don't know....maybe take Fannie and Freddie out of conservatorship....that would probably re-energize the stock and RE market and all the money turnover that happens from it will push the economy even higher. OR, we could have a mild correction. OR, we could have a deep recession as I think we are coming due for one of those bad "every 75-years recessions" or something like that. 

The best precautions I think are to watch housing statistics in your local market (your agent can provide you that stuff from previous years) and pay attention to days on market and prices listed vs prices sold for houses in your target areas. Those will be your best indicators of where your local market is going but overall, in the end, no one really knows, BUT..... the risk of not investing is even bigger.