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All Forum Posts by: Annmarie Hill

Annmarie Hill has started 6 posts and replied 11 times.

Help me evaluate this off market deal that's non-traditional. Seller will finance

Large building with 3 storage bays/shops on one end

1. Rented at 1500/mth

2. Will rent back to owner at 1500/mth

3. Small one rented at 500/mth

4. Apt 1 rented (3 bdrm) at 1600/mth

5. Apt 2 rented at 1300/mth (2 bd)

I would call the rentals B-/C because they are in a giant metal shop and low grade materials.

So gross income of 76K annually.

Expenses:

Insurance is currently $14652 annually but that seems way too low when SFH go for that much

Taxes are currently 2800/yr, but I expect those to nearly double if I pay his asking price (so let's say 5k/year.

Landscaper 1800/yr

All utilities are paid by tenants

Unknown roof age.

He wants 720000 but I think I should allot at least 10%-15% repairs on this older funky building that he's managed and maintained himself. (I will self manage). So I would think the property is worth more like 600K-650K. We haven't discussed terms of his owner carry yet (10% down). It's currently assessed at just under 500K. He bought in 2021 and paid 320K.

Building in fair condition 33 years old

Quote from @Nathan Gesner:

Here's an explanation with a sample at the end:

Your offer to purchase should include a requirement that the Seller provide all documentation and agree to sign an estoppel certificate (also called estoppel form or agreement). The estoppel is a form filled out by the tenant, then confirmed by the Landlord, then accepted by the Buyer. It's supposed to ensure there are no surprises after closing. For example, I often see Buyers purchase property thinking there is a $1,000 deposit but then the tenant claims it was actually $2,000 because they paid the last month's rent. How will you know? An estoppel certificate fixes this problem.

Some things it may include:
1. Tenant name, contact information, and address
2. Occupancy date
3. Is there a written lease? If so, review it to ensure it matches the estoppel certificate
4. Are there any modifications to the written lease?
5. Are there any verbal agreements or arrangements between the current Landlord and Tenant?
6. Current lease term (expiration date, month-to-month)
7. Current rent rate
8. Rent due date
9. Security deposit amount
You can find plenty of examples by searching for "tenant estoppel certificate doc" or exchange "doc" with "pdf" for more options.

Here is an example and explanation: Sample Estoppel

Some have a lot of legal jargon but this document does not need to be so detailed. This is an important tool for anyone buying a tenant-occupied property.

I noticed it's notarized. How important is that when the lease itself isn't notarized? I can imagine the tenant may balk at that.

So a follow up to my prior question after speaking to an attorney in WA state: 

I am considering an offer on my first investment property to househack. It's a duplex with one unit vacant. The tenants have been served the 90 day notice to sell (Jan 1) required in WA state. One tenant is already vacating Feb 8. The other has not said a word so Im assuming theyll ride the 90 days out, or even not leave. Would you recommend making the sale contingent on the tenant leaving at the end of 90 days (or the seller getting tenant out sooner (eg cash for keys), and returning the unit broom ready, OR in the interest of moving forward would you negotiate a holdback in case eviction is necessary and to cover paint, repairs from wear and tear and carpet replacement, cleaning etc? Can lost rental revenue be included (so if it takes 3-6 months to evict can that be the sellers obligation through the holdback)? Would 10% of the purchase price be fair if I feel that will cover expenses (485K purchase price asking)?

My thought was to offer two different PP: maybe 10K more if they get the tenant out within 30 days, 10K less if we have to ride out the 90 days (but then Id ask it be delivered broom ready).  The holdback account would be to pay costs to get tenant out, replace/clean etc. The 2 bedroom unit that is still occupied is the one I need to live in with my kiddo.

Quote from @Kevin Sobilo:

@Annmarie Hill, yes in my area it is normal.

What I would expect to know from them BEFORE making an offer is if the unit is occupied, what the rental rate is and whether they are on a lease or month to month.

Reviewing the lease itself falls under your "due diligence" as part of the sales contract.

So, the sales contract should specify any inspections etc you want to do, including reviewing a copy of the lease and also getting estoppel forms signed so that you know what the current rental situation is in detail and that the tenant is attesting to that so there are no disputes later.

If you plan to move in, you should probably require them to make the unit vacant before closing because even if the tenant's lease is ending doesn't mean you won't have to then evict them which could take more months. 

Yes it would be ideal if they can be vacant prior to purchase. I will try to get the date they gave them the 90 day notice to sell. I believe in WA they still have to give them 60 days notice to vacate also. I am meeting with an attorney Tuesday to discuss. 
Quote from @Simon Ashbaugh:
Quote from @Annmarie Hill:
Quote from @Simon Ashbaugh:

Hey Annmarie, it's true that sellers sometimes withhold lease information to protect tenant privacy, I do find it a bit inconvenient not having full visibility before making an offer however, the seller might be concerned about protecting the tenants' privacy. In cases like these, you can structure your offer with contingencies that allow you to back out if the leases or the 90-day notice don't meet your expectations after review.

I can see that. They could redact that info for sure. I was trying to pick a closing date, and to confirm they have a termination clause in the lease. Any suggestions for verbiage on the contingency for lease review? Or do I out no closing date in the offer until I can review the lease terms and 90 day notice (she posted it on their door. I'm hoping that's considered legal service).

 I'd recommend asking an attorney, but here in ohio I usually say something along the lines of - Contingent on satisfactory review of lease and tenant ledger


 Thank you! I have a consult with an attorney scheduled for early next week. Trying to build a team in a rural area isn't easy. I appreciate your help!

Quote from @Simon Ashbaugh:

Hey Annmarie, it's true that sellers sometimes withhold lease information to protect tenant privacy, I do find it a bit inconvenient not having full visibility before making an offer however, the seller might be concerned about protecting the tenants' privacy. In cases like these, you can structure your offer with contingencies that allow you to back out if the leases or the 90-day notice don't meet your expectations after review.

I can see that. They could redact that info for sure. I was trying to pick a closing date, and to confirm they have a termination clause in the lease. Any suggestions for verbiage on the contingency for lease review? Or do I out no closing date in the offer until I can review the lease terms and 90 day notice (she posted it on their door. I'm hoping that's considered legal service).

Newbie here: I want to place an offer on a tenant occupied duplex to owner occupy. In order to place an offer I requested copy of the leases and the 90 day notice to sell. The sellers agent refused and said only after an offer is accepted by the seller. Is that normal? I wanted to see when the 90 days was up so I could move in to one unit and remodel the other. 

Excellent post, but isn't mileage only added back as the portion allowed by the IRS, not in its entirety, so it wouldn't be a full 10K add-back in your example? I believe the add-back is about 22cents/mile for 2023 isn't it? My lender explained because there are still going to be those ongoing expenses of maintenance, gas, wear and tear ok the car so it's not all income. 

When evaluating multi-family properties do you simply go on rental rates listed on Zillow by agent and make an offer if those numbers cash flow, or do you ask for taxes or p and l's first (are sellers willing to do that before going under contract)? 

I am looking for a good attorney well versed in landlord/tenant laws in both WA and OR. My understanding is they are not landlord friendly states and I'm about to offer on a duplex. I don't want to do something wrong with terminating current tenants so I can move in.