All Forum Posts by: Chad Benedict

@Corey Pascuzzi

As others have said, as long as she can continue to pay rent, she's meeting her obligations under the lease and you should work with her. The fact that she's being proactive and communicating with you, and getting financial help from family, is a big plus. Many tenants just stop paying and don't say anything to the landlord until it's time for eviction. I certainly wouldn't let the tenant stay if she can't pay rent, but considering she just lost her job I'd try to be flexible about if and how she needs to move out.

If I were you I would give her a call toward the end of the month after Thanksgiving to see how things are going. She'll likely volunteer some info about December's rent or where things stand. If she does need to move, I see no reason not to work with her to let her out of her lease early if you're able to find someone to take it over as soon as she leaves so you don't have any vacancy. I've had to do this twice when I was a renter myself when changing jobs for various reasons, and the landlord/property management companies allowed me out of my lease a couple of months early because they found someone to take it over without vacancy (obviously I would have still paid the rent if they couldn't have found someone). I know January 1 isn't the best time for a turnover, particularly in Massachusetts, but it's not terrible.

Regarding the security deposit as some people have mentioned, make sure you follow your local laws when it comes to deductions for damages and/or unpaid rent. Massachusetts is a tenant-friendly state and you don't want to do anything that would raise any red flags. If she's willing to move out and you can get another tenant in there, and there's no damage, I'd give her full deposit back to her. Sometimes it's good karma, and you really haven't lost much, if any, money in that case. In the end you're running a business and you need to do what's best for your business, but it's also important to remember that these things just happen sometimes.

@Hersh M.

Sure, I figured an extra $75 per month or so for flood insurance, which is just an estimate. That means less cash flow. Hard to know without getting an actual insurance quote. I also assumed that the rent rates would be on the lower end of comps as renters might not want to live in a house in a flood zone, which would also affect cash flow. And I assumed the property value of the house would be maybe 10% lower than similar comps not in a flood zone, but who knows? The market in these areas remains so tight that I think the houses still may have gotten market rents and could have even achieved the same ARVs as non-flood zone homes. Maybe I was being too conservative, but it didn't matter in the end.

@Fred Heller is right in his explanation of the flood concerns and percentages. I'd probably be okay with a 500-year flood plain, but the 100-year is a little riskier and insurance is more expensive. I lived in Houston for a long time and know exactly which areas will flood and which won't, doesn't matter what their flood zone designation is. Sometimes the government also expands flood zone designations to areas that likely won't flood in order to force more homeowners to buy flood insurance, thus spreading out the government's risk and replenishing flood insurance funds (or so I've been told). Even just having a house built up a couple of feet from the road can make a huge difference.

I'm not trying to downplay the impact on those individuals who have lost a home (or worse) in the weather this year, but the media often makes it sound apocalyptic, which it's really not. Insurance rates may go up, but that can happen anywhere. There are earthquakes, fires, and mudslides out west. Drought in the southwest. Hurricanes and heat in the south and east, and even in New York. Nine feet of snow in New England. Bad weather isn't limited to one area of the country. You just have to factor that into your numbers on any deal and whether that affects insurance rates, cash flow, property value, etc., and then make sure you buy it at the appropriate price.

I just looked at two houses, both built in a 100-year flood plain behind a creek (although they have never flooded), and I adjusted my numbers based on that. Didn't get either one as the homeowners wanted too much, but that happens.

Now would I buy a house or lot that had already been destroyed by a flood once before? Probably not, but I'm sure there are investors who would.

@Lee Warren is good, I've used him before: www.prospectinspectors.com

Always live if you can, but sometimes that's not an option -- either you're on the other line, or meeting with another seller, or in the car. I hate playing phone tag if it goes to voicemail as it can be hard to get back in touch with them. Just make sure you have a way to capture their phone number even if they don't leave a message. I always try to return the call ASAP. What @Devan Mcclish said is true, if they're actually a motivated seller and you don't pick up, they may just call the next buyer in their stack of mail.

@Mike Cowper I agree that those just aren't motivated sellers. When someone says that to me I'll ask a couple of follow up questions, but I usually try to get off the phone as quickly as possible.

