All Forum Posts by: Ashly B.

Well now I'm diving in to the really noob questions. Our other investment property was 100% flipped 2 years before we purchased it so I'm questioning what areas are worth spending money and what aren't. First up is heating and cooling.

Quick background:

Buying a 4 plex in a transitional neighborhood. Current tenants are all lower income. Units are all currently rented but as they turn over, we'd like to update them and work toward appealing to the young professional crowd. Posted before about one (not in contract) tenant who is not taking care of the place where we found roaches during the inspection and they have 2 dogs that are peeing everywhere. We plan to give them notice to leave once the sale is final and use the opportunity to make that the first to get updated. 

Questions:

3 of the 4 furnaces are from 1984. Currently there is no ac. 

1) Do you suppose there would be a large enough discount to make it worth going ahead and replacing all 3 units at once or should we wait and do them as we upgrade each unit. If its relevant I anticipate it taking 2-3 years before we work through all 4 units. 

2) Where do you source them? Do you just go buy from a box store or are there better options for investors? 

3) Since the units all have their own furnace, I presume I can get a smaller size? Each apartment is about 800 sq ft. 

4) Wondering if its worthwhile to do heat and ac together? Currently tenants would have to provide their own window ac. Not sure that offering central air has THAT big of an impact on rent or marketability. FWIW we do have hot summers and most people use their air from may to september. 

I mean to be fair, my expectations of the lending terms were set by the lender. I asked all these questions when we first began our search for an investment property and it wasn't clear to me that the terms would change if we purchased a 4 plex as opposed to a SFH or duplex... not necessarily trying to pass blame, but having never been through this before, I had no reason to believe that would change the terms she had outlined for me. I asked what happened if we bought a multi-plex and her response was that they could only finance it if it was fewer than 5 units... I was asking the questions but they were not being answered fully.

Don't disagree with you one bit on the closing costs. I know its my fault. I read the agreement cover to cover the first time through, sent the agent 3 small changes, it came back and I checked to be sure those were incorporated and then signed but did not re-read the entire document. I 100% understand that I signed and therefore I'm responsible but its extremely frustrating. I can say with certainty that I will never sign any meaningful contract via an electronic signature program again - it was hard to read through because it just skips to the signature parts and admittedly thats why I skimmed the second time. As I said, its just been a huge eye opening learning experience. I fully expected to have $5k in unexpected costs come up as a landlord, but not before I'm even reaping the profits. 

I'm still stewing over all this. Obviously I don't want to give the deal up over $1100 but I'm frustrated at how poorly communicated everything has been, honestly mostly from my lender but the realtor is adding to the pain. First I was told 20% down @ 3%. Then it was 25% down because its a 4plex. Then I get the papers to sign and its 25% down at 3.6%. Now its only $1900 in closing costs are allowed. I guess its all part of the learning experience but we just went from an estimated $19k out of pocket to $24k between the added 5% down and the loss of closing costs. That's not chump change and eats up the entire updating budget we had planned and then some. We're going to be scraping the bottom of the barrel to make it work and I'm having serious second thoughts. Why do they wait until 4 days before closing to reveal this?

 Interesting. To add fuel to the fire, we're also closing late because the realtor did not provide the agreement to my lender until 2 weeks after the offer was accepted. He played it off as if I should have taken the lead to send it to her but he hadn't provided me a copy either. I finally got a copy from him the day after the lender did, which was May 21 - offer made May 8 and accepted May 9. 

 I'm trying to track back through email and figure out where closing costs fell out of the agreement because they were in the original offer agreement the realtor sent me - I specifically looked to be sure everything we asked for was included - but I did have a couple changes so he sent a revised, we signed through dotloop electronically and somehow the second version didn't have the closing costs and because of the method he used to send it, I can't even see the original version because its been deleted. I don't believe the sellers ever knew we asked for them so no there was no verbal agreement. 

 Actual will come in at about $2100... so more than what the lender is saying we're allowed to have. 

Exactly. So for the seller, they are getting an offer of $92 no matter how you dice it because those closing costs just come out of their proceeds from the sale - there's no downside for them. On the buyers side it just plays with the financing percentages. 

 It slightly lessens the amount out of pocket for the buyer at closing. If I offer $92 and put $25% down that's $23k + $2k in closing costs for a total of $25k out of pocket. If I offer $95k and ask the seller to contribute $3k to closing costs that's $23,750-$3,000+$2k in closing, and I come out only paying $22,750 out of pocket. 

@james wise, I suppose 2% aligns with our offer price. Would have come in differently with my offer if I had known that. And since its not in the original agreement, I'm probably hosed with trying to negotiate it through another means. 

We made an offer of $95k + seller to cover $3k in closing costs for a 4 plex on May 8. Seller accepted the next day. Realtor apparently forgot to put the closing costs in the offer and no one noticed until now when the bank is drawing up the paperwork.  Our realtor admitted it was his fault and sent us an addendum yesterday stating that the costs would come from his commission. I was a bit confused because I wouldn't think his commission would cover $3k but I wasn't out any money so I signed. Today I get a second addendum with a note that says the bank doesn't allow seller paid closing costs to exceed $1900 on investment properties. 

I've never heard of this rule and it seems ironic that it just happens to be an amount low enough to where his commission would cover it... can anyone weigh in? Is this a real rule or is he covering his ***?

Regardless I feel pretty peeved that if this is a rule, my realtor wouldn't have been able to advise on that.