Rental Property Diary - 2nd Fourplex @ Fresno, CA

Here is the rental property diary for my 1st Fourplex in Fresno, CA.

https://www.biggerpockets.com/member-blogs/7361/46...

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Take out your popcorns, and hang tight for a second roller coaster REI ride.

12/13/2017 - My real estate agent called me that he had a great deal, but it is in a sticky situation. The seller rented all 4 units to his 'friend' @ $400/unit and allowed him to 'sublease' to anyone as he likes. There was no explanation on this relationship, but this 'friendship' went south. Seller decided to put property for sale instead of dealing with this 'friend'.

12/14/2017 - Pulled out my analysis sheet as shown in my first diary. Punched in some numbers and the cap rate (8.5%) looked amazing if we could obtain this property.    

12/15/2017 - Got my offer accepted at amazing price. $285k. Things were moving along well, until...

1/26/2018 - Oh shoot, the loan was rejected because the lender was unable to obtain the current executed leases or any sub leases for the properties. My agent tried his best but there were no leases to obtain. The conversations were ping ponged back and forth. We asked for exemption on waiving the leases or subleases.

2/9/2018 - No is no. Lender's underwriter declared. The chances of getting this property is so slim. It is slimmer than a piece of paper. Both my loan agent and real estate agent started to sing 'Let it go ... Let it go...' . My real estate agent recommended me a local lender. He may be able to help us out with the loan.

2/12/2018 - Holy Macro, I found the solution. I spent three days reading all the Fannie Mae's loan requirements in which my lender had to follow to the T. There was a freaking clause about "Documentation of Net Rental Income" which states that if the net rental income of the property is not used to establish the loan, then rental income documentation is not required. I quickly checked with my loan officer, and he confirmed that he only used my W2 for the loan application. He wasn't sure that it would work, but he would forward it to the underwriter and his manager.  It's waiting time again. 

2/15/2018 - I spoke with the lender agent's manager, a very understandable person. He said he would talk to the underwriter for me.

2/23/2018 - Boom! a new path opened. The lender's agent sent me a list of new loan conditions and stated that we cleared the previous condition about providing leases and subleases. Loan was fully APPROVED by the end of the day. It is a miracle, both my lender agent and real estate agent said.

 3/2/2018 - Escrow was closed. :) Happy dance! Of course, it was too early to celebrate. Don't forget about the 'unhappy' friend and his sublease's tenants. 

4/2/2018 - first tenant moved out and 2 more are on the way. All units were repaired and rented out within 1 to 2 months at the full market price. 

9/24/2018- here comes the eviction notice to the former seller's 'friend'.

11/15/2018 - Luckily, the eviction went smoothly. Unit was repaired and rented at market price within 1 to 2 months.

4/8/2019 - I am in a contract to sell this property at $410k along with my 1st Fourplex for 1031 exchange to a larger MF (14-unit to 15-unit). If you are thinking or know a friend who thinks of selling their MF, please message me. 

Thanks for reading my blog. Hopefully it will help you in the future if you happen to get into a sticky situation.