All Forum Posts by: Barrett Lund

Quote from @Bill B.:

My point was you were the highest offer and you just said you wouldn’t have bought it. So unless they attracted another buyer they would have gotten less. You would have had to put down 25% and paid 4.5-5% interest. You probably eliminate 90-95% of the buyers when you need 25% down. 

This is why many people target the 5-12 unit market. They don’t have the demand of smaller or larger buildings. 

I meant I wouldn't have been able to buy it because the price would have been much higher. I would absolutely have still bought the property if it was the same price marketed as a 5 unit property regardless of 4.5-5% interest and 25% down. But your point does help me understand a little bit of the seller's mindset. 

Quote from @Andrew Moore:

My first thought is that those units haven't been approved by whatever municipality it is in. They could have done repairs they didn't have permitted, it's possible that the zoning for that property wouldn't allow for it to be a true 5-unit. 

My next thought is regarding the pool of buyers that have access to commercial financing is likely much smaller than those who can qualify for a residential mortgage. 

The only way you can really refinance out of the FHA would be into a commercial loan. I'm not sure what your equity in the property looks like, but they are likely going to require between a 70-75% LTV. On top of that, your FHA rate is probably somewhere around 4.25% on a 30 yr note; you might be hard pressed to find commercial terms that would be as competitive as that. You are probably going to be looking at 4.75-5.25%, on a 15-20 yr pay-off.

You may need to keep your existing financing in place for some time depending on where your equity is at now, and even then you will likely roll that into a commercial loan. 

Hope this was helpful. Don't hesitate to reach out if you have any more specific questions, I'm happy to be a resource any way I can.

I can't imagine it (stand alone fifth unit) having been around for over 30 years and not have been permitted? 
I'd say you're definitely right about the pool of buyers being smaller, but what does the pool being smaller really matter to the sellers if they could have gotten a significant amount more money through that same small pool?

My FHA note currently is 2.65% but I would believe that the property would appraise for much more through a refi and then increase my equity and maybe allow me to get off PMI.

Quote from @Bill B.:

Would they have gotten more?  Would you have still bought it? If you had to get a shorter term, callable mortgage at a higher rate? How much more would you have paid at a higher interest rate for a shorter loan for the same building?

There was a 4plex on lake Minnetonka with an “owner’s storage unit” this had a kitchen, bath and bedroom. They figured they could get more with the easier financing and a built in “cabin” for the owners to spend weekends on the lake. 

I would say unequivocally they would have gotten more, but I probably wouldn't have been able to buy it as I purchased through FHA. The unit did need some repairs (a new toilet and vanity) but beyond that it was good to go. Other units at the property list for $900 while the standalone "storage" unit has netted me $1050 a month. I would also say demand for the property was really high, it sold within 3 days of listing. I am still really puzzled.

I apologize in advance if this is the wrong area to post this question in, I am still finding my way around the site.

Last year I found a 5 unit property that was marketed as a fourplex with "garage storage". Low and behold I view the property to see that the "garage storage" is actually a fully fledged and functional detached unit. This property also had a "shed" that wasn't utilized at all. When the bank appraised the property the sellers were adamant about not allowing access to the shed or "garage storage" and thus the appraisers didn't even look into these parts of the property, yet the appraisal still came back right at the amount that I purchased the property for. 

I know that the property would have had to been categorized as a commercial property to be sold as 5 units, but clearly the sellers could have gotten more for the property with that being the case? What would be possible reasons they sold it the way they did?

My second question is, is there any creative way I could refinance this property out of an FHA loan into a better loan that accounts for the additional property? The "shed" is now a communal washer/dryer room.

Really appreciate the kind replies. 

The renter certainly has the money, unless they forged their income verification documents. They only decided to pay me what they earned from the property from airbnb after a few months of paying in full on time, with no justification other than "that's what I earned from AirBNB. There is a substantial amount remaining on the lease, if I believe this person has the funds, is it truly not worth it to pursue or come to an agreement on compensation?

I leased out 4 of my units to a single renter who transformed the units into STRs. I was fully ok with this, as I wanted to be as hands-off as possible. Long story short his business or business model is failing and he is requesting an early termination of the lease. AirBNB has suspended the listing and it may be months before it can be relisted on the site. There is no early termination clause in the lease. The renter is behind around $3000 in rent payments and has over six months remaining on the lease. I'm open to breaking the lease and finding a better renter or renters regardless, I'm even interested in doing the STRs myself. The units were furnished by the renter. If monthly rent is around $4000, what would be a fair negotiation to let him break the lease?