What does this mean for contractors on your projects?  Well, this could be a BIG problem for fix and flip investors.  Or it could be just a minor inconvenience. When was the last time your contractor went back to school?  What happens if you get caught?

To be a certified renovator, contractors are required to take eight hours of training from an “accredited” service.  Two hours must be “hands-on training.”

I can’t wait to see some bureaucrat training MY contractor!   If that happens, the training certification is good for five years. The cost of this training is set by the providers, and of course these companies that will have to apply to be certified as qualified to certify other contractors.  Sounds like a big bureaucratic mess.

Do you think you could find a certified “Lead Safe Renovator” today if you wanted to?  Well, the Rule is effective on April 22, 2010. Here is a quote from the EPA website on April 24, 2010:

NOTE: Due to heavy demand, users may experience delays in searching for training providers and certified renovators. EPA regrets the delays and is working to improve the system.

If you are a contractor looking for a “school,” here is a short cut to the local accredited companies as of this writing.  Its risky not to become certified, as fines for contractors who work in pre-1978 homes without EPA certification are rumored to be as high as $37,500 per incident per day!. Wow.  How will the rule be policed?  The EPA expects those who bother to get certified will police their own industry.

They are probably right because contractors who abide by the rules will have significantly higher costs and will lose bids to contractors who are not certified.  This is of course the bad news for investors:  our construction costs just went up!  We just don’t yet know by how much.  Ouch.

If you are an investor (or homeowner) looking to hire a certified contractor, I have words for you:  Good Luck!  In the meantime, watch out for the “spot checks” by the EPA on your job sites.

• EPA Lead Safe Accredited Renovation Training Programs in Denver

Links to more information:

• Contractor Fact Sheet
• Read other information related to the Renovation, Repair and Painting Program Rule.

Attention all real estate investors!  HUD is proposing to eliminate ALL seller financing with two lame exceptions:

• Seller lives in the home, or
• Seller becomes a licensed mortgage originator

Passed last year, the federal SAFE mortgage act passed last year preserved the right for sellers to make up to five seller financing transactions per year without needing a mortgage originator license.  But that law was passed subject to HUD’s approval as “compliant” with the intention of the federal law.  This means that, for those states which do not have a ‘compliant law’, the SAFE act allows HUD to implement licensing for those states.  HUD has since issued proposed rules which would no longer allow seller financing for non-owner occupied homes.  This is a disaster for real estate investors trying to capitalize on the high-inventory and poor lending environment we currently face!

HUD is soliciting comments on these proposals and the Deadline for filing Comments is February 16, 2010.

Please contribute and do your part to help our industry comment to HUD on this issue.  Efforts to affect this law will not be successful unless thousands of individual investors communicate that we are opposed to this the rules.  Please submit your comments to HUD today, here are the links:

To read the proposed rules, go here – http://www.regulations.gov/search/Regs/home.html#documentDetail?R=0900006480a6b033

To file your comment, go here – http://www.regulations.gov/search/Regs/home.html#submitComment?R=0900006480a6b033
and fill out the form.

Here are some sample message to relay to HUD:

• Mortgage bank loans are not available on many types of properties today
• The current lending climate has made traditional bank financing impossible for some borrowers
• Seller carry financing is a solid way to help the housing industry recover
• These rules would prohibit even partial seller financing – e.g., a “owner carry second”
• Many investors own a property free and clear and would like to get interest on their investment
• Million of Americans own a property other than a primary residence
• Mobile homes are more difficult to sell with bank financing, and there are LOTS of them

Please comment TODAY and help our industry.  It only takes 5 minutes.

Old House Sewer Pipe Problems:  When Don Nichols visited our real estate office recently, I asked him about his Denver sewer line inspection company. Specifically I wanted to know how it relates Realtors who are buyer agents shopping for older houses in the central Denver area with aging sewer infrastructure.

Here is a recap of the questions answered in the short video below offering tips and advice to Realtors, real estate investors, home buyers and home owners about the importance of understanding sewer inspections and repair costs.

• Beware the Sewer Line Repair Salesman
• How much does it really cost to fix a broken sewer line?
• Question the repairs being suggested by plumbing companies
• What are the hard costs of sewer line plumbing repairs?
• Is the Denver city main verified or that a sink hole?
• #1 TIP? Make sure they are putting the camera down YOUR sewer line!

It’s so refreshing to meet people who are really good at what they do, and can explain technical and mysterious jargon in plain English.  Don offers a unique perspective when it comes to the costs and risks of sewer line problems: in addition to being in the plumbing business with his dad since childhood, he was a Remax real estate agent for more than 8 years.

