All Forum Posts by: Cameron C.

@Jessica Zolotorofe thank you for that perspective, it's much appreciated!  I have two follow up questions considering your professional line of work...

1)  Would it make sense to terminate the contract and have them re-sign a more comprehensive lease and/or template to my liking?  Our current lease is only 2 pages and I assume it's very high level and may have holes in it compared to others I've seen in the past?

2)  Pittsburgh has an odd ordinance similar to most college towns that prohibits more than 3 individuals with different last names to enter into a lease today.  Today, we only have 3 names on our lease.  This obviously won't be a problem if I'm the owner and the fourth one not on the lease but are you aware of a way for me to protect myself in the future?  I want to ensure that when I do not live there I am able to hold all 4 tenants liable for the full $2600/month rent.  Is there a work around relative to the language in the lease I could look into?

Thanks!

Cam

I have  a verbal agreement in place to purchase the 4BR home I currently rent from my landlord, which I would then continue to rent out to my other 3 roommates in order to ensure I'm cash flowing each month, covering my obligations etc.

I would love some perspective on specific steps I should take as it relates to taking over a property that will have existing tenants, leases, security deposits etc?

For instance, I understand the lease will transfer with the sale of the property and I can have them sign a new lease when it expires but a couple specific questions I have are...

1)  Should I draft adjustments to the lease and have tenants initial to update owner information etc in the interim?

2) How should I handle the security deposit the current owner has?  Keep it separate from the purchase price and have a check transferred outside of the closing room as a separate transaction?

3) Because I'm a Realtor, I've already sent over "Seller Disclosure" paperwork but are there other due diligence documents I should have completed prior to submitting an offer?

Thanks in advance for any advice you may have!

Cam

Anthony Angotti always appreciated. You definitely have a good perspective considering you've walked the property. All in all, I think I'm going to go for it. I think I do have the exit strategy of selling or potentially holding on to a rental in a desirable area for years to come. I certainly don't think it's a incredible spread or get rich quick scheme but I think it'll work.

Emily M. Are you identifying it as a bad deal because of the numbers or just because the area is saturated and isn't a diamond in the rough. I do agree that this is not "the next big thing" which is why I'm certainly paying close to market value. My comps suggest this property could be listed today for $315,000 so I think there is a spread there if I'd like to sell in 5 years, otherwise I think it will continue to cash flow as a standard SF rental.

Brent Coombs I guess the point being that I'd only be truly living for free if none of those escrowed balances came into play and didn't materialize. Otherwise, I more or less view it as if I'm paying $650 for my bedroom now per month, why no put it in escrow to address major problems , vacancy, and property management when I do move out in 2 years rather than to my landlord for nothing. This is what I meant by including my rent and the total of $2600 to understand the full picture after I'm no longer occupying the property.

Kevin Siedlecki cannot thank you enough for your input. You are correct - I'd be cash flowing at least $150 in my most conservative projections, while living for free and essentially escrowing my rent for major capital expenditures, vacancy, and future property management services. The home currently rents for $2600 and could easily be raised to $2800 upon moving out and replacing all 4 bedrooms to align with market trends. I would only be putting 3% down. The numbers below capture everything minus the property management escrow. It is very conceivable that for the next 2 years while I'm definitely owning that there will be no vacancy, no capex (entire house was redone 5 years ago), and no property management fee. I'm including my rent as I would "invest" it back in the property short term while I live there but also so that I fully understand the full picture upon moving out. Cheers! Gross income (after 10% assumed vacancy): $2,340 Mortgage Obligation (PMI, taxes, insurance included): $1,758 Capital Expenditures Reserve: $199 Monthly Cashflow: $383

Hey Guys, 

The input is much appreciated and is great food for thought.

@Christopher J D'Angelo I will certainly shoot you a PM.  To add some more context to the situation and to address some of your questions: 

1) I will be applying for a first time home buyers conventional loan for 3% down and will try to roll some of the closing costs into the mortgage via the sellers assist option. 

2) He purchased the property in 2006 for 50k and it was all but condemned.  According to him, he has over 150k in materials in the property as all labor was performed by him and his business partner.  

