fliprent

Some house flippers choose to use a general contractor to manage the entire job.  This is especially true when house flipping is not your primary source of income.  You will need someone there watching your contractors every other day at a minimum in this business.

The two types of bidding methods contractors typically use are “Total Cost” or “Time and Materials”.   The rehab or remodel process can be a tricky one.  You can never know just how much work needs to be done until you start the demolition process.  This is why many contractors choose a time and materials bid.  This type of contract requires you to pay them by the hour, plus materials, until the job is completed.  As you can imagine, this could get very expensive!  A total cost bid however contains a set price.  When combined with detailed plans, and a spec sheet, the total cost contract is the safest route to take for house flippers.  It limits the amount you will pay and typically only very experienced contractors will even give you this type of bid.  If the contractor under estimates the job, he or she will have to eat the extra costs.   The only down side is that you run the risk of the contractor quitting or attempting to get ahead of you on the payments and then leaving the job.  Once again this goes back to doing your due diligence on the contractors prior to hiring them. 

Owning an apartment building or rental units can be less time consuming when you don’t have to deal with the daily property management yourself.  Hiring a company to manage your properties eases the responsibilities of the owner.   This means no longer dealing with collections, vacancies, maintenance, repairs, complaints, budgets and many other items by yourself.  This doesn’t mean you are hands off as the owner.  Your property manager should provide you with comprehensive monthly reports outlining the daily operations.  These monthly reports should include information pertaining to rent roll, disbursements, operating statements, vacancies, market surveys, and an annual budget.

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In this series I am outlining clauses commonly used in real estate contracts.  Use this information as a reference but do not repeat any examples word for word in a contract.  Consult an attorney in your local area for more details.  You can read Real Estate Contract Clauses Part 1 for the first five clauses or click on the contracts category to follow along with this series.

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Real Estate investors need to know as much about writing contracts as they know about real estate.   This series of posts is a continuation from the Negotiating Real Estate Contracts article.  In Part 1, we will discuss 5 clauses that are commonly used by investors in real estate purchase contracts.

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One of the biggest obstacles I faced when starting out investing in real estate was writing contracts.  It would be nearly impossible for anyone to write a blog post (at least one that would be read) about everything one needs to know about contracts.  With that in mind, I’ve decided to provide some basic knowledge for a beginner in real estate investing.  Another thing to note is that rules and laws are mostly local.  Writing a book or post that covers the law for the entire nation would also be, well… pretty darn long.  Here are some rules that I still use today.

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