All Forum Posts by: Account Closed

Hey BP,

I have a question regarding what happens when an oral lease agreement switches to written. Some background: my friend is a tenant who has been living rent-free in a unit for over ten years but is a professional painter and has been painting numerous properties/units for the landlord in lieu of rental payments. This has been their arrangement for almost twenty years (the tenant has lived in three of the landlord's properties, all located in California) and from inception there was never a written agreement for this arrangement.

Now the landlord wants to have them sign a lease and write them checks for the work that is being performed, which apparently is to be cashed and returned right back to the landlord as the rent payment. He states it is for accounting purposes. My friend's concern, however, is that the landlord may be trying to formalize their relations so that he may eventually evict them, as many of the legacy tenants in this apartment building have been evicted or "pressured" to vacate for frivolous reasons so that the landlord can renovate and convert their units to Airbnb in order to receive a higher return for each unit. There are 13 units at the property and ever since the landlord began Airbnb about three years ago, suddenly only three legacy tenants remain and all the others have been pressured to leave for reasons that were not of concern for the many prior years.

What would be the potential drawbacks to the tenant should they choose to sign the written lease? What could happen if they refuse and prefer to maintain their original oral agreement?

@Ewa Reza Interesting! Not to mention LA County as a whole is overinflated and is deterring demand. By the time construction actually begins and new comps hit the area, properties purchased around this time could ride a soaring wave of appreciation in 3-5 years. At least this is the prospect I'm trying to assess by reaching out to more seasoned professionals operating in the area.

Hey BP!

Here in Southern California, Google has made a significant purchase of 12 acres of empty land in Playa Vista, CA for $120MM. You can read about this move in a Dec '14 LA Times article here: http://www.latimes.com/business/realestate/la-fi-p...

Of particular importance: "Google's land purchase 'brands Playa Vista as the tech and innovation capital of Los Angeles,' councilman says."

I'm interested in reading from any professional investors out there what this could mean for appreciation in the surrounding areas, namely Westchester, Playa Del Rey, MDR, and El Segundo. As young techies continue to relocate and propagate the expansion of the Silicon Beach movement out here, could this landmark purchase by Google deliver huge prospects for local investors?

Hey BP! I would greatly appreciate your expertise on the concept of holding companies with respect to real estate investing. Robert Kiyosaki, in Rich Dad Poor Dad, says his first company was a real estate holding company. I researched into them a little and would like to know if the following scenario would be worthwhile.

My two partners and I would start a parent company and form a wholly owned subsidiary under it to build capital. This first subsidiary's purpose would be to invest in such products as stocks, mutual funds, REITs, and other brokerage services to build capital for the venture. Then we would form another wholly owned subsidiary for our first acquisition, funded by the investment subsidiary for its own return on investment. Essentially, one subsidiary profiting off the success of the other as an investment,

As our business grows we would continue this structure, placing layers of corporate veiling between us and our assets. We do anticipate growing a rather large real estate business, with divisions in both residential and commercial. Does this structure seem plausible for us as new investors? A primary motivator for this is to utilize an entity as a way to pool our money together while maximizing its growth through various investment vehicles prior to purchasing real estate.

Your professional insight and experience are greatly welcomed!

Thank you for the replies. Based on Southern California estimates a single unit paint job can cost about $500. Rent for the unit in question for these tenants is about $1500/month. Given that three to four units are being labored for the rent is definitely made up for. The question was more with regards to the ethics of choosing to ruin one tenant's personal property over another's when a reserve fund should be set aside to fix a problem associated with the landlord's property that is clearly inconveniencing his tenants.

Hey BP,

I've got a couple questions regarding tenancy-at-will. A friend of mine lives at home with her family and rather than paying rent, her father (a house painter by profession) paints for several of the landlord's units once or twice a week to make up for the rent. As I understand it, this is a tenancy-at-will.

However, a situation has come up which has concerned her family about their rights as tenants. One of their neighbor's parking spaces sits next to a broken sprinkler that is spraying water onto their car, dirtying it up or perhaps "damaging it" according to the neighbor. This neighbor has decided that he would like to have my friend's parking spot instead.

The landlord is okay with this idea and has mandated that my friend switch parking spots with the neighbor. However, I must concede my friend's point that rather than ruin her personal property instead of this neighbor (who, according to the landlord, "pays a lot of money for rent," which is a poor excuse as he probably saves a lot of money getting free paint jobs on the fly from her father) should instead fix the sprinkler out of his operating budget.

This is for a 13-unit building and my friend and her family have been designated as managers who need to make these sorts of adjustments for the other tenants. As this is a tenancy at will, there is no contract that states they are managers, and whether there was ever an oral agreement or not, her family has never been designated any managerial duties from the onset of their tenancy. They simply inhabit the dwelling as any other tenant. The landlord also countered with a threat by stating that he isn't obligated to give them any parking space at all.

My questions are the following: given their tenancy status, do they have equal rights to stand their ground and not feel obligated to swap spaces with this other tenant? Is a property owner obligated to provide at least one parking space to every tenant in this type of multi-family setup, given that there actually are enough spaces for each unit, or is he able to play favorites and provide two or even three spaces to one unit when there exist enough to cover each individual unit? Lastly, is the landlord even legally justified to inconvenience tenants under a tenancy-at-will arrangement and force them to ruin their vehicle against their desires just to please another tenant who pays rent, since realistically he should repair the sprinkler system?

Dimitriy, thank you for that reply and for taking the time to touch upon all of my questions!

I am particularly interested in learning more about the last point you'd made, namely buying investment property inside of my IRA. How exactly does that process work? If an IRA has been established and I locate property to purchase, how is the vesting established? Once the IRA is fully funded for the tax year, what becomes of the excess earnings from the property?

I work for a bank and during IRA training today it was briefly brought to our attention that the IRS waives its 10% premature penalty on a Traditional IRA distribution if that distribution is used for a first home purchase for the IRA holder. I have a couple questions regarding this strategy:

a) What is the amount limit that you are allowed to withdraw without penalty? In class they approximated $10,000 but they aren't confident of this amount.

b) Does this strategy also exist for Roth IRAs and if so which plan type would be more beneficial to distribute from?

c) Could this strategy be implemented to fund the purchase of a 1-4 unit residential property if the IRA holder is an owner-occupant? Could this method be used together with an FHA loan?

d) Finally, how long must an owner-occupant live at the property before he is able to relocate and use the former property strictly as an investment?

Thank you so much in advance for your advice!

Brooke Isbell Would you be able to message me the info for that attorney and your contractor friend as well? I would greatly appreciate networking with them!

@Joel Owens @Andy Luick @Manny Cirino Thank you guys! I'm only starting out as a buy-and-hold investor for 2-4 unit residential properties in the Koreatown and Mar Vista sub markets of Los Angeles.

I'd need an attorney to help draft purchase and sale agreements, review contracts, lease agreements, and to be on call for potential evictions or lease violations.