All Forum Posts by: Kevin M.

There haven’t been deals for a while in northern Arizona but as of late, I’ve seen quite a few decent deals out there for folks with the cash on hand

Interesting comments thus far with respect to the contractor.  I didn't see anywhere in your Post where you met with him in person at the property.  If you have not yet, I would highly recommend it.  My experience is that in person meetings at the project site can serve both sides to level their heads a little.

I would agree that you would not want to release any future money until you've resolved your differences and have a signed lien waiver.

I have not had so much luck with the lawyer route.   Seems to me that the lawyer always seems to get his/her money and I persist at a greater loss. Ever heard the phrase throwing good money after bad? 

I know folks will buck at this, but $1900 is pennies.  I'd meet both him and his subs onsite and try to strike a deal.  I'd bring my check book, blank lien waiver, and a big smile to the meeting.  You can probably walk   away with the work done and an extra $900 out of pockets. 

In summary, just like the contractor makes his money on multiple jobs, the RE investor makes his money on getting it closed and moving onto the next project.  Persisting in the battle has never worked out financially for me.

Good luck and try to find the humor.  

Water is tricky.  Can you offer any more details as to the house and surroundings?  How much water per day are the dehumidifyers pulling out?  What type of HVAC are you running?  Are the affected areas above grade?  Shady side of the house? Do you have any pictures? 

J.  

My first move would be to approach several lawn/landscaping companies and get pricing to tame the area and complete the work.  Armed with that information, I would approach the escrow steward as well as the contractor and see if I could reach a reasonable accord and get rid of the problem.  

You've stumbled into one of my people's major character flaws...once we walk away from something, we file it away as "done" in our brains.  If I'm your contractor in this situation and you bring me the solution, while I'd be slightly embarrassed In the moment, I'd welcome the amicable resolution and move on.  Even if the amount left in escrow is less than what it takes to finish, if the price is right, I'm going forward with it.  

I avoid all legal or punitive actions at just about all costs.  In my my mind, the only one that ever wins in those actions are the lawyers.

On a final note, I'd be leery of your tenant.  Their behavior is indicative of deeper issues.  If I'm renting your house and find myself in their shoes, I'm asking the landlord if I can buy some seed and straw and deduct it from my rent, especially if I have kids.  Crossing my arms and complaining is not ever something I'd want to be found doing.  

Good luck

Hey Jim, your story sounds rather familiar.  Charlottesville is our ultimate destination once we settle down.  Hope to run into you next time we're in town.

Kevin

Can you get away with it?  Depends on the jurisdiction, inspector, and level of rehab you're doing.  If you can get away with it, should you?  Depends on your moral compass.  That old wiring is pretty sketchy, the insulation usually falls off with just the slightest touch.  Any critters or other movement could expose the wiring within the walls/ceilings with palpable risk of fire.  Making things worse, most of those types of homes don't have adequate fire/smoke alarms. Given the chance, I replace it...it might mean that I don't get a record profit on the project (or any at all), but I sleep well knowing I've done the best I can.

That being said, 15k for a re-wire and panel upgrade it pretty steep for one apartment.  You might be able to find a more attractive offer.

Updated electrical is a prerequisite for me in choosing s rehab.  The work updating electrical yields almost no return but can be quite costly and time consuming.  I've yet to meet a prospective buyer who enters the house and says "look honey, this one has a new electrical panel, and receptacles!"  Nevertheless, once you've gone down that road, it's a very strong "should" do.

You're getting sound advice above.  In addition to a decent Architect, many these days defer the NFPA requirements to a sprinkler designer/installer.  Those guys will know more of the tricks and nuances with hands on experience with local inspectors and their interpretations of the issues.  The Architect will get them pointed in the right direction to firm up the occupancy stipulations which govern the applicable NFPA code.  From there, the sprinkler sub should be able to work with the designers to develop an accurate set of permit drawings for review/approval.

I've done a couple of multi-family projects over your way with sprinkler systems.  Send me a PM and I'll share with you my thoughts on a few subs over that way that might be happy to join your team at this stage in the process.

PS...could be worse, you could live in the People's Republic of Maryland with Michael where they require even new houses to have a sprinkler system!  (sorry for the jab Michael, I just couldn't hold back the shot at my old alma mater) 

Guessing at the future appraisal value is similar to guessing at the ARV. Conservative comps and experience.

Estimating the construction costs depends on you.  My budgets and purchases come from a variety of sources.  Mechanical, Electrical, Plumbing, site work, and concrete are usually rough budgets from historical data.  Someone new would want to spend some time in the residential construction industry to get a good feel for pricing and sourcing.  

Re:cashing out....when you have the certificate of occupancy you close out the construction financing and open the permanent financing.  Cash needed or received depends on your loan and deal structure.

Brent,

Build at roughly 75% of final appraisal value.  Finance construction, convert to permanent financing with a traditional 20% down using the equity gained during construction.  Result...20% equity in a hold property and initial cash back out for a repeat performance. 

The above is obviously simplified and of course doesn't work on every deal or locale, but when you can get it to work, beats rehabs hands down even from the cheap seats.  

Hi Mariama,

I personally see the build and hold variation of BRRR to be a cleaner and more predictable process. Granted I am much more comfortable with new construction than the average bear, but in my mind it holds a much greater potential to build equity into the property without a large financial investment.

In the DC and surrounding areas, you'll need to be sure to do all of your homework on the local fees associated with building.  Cash strapped governments are increasingly targeting developers with fees from many angles.