All Forum Posts by: Bill B.

I literally asked my agent about this last Friday. I have a studs in townhome policy. I asked if the “building coverage” covered clean out after something like a fire. And, do I need enough coverage to cover that as well. He said there’s a 10% “overage” for clean out in my policy. ($18k on top of $179k in my case.) Check with your insurance agent. 

You won’t be able to 1031 in to another property unless you have that much cash sitting on the sidelines. 

Imagine you are selling for $500k and owe $350k. To do a 1031 you must purchase at least a $500k property and put at least $150k in cash down. Anything less will be taxable. 

Ps. In this example Don’t forget to keep $350k more in cash on hand incase the lender calls the loan on property 1 due on sale. 

TLDR: if you’re willing to pass on doing a 1031. The buyer is offering at least 25% down and paying you 6-8% interest (not your interest rate as you are still legally responsible for paying that debt. You should be ok as long as you have enough cash to pay off the loan if it gets called. 

You forgot to put your location in your post or your profile. Do that and local experts can weigh in. There are places it’s allowed, some where it’s not. There are some where’s there’s a large penalty (call it 3X) if you withhold and the tenant wins in court. 

If it’s only one room here’s your chance to rip it out and replace with LVP from a name brand supplier and seller. Take a picture of the box so you can buy more of the same in the future. 

It looks like people walked on it. That’s every day wear and tear. 

I don't know. I’d never invest in California as a landlord when we have 49 other states and at least 45 of them are better. Hopefully you or your PM know the law if you’re forced to invest there.  I just googled it. It just said adults. Hard to believe they’d let 3 adults and 10 kids live in a 1bedroom. But the first result only said adults. Your OP said 5 adults live there. So I figured I provided enough info to stop that. 

Ps. California has a “2+1 rule” meaning 2 adults per bedroom plus 1 extra adult. I don’t know if they’re breaking the law or you are. But I’m sure you’d be held responsible if something happened because of illegal overcrowding in a property you owned. 

How much more could he sell it for if you backed out and he did those repairs? I assume you’re not saying that $58k will add ZERO value. You can certainly ask but I would assume anything about $20k is hard no. I can’t believe he gave you the $12.5K on top of the $20k closing gift. Add that to $29k in commission and they’re already out $50k. 

I assume it’s renting just fine as is. You aren’t buying a new home. USUALLY, 60-80% of inspection “problems” are things you wouldn’t fix on your own home if you lived there. And you asked for 100% of the items to be fixed?  Safety items sure, but those should be fixed because tenants are currently living there. I understand the world is your oyster when you’re putting $0 down. But I can’t believe they’re even entertaining the offer. The market must be tough for sellers. 

TLDR: if you’re looking for a reason to bail without losing your deposit, bail. I assume it was way overpriced or the area is crashing if you think $50k in repairs will add zero value. Get out now. (All this is assuming for the first time ever, 100% of the inspectors problems were real problems and you’re not over reacting.) 

Good luck. 

Read the the state and local landlord guides as well as the fair housing laws. One violation will cost you more than you can even imagine…

Do you have a written down list of qualifications that EVERYONE will have to pass. 
Do you know if you must accept the first person that passes the qualifications?

Do you know the difference between a pet, an ESA and a service animal?

Do you know what questions you can’t ask, what reasons you can’t use, what market rent is, etc etc. 

I understand it’s a huge risk of violating local, state and federal laws to save $100 or $200/mo but how else will you learn what’s illegal. Plus especially valuable when your time isn’t worth more doing something else. Good luck. 

Ps. Please tell me you hired a professional photographer and didn’t use cellphone pix. 

Another solid argument for max rent cap increases every year. Somebody was a “good guy” for too many years and now it’s coming back to bite them. Why would they ever move out, heck their kids will pry be there in 20 years if you’re 33% under market and increasing every year. 

Next time just charge market rent and gift them $6,000 at the end of the year, every year, like Santa. That way you can keep up with market rent increases. (Plus it becomes more obvious what the gift costs.). Good luck. 

A good guy to who? Their competitors don’t know or care. The person losing their home doesn’t care if it’s bought a charity or the devil himself.  Heck, personally when they go to sell I’d be less interested in buying from them.  It’s obviously a flip. Either by someone more interested in coaching than real estate and might cut corners (to make their coaching numbers look better.) Or doesn't know what they’re doing. 

Either way. No. It's not called that to be the good guy. Either an LLC they already paid for, or a form of advertising would be my 2 guesses.

How much less they paid doesn’t matter. If they had paid the previous sellers $100k more, would you want to pay $100k more? The property is worth what it’s worth. 

I don’t know when hvac/furnace/water heater become “not new”. But obviously we all agree 6 months is still new. Is a year or 2 year old system new? Probably depends on the age of the property. When I sold a 17 year old home I advertised it as have all new appliances/hvac 4 years ago. Now I stated a time, but basically what all new meant is not 17 years old, about to fail/updated. Obviously you and your inspector both knew the age of the water heater and furnace/hvac when you walked through the house. The dates are right on the equipment. 

The duplex question is harder. Not a “Legal duplex” can mean 100 things. The most common are 1) it’s currently and forever illegal for you to rent it out to two unrelated parties and have two addresses. 2) it’s illegal to do that unless you do “x” (pay the city, add a seperate entrance, whatever. 3) it wouldn’t be legal to be a duplex today but it has been and there fore is “grandfathered” in. 1 is a big deal, 2 is a small deal, and 3 is nothing, a non-issue. 

Obviously if you just want out of the deal you use your inspection contingency and walk, you obviously haven’t waited for that to expire before asking for help. If you did make that mistake as well as the others you can try to weasel out under the duplex issue if it’s problem 1, or maybe problem 2, but most likely not problem 3. Lastly, you simply say “I’m willing to walk away from my deposit and lose it if you don’t fix A or reduce the price by B…”. You don’t spend hundreds of thousands to not lose $5-10k. Especially if it can’t be a duplex and that was your plan. 

But what they paid doesn’t matter in the least. Again, if they had paid the sellers more than they were asking I doubt you’d offer over asking price. And if the “new stuff” is less than 4-5 years old on 20+ year old property I’d let that slide, although that’s the 1/2 life for most water heaters, you could ask for $700 off for half of a new one. The only “biggie” is can you use I as a duplex. If not, walk. If so, in 10 years if you buy you won’t even remember this issue. If you don’t you’ll think about how you could have bought it for $100-$200k less than it’s worth then. 

Good luck.