All Forum Posts by: Aladdin M.

@Julee Felsman

@Will Dixon

Thank you so much for your answers!  That's wonderful insight, Julee!  Thank you!

The home owner ended up discussing our concerns with the lender to which the lender came back and requested (and accepted) pictures of the smoke detectors.  

Hi BP!

We have come across a peculiar issue which I am sure others have or are going to experience.

I am a tenant in CA (I am also a rental property owner, just not this one) and my landlord is refinancing the home in which I reside.

The lender gave the owner a set of guidelines as far as the appraisal process goes and part of this process is that an inspector/appraiser has to set foot in the home. I am not comfortable with this as my wife is immunocompromised and also carries other factors that could affect her long term health and or death. We expressed this to the owner and he seemed concerned, but not so much to delay refinancing. We really do not wish to put ourselves at risk even in the most infinitesimal way, but we do wish to support the owners with their refinance.

Questions:

- What are current California tenants rights in these situations?

- Are lenders attempting other methods of inspection like video conferencing and tools of the sort? I would like to think that stepping foot in a home and taking pictures and measurements is an archaic form of verification for appraisal.

- Any peripheral brainstorm-type creative solution ideas as to how to get this completed?

Hi BP!

We have come across a peculiar issue which I am sure others have or are going to experience.

I am a tenant in CA (I am also a rental property owner, just not this one) and my landlord is refinancing the home in which I reside.

The lender gave the owner a set of guidelines as far as the appraisal process goes and part of this process is that an inspector/appraiser has to set foot in the home.  I am not comfortable with this as my wife is immunocompromised and also carries other factors that could affect her long term health and or death.  We expressed this to the owner and he seemed concerned, but not so much to delay refinancing.  We really do not wish to put ourselves at risk even in the most infinitesimal way, but we do wish to support the owners with their refinance.

Questions:

- What are current California tenants rights in these situations?

- Are lenders attempting other methods of inspection like video conferencing and tools of the sort?  I would like to think that stepping foot in a home and taking pictures and measurements is an archaic form of verification for appraisal.

- Any peripheral brainstorm-type creative solution ideas as to how to get this completed?

@Rachel Grunn

I second @Ric Ernst's opinion.  

Rent rates are going to be lower in that area.  Double check those.

Thank you @Todd Rasmussen.

Oooh!  @Nick B.  Very relevant point.  Love it!

I would like to see this list, please. @Dale Pfeifer

Let me start out with I am not new to cashflow analysis, BUT the one issue that I keep revisiting and have not found a great answer for is why 5% vacancy. When I get sent wholesale or turn key properties and I go over their proforma (if they send one), I tend to see 5% vacancy. When I hear an REI podcast, I hear things like "just put down 5% for vacancy". I don't understand the logic. I just had a back and forth with a turnkey property marketer where the seller told me that if I use the number I use and make the assumptions that I do, I won't make any money in real estate investment. This might be so, or it could also be a sales tactic depending on how confident I am in my analyses. So, again, no one has been able to give me sound logic as to why they choose 5%.

I choose 8.3% and let me impart my logic.

It isn't too far fetched to assume that if you own property, there is a possibility that someone will not want to renew their lease.  It is also safe to assume that this could happen once a year.  Now, if this does happen too many times, yes there is an argument to say that the right tenants are not being sought or that your property happens to be next to a college, but regardless, the scenario exists that someone may not renew their lease.  Now if someone does not renew their lease it is safe to assume that it could take up to a month to clean, repair, market, and re-sign a new tenant. So, if this is the case, then 1/12 = 8.3%.  I actually think it is safer to assume 2 months which is 16.6%, but that may also be doomsday thinking.  8.3% is only 3.3% more than 5%, why would my real estate career be at stake if such a small percentage is used to account in my favor.  If I find property that works with my numbers (and I have), why couldn't I adjust my vacancy rate down once I have proven vacancy numbers and pocket the difference?

Can anyone with more savvy than most give me a sound reason to choose 5% over 8.3%?

Thank you kindly in advance.

I think at this point I would be coming in and beating a dead horse, but there is absolutely no reason for the PM Company to not respond to you.  Even if the next property manager to take over your account makes the excuse that the previous one didn't leave a transition plan, that to me, says that the PM company itself does not have efficient enough systems in place to take care of your (and others) needs.

Investing out of state is so tedious, that you need to most responsive PMs you can get.

Bottom line:  Find a new PM and make sure you have relationships with all of the key people (contractors, other PMs, realtors, inspectors, etc) on your own.  There should be no excuse not to have these.  This situation could have been mitigated if you had been able to send out your own trusted contractor (while looking for another PM).  ;)

GL!

I have to agree with everyone's very real assessment of the BRRRR strategy. It truly seems like an excellent plan until you get to the point where you have to refinance and no lenders want to deal with you because you are out of state and/or when you do find a lender, the closing fees eat into your equity at an alarming rate because home values are so low. Without sitting down with an actual calculator, to get the proper and safest returns, it seems like you have to snag a home for less than 50% ARV. Quick example: A house in a C neighborhood's ARV is 50K. You pick it up for 25K (50% ARV), rehab it for 20K, refinace it for 37.5K (75% LTV) paying 10% for closing or $3750, and you are left with $1250 in equity.... ?!!? The possibility will exist that you can still get a decent ROI, but don't expect too much from the equity side in this scenario.

@Jose D.

If you find that neighborhood, I would love to know as well.  I hail from Miami and the Bay Area California and I have nothing but praise for our friends from the south.