The search for the 1st pt 3

If you haven't read part 1 or 2 Start here:

https://www.biggerpockets.com/blogs/10679/71273-th...

https://www.biggerpockets.com/blogs/10679/71366-th...

So last we left off my new partner and I had decided to go ahead and make an offer on this Triplex. We put in a full price offer because I had already tried getting him to lower the price and 139,900 was as low as he'd go, so that's what we offered. After a little over 24 hrs the seller agreed and we set closing for Feb 22nd, today was Jan 21st, so we had right at 1 month to get everything done. 

January 24th we finally got to walk through the units and see the property that we’re under contract for, making sight unseen offers can be scary to some, but if you leave outs then it shouldn't be a huge deal. Turns out that the tenant in the smallest of the 3 units had been evicted recently and they were still in the process of turning it over. It was readily apparent that they were in the process of turnover because the second you step in the strong smell of mold smacks you in the face. That combined with the freshly patched holes in the drywall. We also realize that this used to be a four unit, which finally makes sense, because there are NO 3 units in this neighborhood. So let me break it down:

The tenant in the 1st big unit pays 850/mo, ( this apartment is more like a townhome since it's half the building) seems like a pretty good tenant and gives us the info on the property, PM, area, etc…Says he’d be willing to stay on if some of the minor issues in his unit were fixed up, call it $1000 total. The tenant would later decide to leave and we're happy with that because of some personal issues we had with him, but all in all it was good he moved so we could do a proper rehab on the unit. The other half of the building is a 3 bedroom 1 bath upstairs unit and a 2 bedroom 1 bath downstairs unit. The upstairs tenant doesn’t speak a lick of English, apparently one of his kids does, but he pays 800/mo and is pretty much not going anywhere. 

The downstairs unit is pretty trashed, market rent after fixed up is 650-700/mo easy. Needs new kitchen cabinets, sink, flooring throughout the first floor, bathroom vanity, probably a new furnance (home warranty for that), and clean and paint all the walls. Estimate $6000. So total repairs around 7k. ARV is only `160k, so not a lot of room to BRRRR, but at least we’ll have equity. 

Over the next few days we order the appraisal, which comes back at 144k, so we're good to go there, get the insurance quote at 85/mo for umbrella liability and owners insurance, and find out the actual numbers on utilities. After some back and forth we finally had the seller just take a photo of his utility bills and send them to us, Quick Tip: always have the real bill or a picture of it sent to you to verify. At first the owner said his sewer was 164/mo, almost 2x what we though it would be, but after seeing the real bill it turns out he hadn't paid it the last time, so that was 2 bills worth, turns out it was only 82/mo. 

We opted to not do the home inspection because we thought we had seen most of the problems that we would find and the inspector wouldn't find more. NEVER NEVER NEVER SKIP THE INSPECTION!!! Have a professional do the inspection, someone who does this for a living and has no skin in the game. It helps to have someone who's not involved in the transaction walk through it and find everything that's wrong, plus it'd give you at least a partial scope of work to complete even if the seller says no to doing it himself. My wife won't let me live down the fact that we didn't do the inspection (3 weeks after purchase new stuff keeps popping up and every time she says "could have had an inspection"). 

February 10th, after a lot of waiting we get the actual appraiser’s report, and while I have issues with some of his notes, since it appraised higher than asking I’m not going to dispute it. He also noted the garage is 1000sqft which seems wrong. My partner and I think it is only about 600sqft. We plan on having a contractor come in and take measurements and get bids on converting it into a 4th unit. If we can’t do that we’ll try to find a local contractor to rent the place for about 150/mo hopefully. 

February 21st, the day before closing, I went to meet my agent to do a final walk through to make sure nothing crazy had happened and speak with one of the tenants to see if they’d be staying on after their lease expired in a week. As I was waiting for my agent to show up I notice a HUGE black flume of smoke coming from behind the next door neighbors. I thought his house was fire, but turns out a large metal shed in the back yard was going up in LARGE flames. I, along with a couple neighbors, called the fire department and thankfully nothing happened to our property. The STLFD put the fire out fairly quickly and responded in force, probably because the first caller thought it was a house fire, not a shed fire.

Anyway, we get into the units and everything’s pretty much as it was. The tenant said they would be moving out, but did want to rent the garage for a month or so until he was moved, so we went ahead and agreed to a 1 month $100 rent for the garage. So now it’s on to closing! Here's an after thought quick tip for you new guys, don't rent to someone who's moving out any portion of the place, like the garage. I'll go into more detail later, but if someone decides to leave, have them leave completely. It's too much of a headache to deal with. 

February 22nd, CLOSING TIME…. Oh yeah, so we closed, everything went well, got the keys, got the loan funded, and even went to a BP Meetup that night at a bar to celebrate, perfect timing! This Saturday all the real work begins!

Fun begins on pt 4 in a week or two....