All Forum Posts by: Scott P.

I'm sorry to hear about this situation. I agree with the comments so far by @Lynsey Dreis

@David Robertson and @Jimmy Deringer since what they are saying is what is standard/customary in my area.  Since you're saying the work includes both "lumber" and "pipe", I'm guessing this is a general contractor and not just a framer or a plumber?

I'm hoping you haven't given a deposit and that the contractor has not started work and that you're not in a time crunch.  If he's telling you this before he starts work I'd give him the benefit of the doubt that it's a misunderstanding and I'd consider his new price.

I don't know enough details to give you advice but based solely on what you've said I would stop everything until this gets worked out.  

I hope he's not surprising you with this after he completed the work....

@Andrew Wright I've been on the landlord and tenant (actually parent of tenant) side of that issue.  I charge more and have a 9 month lease if the tenants wants that. I explain that I charge more to recover the cost of cleaning, painting, etc. over a shorter time period.

My favorite plan is an option to the tenants to lease for the other 3 months at a reduced rate if they keep the utilities in their name.  In return, they can store their items there for the summer as part of returning to rent again the following year.  I've had rental companies do this twice for my college age children.  As part of the deal the students were not allowed to use the apartment over the summer as they went off for internships or back to home towns in home States.  I'm not sure how that is enforced but I could probably find out if it would help you.

@Laura Hines, I did my own taxes until the year I started living in one side of a duplex and wanted to be sure I was depreciating correctly.  (I may have gotten a K1 from a SubS Corp for the first time that year too but my memory is that the "house hack," as they now call it, was the impetus to find a CPA.)  

My memory is that we stopped depreciating the side we lived in while we lived there.

I'm still with that CPA as are a couple of friends/relatives I referred to the firm and even a now grown-up child who we brought home to that duplex as a baby many years ago....

As your real estate interests grow, you'll probably want to  look for a tax professional as will @Craig Curelop's future book readers :-).

Good luck!

Hi Kyle, by "developing" I'm assuming you mean turning land into lots which have utilities.  Also it appears you'd like to build on at least some of those lots.  

If I was starting over and wanted to do that from the ground up I would keep my 9-5 - or find a 9-5 related to construction, development, or real estate if yours is not - while I house hacked 5 times within 1 hour of my 9-5: 1 fairly move-in ready duplex, 1 duplex that needed remodel, 1 SFR that needed remodel (which I might flip or might rent), and then I'd hire a builder to build a SFR new which I'd move in to and then I'd buy an already developed lot and build a SFR or duplex by subcontracting it all out.

At that point you'll probably know what you like and dislike and what you're best at doing and you'll have a network of folks to get advice from and you'll know what builders and buyers want from developers and builders.  You'll also have property equity. You'll have gained a huge amount of experience and it will be super valuable.  Also, be certain you pay all your bills on time during this period - especially to people who supply labor materials or labor to  you.  That credit rating and reputation will be vital for you.

Then, I'd look for an area in the State I'm most familiar with which is no more than 3 hours from my home and which has the least restrictive planning and zoning regulations.  I'd look for 5-10 acres of brown field or green field land which could be bought and get permission to do due diligence on it. Then,  I'd hire an experienced 10-25 person Civil Engineering firm firm to estimate timeline and cost for the zoning, planning, utilities, etc. and to draw a layout of the lots, streets, utilities, etc. That would be your first cash outlay.  If the Engineer doesn't estimate construction costs, you might leverage the network you built on those first 5 endeavors to learn how to get those costs estimated.
 

I don't know what area you're in but there are likely State and local permits, hearings at a Zoning commission where neighbors may voice concerns, Health department approvals, etc. There will be many, many decisions to make such as how to build the streets and who will maintain them, a HOA or the City/County, etc.?

When all that is complete, you'll decide if you think you can develop the lots for a cost that when combined with costs of the houses will total to a number that people can/will pay.  You'll also decide if you have enough $ to develop the lots or how to finance the development.  In my area, if you go forward, even when you are complete, people will then wait to see if others move in to the development first or if, like @Tim Johnson said, you go BK.

