helping brother in law find a fourplex in Las Vegas

[Terry Lao]

Hello fellow BP members

I need some unbiased opinions for this argument that involves cash flow 4plex, helping my wife’s brother, and asking her not to tell him. Here are the below facts:

1. Brother in law (lives in UK) and occasionally visits parents in Pasadena, CA, asked me to help him find cashflow properties in Las Vegas, and the first question I asked him was what is your expected return (ROI). He stated double digits. He was going to finance property with 20% with local lender he found with referral from real estate broker.
2. I currently have two fourplexes in Las Vegas that returns 10% (owned 1 year), and 14% (year 1, and 12% year 2) respectively. I manage these properties myself.
3. I’m in the field of accounting and finance, and done mortgages for almost 4 years in past. I’m a regular on Redfin looking at fourplexes, listed, sold, and pending, in Las Vegas. I noticed a recent trend starting in Dec’16 to present, increased sales in a slow period, and low inventory.
4. I found a 4 plex in a HOA community that I currently own, and have cash flow of $800 net per month. I ran the numbers and saw that it can still net around $500 per month, and get 8-10% ROI with an upside of $150-200 per month due to below market rents. Listed $234k, on market for 120 days. First thing I asked from brother in law was do you have a pre-qualify letter and proof of funds. No to pre-qualify letter, and yes to proof of funds. Send to me when you get. I subsequently sent agent my pre-qualify letter and proof of funds, and help negotiate price with intention of getting my name off contract and him solely. After 3 weeks, back and forth, settled on $226k, originally listed at $234k, contingent on viewing inside of units due to no pictures on MLS, with 15 day due diligence. Keep in mind upon agreed upon price, he still did not send agent pre-qualify letter and proof of funds.
5. After I had to call Las Vegas lender to find out what was taking so long, he did not send proof of funds to lender. Also, he was 1099 income, and averaged 21k per year which is about $10 per hour. He did get a pre-approval letter after 3 weeks. I asked if he put live in California, he said yes, but I knew he lived in UK. Fine, you need to handle the loan by yourself. Underwriting will be another issue down the road to prove living in Pasadena, CA, with sister.
6. After all the above, he backs out of contract with seller. I was not upset that he backed out, but more to fact that he should have waited to see the condition of the units before backing out. There was plenty of time with the 15 day due diligence. After all this, it was a complete waste of time, and I had to speak to him during week 2, that you need to decide what you want and not waste my time. I said if you are serious, a yes is a yes, a no is a no, and a maybe is a no. You decide if you are serious. His answer was yes, I am serious.
7. I told my wife not to tell his brother that I was mad and he is a complete waste of time. I was helping him and not paid, nor did I want to be paid. She goes ahead and tells him. I am mad for her telling brother after I exclusively told her not to.

Who would you side with me or wife?

Thanks.

Terrence