We have made some progress since the demolition and trash out. I am posting a few photos below to show where we are with things as of Friday. I do want to share how we handled some of the other details of the transaction during this transition period while the house is getting fixed up.
Purchase contract used. I always use the FAR/BAR contract on my residential deals. If I need to, I do have my own addendum that I use to skew the contract in my favor and reduce my liability. I like the FAR/BAR contract because all the title companies, lenders, and real estate agents are familiar with it. If you use a "guru" contract or an office supply store contract, then everyone is going to have to read through the whole thing to make sure what it actually says. Also many of those other contracts may not comply with specific Florida laws and mandatory disclosures and thus may actually be illegal and leave you wide open to big liabilities.
Getting the title ordered within 7 days. I have a relationship with a local title company. Because I do many transactions with them throughout the year, they typically work a little harder to get things done quickly for me and keep my costs down. On typical residential transactions on platted subdivision lots, a title company should not take more than a week or so to get the title searched anyway.
Getting the $98,000 purchase money together. I have business lines of credit as well as HELOC's (Home Equity Lines of Credit) on my personal residence and some of my rental houses. However, I still chose to use a private money lender to put up the money. I called my money lender right after I signed the contract on this house and he was able to get his package together within about 2 days. Interest rate is 10% and 3 points which is about average for these types of loans. The important thing is that it was 100% financing, with no inspection or appraisal requirement and they were ready to close within days not weeks. I have done business with this lender for about 7 years now. I used the lender instead of a credit line simply because I like to use my credit lines to pay for the rehab and holding costs instead of the purchase costs. Also using credit lines tends to lower your credit score.
Inspections. My rule of thumb on inspections is to always have somebody do a building inspection. On major rehabs, I get a full inspection by a paid professional inspector. On smaller rehabs I typically have my contractors come out and do some quick checking on the basic systems. It is not a bad idea to always have a second set of eyeballs look at the property just to make sure you are not missing an obvious problem. If the property is not concrete block construction or has a crawlspace, I always get a wood-destroying organisms inspection (a/k/a WDO or termite). If the property is on a septic system I always get that inspected as well.
Ordering a survey. I did not obtain a survey on this one. My general rule on ordering surveys is that if the property had conventional financing on it within the last 10 years and it is one platted lot with no obvious additions to the structure, then I do not pay the $300 for a survey. If conventional financing was done within the last 10 years, then I know the lender required a survey so I am not too worried about encroachments. If the legal description is multiple lots, portions of lots, acreage, if it appears there is some addition to the structure, or there was not a conventional loan within the last 10 years, then I do not take the risk. I order a survey.
Property Insurance. For vacant houses being rehabbed, you cannot obtain typical homeowners insurance from a name brand insurer. Homeowner's insurance normally does not allow the property to be vacant for more than 30 days. Many people do not realize this. In fact if you have a listed property that has been vacant for months, you better pray that you don't have a fire or a hurricane hit it. Your insurer will deny your claim due to it being vacant. The correct policy type is "Builder's Risk." This is the policy used by builders and rehabbers on vacant houses. If we end up renting out the property, we would have to cancel the builder's risk policy and get a new landlord hazard policy.
Taking title. Nowadays how I take title to property is in a Florida land trust with my company as the beneficiary. My company being the beneficiary helps to relieve me from almost all personal liability. In 2006 the Florida land trust law was greatly amended and improved to protect property owners even more. The main benefit with land trusts is anonymity. It keeps people's prying eyes from knowing all your business. With the creation of the internet people can easily snoop through the public records and find out all the property that you own. I don't like that idea, especially if I own a bunch of it. My only exception to the land trust rule is when I need to take out a conventional loan on the property. In that case, I do not have much of a choice. The lender requires me to take title individually. I can deed the property into a trust after closing the loan.
Utilities. I typically put the utilities in my own personal name. I have corporate documents that permit an officer of the company to do this for various reasons. The reason I put them in my personal name is simple. I normally am not required to put up a deposit (or else a smaller deposit) if it is in my personal name as long as I have less than 5 accounts.
Here are some more photos of the progress. Most of the interior is painted. The kitchen ceiling is all back together. The exterior is partially painted. The front has been stuccoed where the wood siding used to be. I also took a photo of the no trespassing sign I put in the window (I should have included it on the last post).
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(Copyright © 2008. Sand Dollar Realty Group, Inc. All rights reserved.)
Rob Arnold, ABR, CPL, GRI, Managing real estate broker, Licensed mortgage broker, Notary Public,
407-389-7318 www.SDRhouses.com/
Your full service and investor friendly Realtor in Orlando. Learn to invest in Central Florida real estate and Orlando real estate. Investor mentoring and counseling available. I also provide flat fee MLS listings, For Sale By Owner, and menu-based services in Florida.
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