All Forum Posts by: Lincoln Coverdale

I am purchasing a property and using CoreVest Financing. CoreVest requires that all properties in a LLC be owned out right or financed with CoreVest. We currently have a 2 properties in the LLC we are purchasing the new property under. Both of the properties are financed by a third party. My plan was to move the existing two properties out, but was told by CoreVest it may take a length of time for the properties to come of the LLC's report they pull, preventing us from closing the current deal on time. CoreVest uses a service called Clear to check our LLC. Does anyone have experience with this type of situation and how long it takes after a property has been transferred out of an LLC before it comes off for reporting purposes?

I know we can form a new LLC for the purchase, but the bank has taken 30+ days to accept our offer and the property is scheduled for Sheriff's sale in a few weeks and I am concerned we won't get bank approval for a new purchaser before the Sheriff's Sale.

TIA

Lincoln 

@Priya Thomas - the deal fell apart.  Thanks for the follow up

@Bradford Clark - The margins were thin to begin with.  After stabilization I would expect $6K-$7.5K profit a year on a $160,000 property.  It will take a few years to make the Cap Ex investment back, so breaking even for a few years to get there already (accounting for maintenance and vacancy, which should be much lower than we have budgeted).  Adding the mold costs it would likely not cash flow much for 4-6 years

@Brandon Hobbs - Great input and much appreciated.  

• You are correct, we suffer from damp basements in this area and without proper preventative measures and regular maintenance, almost all basements are wet to a concerning level.  In this case the moisture content in the block was as high as 30%.
• Initial samples were collected by our general inspector, who is not affiliated with the remediation company.  The Remediation Contractor would collect the samples for the post remediation baseline, but all results are run through Pro-Lab.  I've never considered it a conflict of interest because the lab is independent, but a valid point to keep in mind.
• Your point is on target.  The visual assessment in the basement found plenty of mold on the floor joists above.  However, on the 3rd floor (under the roof line, with only baseboard heating) there were no obvious signs.  Making it very hard to pinpoint the source or viability of the results.
• The costs of the remediation  is on par with what we find in our areas and is for surface treatment only.  We are responsible for the bigger project of getting and keeping the areas dry.
• It is the CYA that has me concerned.  The lackadaisical response from the seller does not instill confidence that they will take the right measures and notify the tenants and start corrective measures.

Thanks again, great input. 

@Kyle Schlosser - that's how I felt about it too. From the start we have made it work for them. The existing tenenat didn't want another inspection (they had a deal fall through previous to ours), so we accepted the previous inspection report for that unit. Agreeing to buy having never seen one of the units. Another unit was vacant and we requested no occupancy before transfer unless it was on our lease, theirs is very minimal and not comparable to ours. They had an applicant and proceed with the lease with the new tenant moving in the week before closing. This morning I sent the mutual release over and all of the sudden they are willing to split the cost of the remediation. Weird how that changed so quickly.

@Joe Canfield - thanks for the input. Aspergilus was found in both locations. In the basement it was found on the exposed joist for the first floor. This is not our first encounter with mold. I am familiar and comfortable with remediation. Still baffled by the lack of response/action from the seller.

@Aaron Howell - Long term it is not a big deal, but there is already about $4500 in Cap Ex to be done immediately.  The payback just keeps getting pushed back.

@Jim Cummings

@Jim Cummings - As stated above, the payback is getting pushed back quiet a bit.  It's not just the $1500.  It's going to take more than 3 years to make back the initial Cap Ex items.

@Russell Brazil - You are correct.  For those reasons we do air sampling with an outdoor control.  The mold was high and not the good kinds you find in natural environments.

@Chris C.

@Chris C. - Yes, they would definitely have to disclose to another buyer.  I'm wondering about the current tenants?  

We can do the remediation ourselves.  We typically do another air sample test when done to establish a clean start. 

We have a 3 unit under contract in the Cleveland Ohio area and found mold in the basement (unoccupied common space) and the 3rd floor (occupied space).  We brought in our mold remediation contractor and had an assessment performed and a remediation estimate written up.  The cost was just over $1500.  We sent over the test results, assessment and remediation estimate and asked the seller to split the cost with us.  The seller stated they would not, indicating they were not putting anymore money into the deal.  

My questions are:

  1. Does the landlord have an obligation to disclose to the existing tenants?  I know in Ohio you do not have to disclose Mold to potential tenants when they apply, but the law is unclear on existing tenants.

  2.  If we choose to proceed with the purchase what kind of protection or hold harmless do we need to put in place to make sure we are not liable for any tenant recourse.

  3.  It seems to me as a landlord you can not ignore material information about the condition of your property, particularly an item like mold.  Further, I would think they would need to address the mold regardless of the sale, so why not work with us and split the cost?  I even asked if they had a less expensive contractor to try to keep things moving.

Thanks in advance.

Junior, I live in Shaker Heights and invest locally. I’m happy to answer any questions. Right off the bat I’d say $30-$60k in Shaker with point of sale is going to be tough. Escrow and repairs will easily set you $60k it above, even if you buy low.