All Forum Posts by: Brian Burke

I don't really need anything, because if the initial numbers check out, I'm going to have someone from my team go take a look at the property. That said, if you sent pictures or a video, it wouldn't hurt.

@J Scott, I couldn't have said it better myself. Absolutely correct.

Did you do a stock buy/sell agreement when you incorporated? If so, the process should already be dictated by that document.

If not, perhaps he would consider selling his shares to you, at a discounted valuation of course, and finance the acquisition of shares (like a seller carry back but with stock instead of real estate). You could make payments to him from the rental cash flow, with a balloon payment at some point in the future. At that future time, you could do a cash-out refi or sell one of the properties to make the balloon payment.

The bad part is he can't get off of the loans until you refi. That might be a deal breaker for him.

Susan,

If you even need an LLC (which you most likely don't but that's another topic) you can file the articles yourself if you carefully follow the instructions from the SOS. If you are trying to save money, you don't need to pay a registered agent, you can be the RA yourself for free. You lose anonymity but not liability protection if you do so.

The savings end there. You still need to pay an attorney to draft a proper operating agreement. Don't trust "fill in the blank" boilerplate stuff.

@J Scott is right, but I will add that all buyers from wholesalers will have one desire in common. Profit. If your deal is far enough below current value, you will have no problem selling it. If the ratio of price to rents is favorable enough, you'll have no problem selling it.

The most common reason that I reject a deal from a wholesaler is that they overestimate the ARV, or underestimate the repairs. In either event, it produces the same result...not enough margin. No margin, no deal. This is much more important to me than bedroom count, type of construction, etc.

Guru Srini, the laundry companies had to get clever because it costs them money to place these machines at the property, and people were probably canceling contracts causing the vendor to incur costs to retrieve machines, etc.

The way they got around this is to structure the laundry contract as a lease. A fee-for-service type of contract (such as your landscaping maintenance contract) can be canceled upon notice by a new owner. A laundry lease, much like a tenant's lease, cannot be terminated unless one party to the lease defaults on the terms of the agreement. When you purchase income property, you purchase it subject to tenant's rights, and in this case one of your tenants is the laundry company that leased your laundry room.

There is likely no way out of the lease unless they violate it, but you should carefully review the terms to see if there are any other termination clauses.

I've haven't had any significant problems with Coinmach, and I'd rather not buy my own machines nor have my on-site staff handle the retrieval of the cash. Having on-site laundry is an amenity so I wouldn't want to eliminate it.

I've heard of an old trick (but haven't actually seen it happen myself) where prior to listing a property on the market, the seller executes a multi-year laundry lease for a large up-front fee, then sells the property. The unsuspecting buyer sees the trailing laundry income on the income statement and counts it when valuing the income stream, then after closing realizes that there is no laundry income anymore. That might give them cause to pursue the seller for fraud if it was not disclosed. I'm not saying that is what happened in your case, perhaps the seller just forgot to send you a copy of the lease, and perhaps you forgot to ask. Lesson learned: Always ask the seller about the existence of a laundry lease when purchasing multifamily property.

Laundry contracts are oftentimes structured as multi-year leases, and it's not unusual for an owner to be paid an up-front fee for the right to lease the laundry room. You are very likely stuck with the laundry lease until it expires, but you should carefully read the contract.

The seller should have disclosed the existence of the laundry lease during your due diligence period. It should also have been a requested item on your purchase agreement. Sometimes the leases are recorded, in which case it would have shown on your preliminary title report. Did you provide the seller with a due diligence item list? If you did, did the request ask for all service contracts? If you asked for them, and your purchase agreement required them, and the seller failed to provide it and even neglected to tell you that it existed, you might have cause to pursue the seller for damages, if you actually have been damaged.

More often than not, the lenders require that the property be listed on the MLS in order for them to approve the short sale. Could you arrange for the agent to step aside and work the deal yourself? Sure, but you might get a better outcome if you just submit your offer to the agent.

That said, if you were to convince the agent to agree to step aside, the owner and agent would sign a cancellation of the listing agreement. The agent would provide this form. In most cases, the cancellation is by mutual agreement of the owner and agent, thus there would be no form that you and the owner could execute to cancel the listing contract.

There is some good advice in the earlier responses in my opinion, FWIW.

Right after high school, I took an interest in real estate investing. Looking back, it's kind of funny because I had no money, came from an undercapitalized family, and looked even younger than I was. I took a business law class at the Junior College, then decided that I'd rather invest in real estate than go to college. It took me ten years to get the business to the point that I could quit my job and go full time.

Still no degree from formalized education, but I have an MBA from the school of hard knocks. Good judgment comes from experience, and experience comes from bad judgment. I made some mistakes along the way (who hasn't?) and those mistakes cost me more than an ivy league degree, so whether you get a degree or not, your education will cost you.

Is there value in a degree? Sure there is. A lot of people that work for me have a degree. :)

Rehab costs vary widely by area and property condition. If you buy a newer house that only needs paint and carpet and you spend $50K, you need to check yourself into rehabbers rehab. You have a problem!

If, on the other hand, you have a 30 year old home that has been abused and neglected, has original avocado and yellow decor, a chopped up floor plan, outdated mechanical systems, etc, get out your checkbook and prepare for big numbers.

Is it possible that some rehabbers can do the same work you are doing for less? Perhaps. Look for ways to make your dollar stretch further. However, you might be right in line with other folks in your area. Just dig, dig, dig into your spending until you hit rock bottom pricing. Doing a lot of flip volume helps, too.

If you have stretched your dollar and you still think you are spending too much, try a lighter rehab on your next couple of projects and see how you make out. Remember that you rehab for profit, if you spend an extra $10K, you want to sell for an extra $20K. Test it out and your bookkeeper will answer your question after all of the numbers are in.