When someone calls I'm really only trying to answer two simple questions for myself: 1) Is this a motivated seller? and 2) Does it feel like there's a deal here?

I've found if you start the conversation with, "Do you have a house to sell?" then you're setting them up to respond "At the right price." I tend to start with a more open-ended question like, "So what's going on today?" or "What's going on with the house?" or "What can I do for you?" just to get them talking more.

For follow-up questions you can ask things like, "Do you have any other offers?" or "Have you contacted anyone else about selling the house?" If yes, then maybe they are serious about selling, although they still may not be motivated to sell at a discount. You should also ask something along the lines of "If I don't buy your house, what's your plan?" If they plan to stay in it, then they're just not motivated.

If it does seem like they want to sell but still want top dollar, I usually say something like, "Well, if that's the price you want, your best option is to list with one of our realtors and sell it like most houses are normally sold. This means signing a listing agreement, making the house available to be toured by potential buyers, and then paying realtor commissions and closing costs which can be anywhere from 6-10% of the final sales price. Does that sound like what you want to do?" If no, then you can explain a little more about what you do buying houses off market to see if there's room for a deal. If yes, then refer them to one of your realtors and collect a referral fee for it. Just be honest with them about what is best for them in their situation, and they'll appreciate it.

But as I said, I usually get off the phone quickly if they're not motivated. And when mailing to absentees in particular, you'll get a lot of those calls. Just be sure to always remind them that you pay referral fees as well, so if they know anyone who needs to sell a house, ask them to send them your way and you'll pay them if you buy it! And as you mentioned follow up with them in a few months to see if anything's changed. You've got their phone number now, which is half the battle.

Chad

@Lenna Groudan

As with Guy, I have to disclose that this is NOT legal advice and I am not acting as your agent. I've also not reviewed your specific contract, so I can only talk in general terms. This is for informational purposes only.

What you want to avoid is any ambiguity about what happens next. If there's a problem with title, you should register those objections to the title company and seller within the time period specific in the contract, and then the seller usually has a predetermined time period to try to cure those objections. If they can't, then the contract terminates, and you should get your earnest money back.

It's entirely possible the closing date may extend automatically based on the contract to allow the seller time to cure those objections without needing any extra paperwork. Or you and the seller can amend the contract to extend the option period to give them more time, and you would provide additional option money. Either way make sure whatever you decided is documented in writing with the seller and use appropriate contracts as necessary. Again, you just don't want ambiguity.

The bigger issue is that if the two sellers inherited this property and it didn't go through probate, which is what the title company is objecting to, it's going to take a lot longer to cure the title if they have to open probate or do affidavits of heirship. Find out exactly what the title company needs for clear title and to approve title insurance, and then communicate that to the sellers -- or really, the title company should be communicating that once you make your objections. Then decide if you want to extend the contract at the current price for ever how long it takes, or if you want to cancel it or let it fall through.

Again, this is NOT legal advice. I encourage you to consult a real estate or probate attorney if you have questions, or find a local realtor and offer to pay them a flat fee to advise you on the specifics of your situation.

Best of luck!

Chad 

@Michael Kaufman Also watch out for the old Federal Pacific electric panels. I imagine that's what's in the house and noted in the report. People have different opinions on whether they really need to be replaced, but some insurers won't insure a house with a Federal panel if they're aware of it. Also depends on if you're living in the house or renting it out (you might very well choose to live with the old panel, whereas there's more liability if you put a tenant in there and don't replace it).

Chad

Hi @Aaron Crow,

I hang my license with United Real Estate. They're generally pretty good, although I'm not sure they have a ton of experience with investors. I'm just an investor myself, not a traditional realtor. Feel free to PM me and I'm happy to chat.

Chad

@James Wise I know Ohio in particular has been very direct about treating wholesaling as an unlicensed activity. From my understanding, other states have different interpretations based on whether or not you have equitable interest in the property via a contract (and I've learned lawyers have different interpretations as well). How you advertise the property/contract is also important and can obviously get you in trouble. Either way, you're right, getting licensed is a good idea, and too many people start wholesaling without understanding the legal ramifications. I got my license specifically to avoid any potential issues raised down the road.

(Disclaimer: none of my posts on this thread are meant as legal or financial advice.)