3) At those conservative numbers of $150 monthly cash flow my cash on cash return would be 12% assuming down payment and closing costs equated to $15,000 on the $285,000 purchase, which based on my lender estimates might be less than that anyways.

4) According to county records, the house is not part of an abatement program, however, I am worried that a re-assessment would result in a dramatic increase in taxes.  The current assessment value is $117,000.

@Anthony Angotti and I have had several discussions to date about this property so once again I cannot thank you enough for the help.

Hey BP,

So you may have seen some of my other posts on here recently but I'm currently close to a deal with my current landlord to purchase my single-family house in the Southside of Pittsburgh. This is an extremely strong rental area, my properties has many additional high end amenities that comparable properties do not and I do not foresee the rental landscape changing much after I move in the coming years. Myself and my roommates will definitely be there for the next 12-18 months and I will be using their rent as income to cover the mortgage etc.

I have put together many models, all of which cash flow in this scenario but aren't the eye popping number you may sometimes see on a stellar deal. I continue to rationalize pulling the trigger to myself because of the area that this property is and should be relatively safe for that fact. The University of Pittsburgh, Duquesne, and Carnegie Mellon are not going anytime soon and I feel more comfortable getting my hands on a turnkey property in a proven area for a premium rather than rolling the dice in a risky up and coming community.

That said, I'm still looking for experienced investors to shoot holes in my plans. In my current models, counting my current rent as income I'd reinvest in the property, I would cashflow at least $150/month when conservatively escrowing 10% for vacancy, 10% for CapEx, and 10% for a future property management company. In many cases, if you were to reduce or eliminate those figures, the monthly cash flow could be anywhere upwards of $600 monthly.

This would be my first deal and there are obvious advantages to house hacking a place I currently live in and can guarantee occupancy for the next 18 months. That said, the cash flow numbers are not phenomenal but I am confident that I would be getting the property around 10% below what it would currently sell for on the market (based on my MLS sold comps within the last 3 months) and would be able to play landlord in a few years if need be. The idea of jumping in for a turnkey property around 300k in a great area still scares me a little but based on all of my numbers I think it will be profitable going forward.

Any thoughts or suggestions from the BP family as it relates to calming my fears for not solely looking at cash flow numbers and evaluating a deal in other respects. Thanks!

Cam

Hey BP,

So you may have seen some of my other posts on here recently but I'm currently close to a deal with my current landlord to purchase my single-family house in the Southside of Pittsburgh.  This is an extremely strong rental area, my properties has many additional high end amenities that comparable properties do not and I do not foresee the rental landscape changing much after I move in the coming years.  Myself and my roommates will definitely be there for the next 12-18 months and I will be using their rent as income to cover the mortgage etc.

I have put together many models, all of which cash flow in this scenario but aren't the eye popping number you may sometimes see on a stellar deal.  I continue to rationalize pulling the trigger to myself because of the area that this property is and should be relatively safe for that fact.  The University of Pittsburgh, Duquesne, and Carnegie Mellon are not going anytime soon and I feel more comfortable getting my hands on a turnkey property in a proven area for a premium rather than rolling the dice in a risky up and coming community.  

That said, I'm still looking for experienced investors to shoot holes in my plans. In my current models, counting my current rent as income I'd reinvest in the property, I would cashflow at least $150/month when conservatively escrowing 10% for vacancy, 10% for CapEx, and 10% for a future property management company. In many cases, if you were to reduce or eliminate those figures, the monthly cash flow could be anywhere upwards of $600 monthly.

This would be my first deal and there are obvious advantages to house hacking a place I currently live in and can guarantee occupancy for the next 18 months. That said, the cash flow numbers are not phenomenal but I am confident that I would be getting the property around 10% below what it would currently sell for on the market (based on my MLS sold comps within the last 3 months) and would be able to play landlord in a few years if need be. The idea of jumping in for a turnkey property around 300k in a great area still scares me a little but based on all of my numbers I think it will be profitable going forward.

Any thoughts or suggestions from the BP family as it relates to calming my fears for not solely looking at cash flow numbers and evaluating a deal in other respects.  Thanks!

Cam 

Hey Loretta, I'm an agent with Berkshire Hathaway and have done a few sales related to REO properties. I'd be happy to help you if you're looking for some in the area. Cam