I did some online research for common sewer repair questions related to real estate agents and home buyers.  I was surprised to read that in many parts of the country sewer repair inspections are rare and not recommended by Realtors to their buyer clients.  Sewer inspections seem to be more commonplace in Denver real estate transactions, but there was also a lot of misinformation, mostly by people who Don calls “plumbing repair salesman.”

Thanks to our Special Guest and PMRE Approved Vendor, Don Nichols

Don Nichols
Certified Sewer Inspection
Denver, Colorado
303-847-9805
http://www.certifiedsewerinspection.net/

Estimating repairs, staying on budget and working with contractors is perhaps the most mysterious and difficult aspect of the business of flipping houses.  As any good investor will tell you, you make your money when you buy.  But all too many investors LOSE all the profit in the remodeling or rehabbing process.  Here are the three most common mistakes made by novice fix and flip real estate investors:

• Under-estimating repair costs
• Over-improving properties
• Under-improving properties

General Contractor Guidelines:

• Begin interviewing contractors before you find a project
• Determine cost plus or complete bid procedure
• Pay contractors timely, but don’t let them get ahead of you on payments
• Obtain lien releases with every check you write

Before You Begin Repairs and Remodeling:

• Switch over utilities the day you close!
  • The title company may offer to help, but don’t trust that they will do so timely.
  • Contractors will not be able to start repairs without the utilities.
  • Avoid delays by contacting the utility companies before you close about any special procedures if the house has been vacant for a long time.
• Change locks, change lock box code, secure property by boarding up any broken windows and doors.
• If you are replacing windows, measure and order them right away.  It can take up to two weeks for delivery, the timing will be perfect if you order them first.
• If you are replacing the roof, pull a permit right away and put it in the window prior to beginning demolition work.

Specific Order of Fix and Flip Repairs:  

1. Clean-Out Crew: Many distressed properties will have been occupied by very messy people!  Be sure to budget $250 for each dumpster as well as labor to clean-out the property.  In some cases the full scope of the project will not be known until after the clean-out is complete.
2. Demolition Crew: At this point you will have a full scope of the project planned.  The demo crew should remove EVERYTHING that you plan to remodel.  Cabinets, vanities, tile, carpet, old plumbing, old HVAC, any drywall where new electrical or plumbing needs to be run.  Many investors make the mistake of trying to save and work around certain items in the house.  Ask your contractor:  it is often less expensive to start fresh with than try to save costs by reusing items.  Doors are a prime example.  Strive to have a “clean slate” and work environment after the demo is complete.
3. Roofing Contractor. Always fix the roof first! There is nothing worse than having fresh new drywall ruined during a rainstorm by a leaky roof that you planned to fix later.  Pull a roofing permit and put it in the window on day one (before the demolition).
4. Foundation and Structural, including Framing. Make repairs to foundation, beams, supports, joists, concrete etc.  When the structure is solid you may begin framing new walls and the rest of the project.
5. Windows Installation. The timing of the windows installation is often tricky because they likely need to be ordered and delivery times are a few days to a few weeks.  The interior framing, rough plumbing and mechanical work can be in process, but windows should be installed before the interior drywall work is completed.  You should also plan window installation to not interfere with exterior paint schedule.
6. Gutters / Soffits / Exterior Paint. Correctly perform any brick, framing, or siding repairs or your paint job will not last.  Exterior paint is usually a 3 day process.  Day 1, scrape, day 2 prime, day 3 paint.
7. Rough HVAC. Install furnace, ducting and accessories for A/C if part of scope (condenser can be later).
8. Rough Plumbing. Copper or PEX plastic tubing is becoming popular.  It is less prone to theft and easier and faster to work with.  Check your local building codes.  Have the lines snaked at this time.  Install tubs.
9. Rough Electrical. Many codes have changed recently and inspectors are very keen to improper electrical repairs.  Make sure you install panels, GFI outlets and wiring correctly, to code, with a permit.  Or you will regret it later.
10. Drywall / Texture. Another 2-3 day process for drying times, budget accordingly and keep everyone out of the way of the drywall crews.
11. Cabinets / Trim Carpentry. Install doors and trim.  If there are thresholds or trim that must wait until after tile or vinyl flooring, be sure to schedule a follow-up visit from carpenter for final touches.
12. Interior Paint. Yes, use bland colors even if it hurts your sense of style.  Pick your sheens correctly, semi-gloss for kitchen and bath ceilings, eggshell for walls.  After completion, schedule a touch-up session with the painting contractor to coincide with day before carpet install.  Mark and save extra paint!
13. Counter-tops in kitchen and baths. If you are using Formica you can have it installed by the carpenters.  If you are using tile granite, use the tile team, and if you are using slab granite order immediately after cabinet installation and have it installed by the fabricator.
14. Tile / Flooring (not carpet). Install all bathroom, kitchen and tile flooring.  Make sure to keep tub drains covered to keep mud out.  Finish or install hardwood flooring.
15. Finish Plumbing and Electrical. Install all trim kits, fixtures, faucets, outlets, lighting, switches, ceiling fans, vent covers.  If you did not replace tubs, have them re-glazed at this time.
16. Install appliances, final touch-ups.  Painting / trim, order landscaping, measure and order blinds if applicable.
17. Full Construction Clean. Vacuum ducts if not replaced, clean-out ALL debris, scrub bathrooms, kitchen, broom clean garage.  Wash the windows (yes, wash the windows!)  Make it SPOTLESS!
18. Install carpet. Again, this is the very LAST thing you do inside the house (except staging).  Change the lock box code at this time.
19. Final Exterior. Landscape mulch, rocks, address numbers, mailbox, welcome mat and flowers on front porch. (this can be done earlier in the process if you would like to get the “street appeal” set for the house while it is being remodeled.

