Under contract for my first MFH.....What to do now?

Question

So Last week, I got under contract for 3 unit MFH. All three tenants are there on 1 year lease. 1st Floor tenant wants to renew her lease and her original lease expires on the last day of August.

2nd Floor Tenant's lease expires on Last the of January 2016

3rd Floor Tenant's lease expires on Last day of August 2015 and he will have to move since i am going to House hack ( Special shout out to @Brandon Turner

and @Tyler Blackwell )

What should I do now?

I am working with my lendor to see if they can loan to my LLC for asset protection purposes meanwhile do i run the credit and background apps of the tenants again and give them a new lease or just make addendum.

Need Advice.

Thanks

Rishi Patel · Answer

@Nicole  Clemens

Thank you, I bought it in Drexel Hill

Rishi Patel · Answer

@Troy S.

Thank you, great ideas. I am going to meet the tenants soon and i will start working on the rest.

Feel free to drop me a line of you think of anything else.

Rishi

Troy Sheets · Answer

Estoppel certificates. They're not commonly done (at least in Philadelphia) but I think they're a great idea. Failing that, ask the tenants if there's anything outside the lease you should know about, confirm rent amounts, and ask them if there are any problems with the building they know of.

You can't make new leases or addendums and if you don't like their credit or background, too bad. The lease supersedes the sale unless it states otherwise. You can ask them if you can make up new leases or an addendum but they don't have to agree.

Get signed up for the Landlord Cooperation Program through PGW. If you don't and the tenants don't pay their gas bill, PGW will put a lien on the house you'll be responsible for.

Verify utilities and operating expenses as best you can. It's not always easy but the more you verify (including rents), the less surprises you'll have. Ask to see tax returns. You may or may not get these but it's worth asking.

Consider camera scoping the sewer lateral. Cost is $200-$250 to scope and repair can be anywhere from $2600 and up, way up. You don't want to find out your lateral is bad after you've purchased.

I wouldn't sweat the LLC and it's unlikely your lender will loan to an LLC anyway.

When you do make new leases or renew, try and make them end in the Summer. January is a crap time to be looking for tenants.

Nicole Clemens · Answer

Congrats, Rishi!!

What section of Philly did you buy in?

Rishi Patel · Answer

@Mel K.

I looked at that option for myself, since currently all the tenants are on year long leases, and generating monthly rents of $3000(1250+1100+650) but i could not find any good private investor, best part about your going your way is that in future, you will be able to take out more than your principal and interest, still have money to invest in another unit.

Good luck

Mel K. · Answer

@Rishi Patel

I'm actually using a private investor. The plan is to eventually refi this property with a conventional loan and cash-out to continue with additional property purchases.

You're doing a very smart thing with the house hacking technique. If I was single and without kids, I would definitely do the same thing. Just cant fit the family into a multiplex at this stage of our lives.

Rishi Patel · Answer

@Mel K.

Thanks and Congrats to you too!!

I just had home inspection done yesterday and i should get report before by the end of the day.

Are you doing FHA or commercial Loan?

Mel K. · Answer

@Rishi Patel

Congrats on being under contract for your first property. I'm also under contract with my first MFH. It's great that you have tenants already. I would suggest some due diligence at this time. Have an inspector check out the property. If there are structural issues, you want to be aware of that. If there is anything that needs to be repaired, you want to plan that out before you move in or have someone else move in. If you're working with a good realtor, he/she should be able to guide you with some of the details needed to close. I'm currently at the stage of inspections and getting quotes for repairs/reno's.

I hope this helps and best of luck!