Closing Soon and Nervous! Vacancy? What to look out for?

Question

Hello BP family,

I was scheduled for a closing this Thursday. However, that has been extended a week since they have to evict two units. My loan officer hasn't got back the clear to close due and or closing disclosure, expect to get it later this week. I have to extend my rate lock.

Quadplex: 2br/1bath, cost $211k, seller pay closing. C class neighborhood. Repair 5k. New roof. Older hvac 12 yrs old.

Morgage/Insurance/Taxes: 1400

Rent: Unit A/B (750) and Unit C/D ($650 , long term tenants (4yrs+))

Cash flow:600/month with PM

The issue is two units have to be evicted. Unit B has already been evicted and their cleaning that up. Unit A has eviction court Friday.  Both tenants are failing to pay rent so the owner is in the process of evicting. I am scheduled to close next Wednesday. So that mean 2/4 are occupied. I am looking to home owner occupy, so really 1 is vacant.

Did anyone else have issues prior to closing? I have a property manager that is working with me at the moment to fill vacancy one unit B is ready.

Any advice? How did yall get over being nervous? I'm very anxious, up until now I was told that the tenants were good. I cant stop checking my email to check if I got the clear to close. I been getting less sleep. Any advice?

Jon Dang · Answer

@Bryan Blankenship Thank you for the advice. For some reason I feel like i'm doing this alone. But, as you mentioned a good PM should be able to find someone relatively quick. I feel better now, thank you for reading my post.

I am hoping to close soon. I am still very nervous, but really just scared of change. I'll try to keep my mind off this. And a month from now hopefully have the property rented out and i'll be moved in, worried free! I am going to go out and enjoy my life and not worry about the things my PM should be working on.

I don't intend to let them know the owner. I get a lot of late-night work calls as it is.

Thank you!

Bryan Blankenship · Answer

@Johnny Dang If the other tenants are truly GOOD, long-term tenants like you say, then what more is there to worry about? One unit is available for you to move into, leaving one unit to be rented out still. Most good property management companies can get a unit leased up for you in under two weeks during the summer months. Of course, this can vary depending on your location/market, but I don't think we've ever experienced a vacancy lasting longer than that here in Ohio.

Any big investment will always make you nervous. If it doesn't, then I'd be worried that you haven't done enough due diligence, and you're just crossing your fingers and hoping! I've done thousands of deals, and that anticipation never really goes away, regardless of which end of the closing table you're sitting on. :) Try your best to focus on the rest of your life and not spend so much energy on this if you can. Closings get delayed all the time due to minor things, so it's not that big of a deal, really.

As an aside, do the other tenants KNOW you're the owner? I recommend keeping that to yourself. You have property management to take care of everything for you, and you're paying them to do just that, so no need to involve or expose yourself and start getting knocks on your door at 2AM about a loose toilet handle LOL.

Best of luck, sir!

Matt R. · Answer

You don't.  :)

The evening after I closed on my first (and only, so far) rental property, I would randomly exclaim, "Oh sh(oo)t, I bought a house!", until my other half was tired of hearing it.  :D  The next day, I piled my tools in my car and drove over there to start rehabbing it.

A few random, specific tips:

Depending on how good the lawn care / other tenants are, the outside of the house may look OK, or not so good.  If it looks not so good, consider doing what you can to clean it up, right after you take possession.  I bought my house in February and the yard was full of sticks, there were leaves from last fall against the front of the house, and so on.  The second or third day I owned it, I cleaned all of that stuff up, just so it would look better in the neighborhood.  I was trying to show the neighbors that I cared about the property.

Once you get the roof replaced, make sure your insurance knows about it.  They may be able to reduce your rate a little.

If the units currently have bathroom fans and kitchen vent hoods that exhaust to the outside, good.  If not, consider adding them - or at least the vents for them - while the roof is being done.  It will take the roofers maybe an extra hour of time and $150 in parts to do now, and you will know that the new shingles are sealed correctly around the new vents.  If you call a roofer out to add them later, you'll pay a few hundred dollars, plus they'll be banging around on the roof again - doing it all at once means the noise only lasts for a day or so.  If you don't install the fans/hoods immediately, ask the roofer to put a cap over the inside of the vents when they are installed, to keep birds, bugs, bats, etc out of the attic.  When the fans/hoods are installed later, you will remove that cap, throw it away, and connect the ductwork where the cap was.

If the bathroom has a window, then by most building codes, it doesn't have to have a fan - the idea is the people will open the window when they run the shower, but nobody does that.  If there is a fan installed and working, most people will use it, especially in the summer.  This helps keep mold and mildew out of the bathrooms.

The recirculating kitchen vent hoods do work, but not as well as the ones that exhaust to the outside.  If you or your tenants cook a lot, they will probably appreciate the outside exhaust, because it keeps grease, steam, etc out of the kitchen.

Go in to the empty units and see what you have.  Take photos and make notes on things you want to fix / upgrade / change. The PM "should" check the units immediately after the tenants move out, but it's also good to check yourself, to make sure they didn't leave food in the fridge and then unplug the fridge, or leave a faucet running, or whatever.

If you can, try to fix things like carpet/flooring and paint in the unit you will live in, before you move in.  These are a lot easier to do when the unit is vacant.  Minor plumbing and electrical things (new faucets, new outlets and switches) you can usually do after you move in.

12-year-old HVAC is not too big of a deal, in my opinion.  If the PM doesn't already take care of it, you might think about scheduling a service call on the two vacant units, just to make sure they are in good shape before you or the new tenants move in.  You can change the filters and vacuum out the blower compartment in the furnace yourself, and you might think about hosing out the outdoor units - but if you're not comfortable doing that, ask the HVAC tech to check the outdoor units.

Good luck!

Jon Dang · Answer

Lance, I may have stated it wrong. 2 tenants are being evicted. One of the tenant being evicted been there for a month. And other been there for multiple years, but due to a unfortunate circumstance cannot pay rent. It does not appear to be D, war zone. Aside from like obvious violence and such. What are signs of a C class compared to D?

Closing Soon and Nervous! Vacancy? What to look out for?

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