All Forum Posts by: Stephen R.

I'm looking to JV an out-of-state property. This would be my first time investing out of state and first time forming a partnership.

Since I have the deal, but obviously can't handle the rehab and marketing, I reached out to a local team to help with the deal. One is a general contractor and the other is a licensed Realtor. My thought is that I would bring the deal and the capital, and they would rehab and sell the property. It seems like a good match. But then I started thinking- "What skin do they have in this game?" Yes, they stand to make a decent profit but what keeps them from walking away from the deal other than the profit motive?

Is there another way I can structure this deal to make sure they uphold their part of the bargain?

I recently decided to add a deadline penalty for a contractor that does not meet their agreed upon project completion date. Would a budget penalty be appropriate as well?

I know many contractors will underbid a project in order to secure the job only to inflate the cost before completion. I would think a 15% or 20% contingency would be appropriate but that anything beyond that shows the GFE was nothing more than wildly speculative. 

Would a penalty, or a firm fixed price, be appropriate? Does anyone have any clause language I can use to amend my contract?

I'm wondering what kind of monetary penalty would be reasonable for a contractor who does not complete a project within the agreed upon timeline. 

I had one contractor tell me he would never agree to a contract that included a penalty and I told him to go pound sand just because I didn't like his attitude, even though I haven't used them in the past. However, I recently had a friend have a 4 month project take over 11 months on a contract that didn't include a penalty. To avoid that nightmare I am definitely going to include one going forward. 

I'm using J Scott's Independent Contractors Agreement and SOW from the BP file place and he includes a $200/week penalty to cover his costs during any delay. The interest alone on my hard money is $500/week. Would that be an unreasonable amount? The agreed upon deadline is 7/21 and I wrote in the penalty beginning 7/28.

@Linda Weygant

I don't see any kind of restriction and from what I know of the situation there likely won't be any. I'm negotiating through an intermediary so I'm not even sure if the rep at the charity is correct in his assumption regarding the loss of the tax deduction. As I said, I can't confirm if or when it would even happen. So I guess the issue is convincing the charity that their facts are incorrect. 

@Ashish Acharya I'm sure that there was an appraisal, however I don't know what it was. I did get a current BPO but the issue is that the property is occupied and there are a significant amount of back taxes due. These things will reduce the BPO but not necessarily the FMV appraisal. I think, and this is just a guess, that if the property is sold for significantly less than what it appraised for (because of the occupancy and the outstanding taxes) the IRS will assume that the appraisal was fraudulent, therefore withdrawing the tax deduction.

BA- History 

BA- Political Science with a minor in Global Studies

Graduate Certificate- Business Continuity and Risk Management

Graduate Certificate- Counter-Terrorism Studies

MA- National Security with a concentration in Intelligence Analysis

MA- National Security Law

How did they launch my career in real estate? They got me into it! They taught me that a degree isn't worth the time and money spent to achieve it. It took all of this education for me to finally learn that, unlike Robert Kiyosaki, the choices I made were only leading me down the path to become a "poor dad" to my son. Thankfully, and I say this as a novice with nothing but faith, commitment, and a firm reliance on Divine Providence, that real estate will lead me to the future I once believed my education would take me to. 

I'm looking to pick up a property that was donated to a charity. (Actually to be more specific it seems it was quitclaimed for $10) I'm being told that the charity will not agree to my offer price because they are concerned that the donor will lose their tax deduction if they do. I've been searching the IRS publications but can't seem to find an answer as to when and how that would happen. 

Scott,

It wasn't abrasive, even though sometimes it needs to be. Truth is truth. Reality is reality. Thankfully I'm not part of the "safe space," snowflake generation. 

I did research new construction costs for the area but they seem to exceed the ARV if it were a total gut job. In that case I'd have to get the property for free.

I sent you a PM.

@Scott Steffek I know it's a good area that's why I'm trying to close this deal! I'm just trying to figure out what a good price is before it disappears.

Ok, so knowing the range you mentioned how would I factor that in if I'm trying to virtually wholesale the property? If I'm trying to figure out my MAO what number do I use? The end buyer will accept a certain amount of risk for the unknown and he will also assume a likely rehab cost. I bought a property locally without accessing the interior and assumed a certain degree of rehab based on what I know of this area. I'm not familiar with labor and material costs in IL.

The occupants know and will either face eviction or leave voluntarily. I would think that the end buyer assumes occupancy status. I guess it's not that I can't get someone in there but should I pay contractors from out of state to inspect a property I don't have under contract just to figure out my MAO?

Hi @Emmett R. McCarthy Then you and I should probably speak more about this. I will send you a PM. My attorney is reviewing the title and deed now and I'm waiting for him to contact me.