Finish Schedule Tips

• Know your market. For example, you may not need to use slab granite in the neighborhood where tile granite sells just fine.
• Budget more than you think you need to for street appeal.  I see so many novice investors spend too much money inside the house, but not enough on landscaping and exterior appeal.  Buyers may not even get out of the car if you don’t have street appeal!
• Colors are critical, but not in the way you may think.  The old Realtor creed is correct, buyers should not notice the colors, they should notice the house.
• Light staging is better than heavy staging.  Use rugs to define spaces rather than large pieces of furniture.  A few pictures and well placed mirrors on walls, a Chinese screen, lots of plants and accessories in the kitchen make the biggest difference for the lease cost.

Architectural Types and House Product Tips:

• Buy houses with good floor plans.  A house with some sort of functional obsolescence will be difficult to sell even with great finishes.
• Purchase homes that are 50-70% of your city’s median value for the largest buyer audience and least risk.
• Do NOT purchase homes that have significantly different architecture than the neighborhood homes (odd-balls)
• Ranch style houses with 3 or more bedrooms and 2 or more bathrooms have the widest audience for sales.
• Victorian houses and early 20th century houses (old houses!) are the most difficult to remodel and have the most cost over-runs

Yes, the Remodeling and Rehabbing Videos are Coming! Be sure you leave your Contact Information to be informed of the our complete video shoot of each stage of a fix and flip project in Denver.

Last month we began the Old House Remodeling Series with an introduction and comments about preserving historical houses.  In this article we will discuss inspecting, maintaining and repairing foundations on older homes. (See related post: Sewer Line Inspection and Repairs)

Inspection Repairs Costs

There are three key aspects to checking for foundation problems in older homes:

• The type of foundation – brick, stone or concrete
• Structural movement due to expansive soils
• Settling and/or efflorescence from poor drainage

Architectural Types of Denver Historic Houses:

• Victorian Historic Homes  1885-1905
• Denver Square / Four Square 1900-1910
• Craftsman / Bungalow Style 1910 – 1929
• Cottage Style 1925-1939
• Tudor Style 1929-1940

Masonry Foundation in Historic Houses

In historic districts of Denver, houses constructed between 1890 and 1940 are often built on “spread footings,” which are foundations made of brick, stone or concrete that form the base of the exterior walls.  The weight of a house rests on its’ foundation, and the structural integrity depends on the design and maintenance of the foundation system.

The oldest homes in Denver, the pre-1900 Victorians, are usually built on brick or stone foundations.  Poured concrete is a much better foundation material, but was not commonly used until around 1925, after which bungalows, Tudors, and then ranch homes were built.  Of particular concern are foundations with “sand brick,” as it deteriorates significantly over time.

Sedimentary and Expansive Soils

Soils are another important aspect of looking at foundations. Some soils are sedimentary (sandy) in composition, which are generally more stable compared to the expansive clays, such as Bentonite and Montmarillonite.  Foundations built on expansive soils are prone to bulging and heaving and sometimes total failure.

Evidence of structural motion is easy to detect in houses of masonry construction.  Exterior walls, which bear the heaviest load from the roof, typically will settle downwards, producing stress along the walls that run at right angles to them. You will see cracks formed in the walls, and around windows and doors in predictable patterns.  This is known as “crowning.”

The best place to begin looking for potential foundation problems is to walk the perimeter of a house and observe the drainage systems.  Check to see if the gutters are in good condition and whether the downspouts direct water away from the foundation.  Observe the “slope” of the ground next to the house.  Broken concrete near the corners, missing gutter extensions and any place that water can collect and drain down the sides of the house are signs of potential trouble.