There are a lot more details but this should give you a high level view for informational purposes.

If I was starting over, I'd do all of these things more often and sooner.  At the time I started, I just didn't want any more risk than I took, because, like @Tim Johnson said, it's easy to to BK as a developer or builder.  The potential rewards to me weren't worth the stress of BK.  YMMV.

There are many paths to success but these are the thoughts that come to my mind as I consider your question about developing and building.

Best of luck to you with whatever you decide!

It's awesome that you're standing up and asking a question about a subject that is new to you and that you're asking it here where everyone can learn. Thank you!

It seems you're already getting good input.

I had a realtor handling closing on a lot for new construction.  It was her first closing of that type.  There was a partial mortgage release from the seller / developer's bank which was fine but the realtor didn't made some mistake on property taxes.  She voluntarily refunded her commission to me and I paid the balance of the bill and did not pursue the matter.  The seller/developer declared bankruptcy.  (I was listed as a creditor due to the tax issue.)  So I could not pursue him.  She's still a realtor in the area and I've since sold the property.  The point is...it's wonderful that you're pursuing answers because that can help avoid missing something.

Best of luck to you on the endeavor!

My answer is a little different than the consensus answers so far....I love getting informal notice from a tenant who "may" (or may not) move, especially one like yours who has been there 3 years and has been great.  Informal notice allows me to put out, or have them put out, a sign so that I can start receiving applications.  I sense you're hesitant to do that?  Maybe there is a cost in your case to "marketing the property"?  My advertising in only the sign in the yard.

 Of course, I tell callers that I don't know when the property will be available for sure but in my case that helps me determine who really wants the property next and is willing to flex their schedule to get it.  In my experience, those are stable tenants.  

I would even tell my current tenant that if they gave notice and then decided to stay another month and not move yet that's no problem.  Why take a chance on the new tenant when I have one I like?  Of course i can't promise the unit to anyone else either.

The Lease may govern the time notice and method of notice but I'm flexible on that with my tenants.  I doubt the time and energy to recover any $ from them for not giving exactly proper notice would be worth the effort and might not be legally possibly anyway.  So I take the "nice guy" approach and let them stay and pay as long as possible while I have time to prepare for them to move.

Good luck!

If it was my money only in the deal, and if she pays on time, gets along with the neighbors, doesn't call me to come fix every towel drying bar that comes loose from the wall - and her "hoarding" doesn't cause an insect or rodent problem, I would probably let her stay for $325 because I'm too nice and i like long term tenants even at lower rates.

Maybe she would become my first Section 8 renter ever if Section 8 paid more than $325 in that area.  That way, I'd get closer to fair market value but she wouldn't have to pay more.  If she didn't quality for Section 8  and I thought she could afford more, then I'd give the required notice and raise the rent.  

I wouldn't worry at all about cleaning up after a hoarder if moving meant I could increase the rent to market value.

I also like the comments from other contributors about having the current Owner deal with the situation but I wouldn't let that condition cause me to loose the Buy if I otherwise wanted the property.

Good luck!

If I'm following correctly, you're in an enviable position.  It seems you could hold or sell to both large or small investors.  I would probably sell it all - and then go develop more and hold some of those instead.

I've bought new, individually parceled duplexes twice, in two different neighborhoods, about 6 hours apart but in the same state.  For a variety of reasons I won't list here to avoid going too far off-topic, they are my favorite rentals.

I like having them paid off/mortgage free; however, I would not hesitate to borrow against them to buy more properties.  

As an absentee, mortgage-free duplex owner for many years, I get those "we've been trying to contact you about buying" postcards a lot through the years.  Although I've never responded to one of those folks, I have sold more than one duplex.  What would work in my case would be a letter from you saying that you planned to live in one side and rent out the other.  That would get my attention and open me up to selling, partly just to help you get started.  (I'm the kind of guy who's enjoying learning from and sharing thoughts with folks on a forum though and so I would be the type of person who would respond to a letter like that....Other owners may be different.)

I don't know about the disclosure question.  That one should probably go to your state licensing board or a legal professional in your state.

Good luck!