On the interior of the house, look for cracks over windows and doors and check how smoothly they operate.  Check for slab cracking in the garage, basement or front porch; listen for squeaky wood floors; and separation of floor boards.  A 4 foot bubble level is an excellent tool for checking levelness of floors and trueness of the interior walls.

Efflorescence in Basement Walls

In many cases moisture problems will also be easy to detect in the basement walls.  There will a weakening in the plaster and/or dusty deposits of chemi­cals that have traveled through the foundation with the water and dried on the surface. This is called “efflorescence.”

While the foundation problems discussed are commonplace in older homes, most do not threaten their structural integrity.  A good contractor can fix most foundation problems, and the cost to make the repairs will range from a few thousand dollars to more than thirty thousand.  Qualified home inspectors will be able to identify problems, but severe issues warrant a professional engineer’s opinion.  There are a few inspection companies in Denver that specialize in older structures; one of them is Coyle Home and Building Inspection Engineers.

First Step Old House Foundation Maintenance

• Establish a slope of approximately 5 inches in the first 5 feet away from the home by adding add fill dirt.
• Examine actual drainage of water through the gutters during a rain storm and repair clogged or leaky gutters.
• Add longer down spout extensions to get the water moving away from the founda­tion walls.
• Do not plant anything that requires watering next to the house.

Stay tuned for the next article in the series, Old House Roof Types on historic homes, which will discuss pitches, materials, common problems and repair costs. Please feel free to ask questions or make suggestions for future articles about historic home renovations in the comments sections below, we will reply or respond.

About the series: Old House Remodeling Series is about buying and remodeling older homes for both investors and owner occupant buyers.  The information is relevant to home owners and house enthusiasts in neighborhoods with housing stock built between 1890 and 1940.  Our office also follows how buyer or owners can get grants for historic home renovations.

Investors!  Denver county is offering free building permits until June 15 for both contractors and homeowners.  This is great for saving a few bucks on your fix and flip projects.  However the downside of this bonanza is the possibility that inspectors will get overwhelmed by the number of people pulling permits and professional rehabbers may be waiting longer for inspections.  Let’s hope they accounted for this at the “City Planning Department.”

The permits can be obtained between 7:30 a.m. and 4 p.m., Monday through Friday, at the permit counter on the second floor of the Webb Municipal Building, 201 W. Colfax Ave.   The Home Renovation Bonanza covers the following improvements to existing single-family homes and duplexes:

• Basic interior remodel (existing kitchen, bath or bedroom)
• Basement remodel
• Roof covering repair or replacement
• Wall insulation
• Replacement of water heaters
• Change out central heating and air
• Photo voltaic systems (Solar Panels)
• Stucco or siding home exteriors

The Home Renovation Bonanza excludes complex projects that require detailed plan review such as new homes, additions, garages and new structures such as a gazebo. Projects requiring plan review for engineering and structural modifications are also excluded.

Building permits offer important protections to homeowners. First, they require that inspections be performed to verify work was done correctly and follows building code standards. Permits also protect the resale of homes. For example, a sale may be held up because an improvement such as a basement remodel wasn’t done with the proper permits.

Call Denver 3-1-1 or visit www.denvergov.com/building for more information about the Home Renovation Bonanza.

Denver Square Before Remodel

In this series we will discuss the all aspects of buying and remodeling older homes for both investors and owner occupant buyers.  The focus will be houses of the inner city Denver, Colorado neighborhoods like Baker, Curtis Park, Park Hill, Jefferson Park, City Park, Highlands, Potter Highlands and others.   But the information is relevant to house enthusiasts in other cities and neighborhoods with housing stock built between 1890 and 1940 where there is a rich historical blend of architecture and culture.

Please join our team of professional investors, agents and contractors as we help you explore the general nature of construction for Victorian, turn-of-the-century, craftsman, and Tudor homes, as well as some of the less-common alternative styles, like International Modern, Mediterranean, etc.

Denver Square After Remodel

The series will include discussion of foundations, fireplaces, furnaces, roofs, floors, porches, and windows.  We will explore the costs and benefits of remodeling for both profit and historical preservation, which do no have to be mutually exclusive.

If you share an interest in these types of houses and projects, please  join our mailing list or subscribe via RSS.  We will send you in-depth articles to read and videos to watch showing our adventures in buying, remodeling, selling and enjoying old houses.  Feel free to leave comments if you have specific questions about design, architecture, costs or construction of these beautiful and eclectic homes.  Preserve history and live abundantly.

Read the next article in the Old House Remodeling Series:  Old House Foundation Problems