All Forum Posts by: Dave Kush

Good morning!

I recently put a duplex under contract. I have experience as a landlord, but this is my first time buying something that already has tenants. My lawyer told me I could handle some of the tenant items myself, such as the leases and rents. For them to do it would be another $1,000. My question is whether this is something that is easy enough for someone who is careful and diligent to take care of themselves or if I am just way better off paying the lawyer. I don't mind doing the late work provided it's procedural, but I'd rather pay the lawyer than create a problem for myself.

Good afternoon!

I am purchasing a duplex and I'm having the inspection done. I'm familiar with this process from single family homes, but wondering if anyone out there has specific questions or tips they would recommend for a duplex situation. Obviously, we'll be looking very closely at utilities and common spaces, but would welcome any other feedback or advice. Questions I should ask the inspector or things I should specifically request?

Hi Edson!

I have some experience with this, but in illinois.

I once bought a property that had a smaller house in the backyard, commonly referred to as a coach house, that was called a legal non-conforming structure. This meant that it was not code conforming, but they wouldn't force me to knock it down since it was already there.

That said, because it was non-conforming, should it burn down or something like that, the local municipality would not allow me to rebuild it. For that reason, the bank wouldn't loan money against it. I had to value the property based on one house rather than two. They also would not count the income from that property in my dti.

So all that to say, the adu conversion is one issue, and unfortunately I don't have a ton to offer there. But what really caught my eye was the zoning issue. It may be okay where you're at, but do a lot of research on it. Sometimes you can buy a property and solve a problem, but other times when you buy the property you merely inherit it for good. 

Hi Zack,

I think a lot of us are in the same boat. I have traditionally invested in single-family homes and I'm looking at multifamily now. In both cases, the interest rates are making cash flow very difficult. I also started looking at short-term rentals, and I found the same thing. In fact, in all cases, I found cash flow was possible in that 6 to 7% range still, but it got a lot tighter once the rates hit eight. The asking prices have not caught up yet. They may or may not.

I agree, it is not a good idea to take negative cash flow. I suspect that in the short run it's just going to involve more networking. For example, I am looking at a building that I am hoping to purchase in the next couple of weeks, but either way, I'm going to start sending letters to all of the other landlords in the area and seeing who wants to go out to lunch. It may take a while, but I'm hoping I can get to a point where when one of them are willing to sell, perhaps they will call me first. I would love to hear what other people suggestions are for finding off market deals or other ways to locate cash flow as well. Thanks for posting.

If you have already accounted for the repairs and things like that, I would suggest banking the positive cash flow for the next purchase.

I schedule all showings on the same day to avoid the back and forth and so it's not so much of an issue if they don't show, which is pretty common. I also have them complete an extensive application first and then invite. Weed out the tire kickers.

Hi Carlos!

I have never bought a property that's already rented and managed, but it would seem to me that any good property manager, for their own sake if nothing else, would have detailed records on tenants payment histories. I would not be at all bashful about asking for that info! 

That said, as a prospective buyer they probably will not share anything very detailed, and maybe nothing at all.  

if you have a good rapport with the person, sometimes asking for what they can share with you "off the record" will yield more information. I think what's more likely though is that if you get under contract you can get more of that information. And, probably best to just plan a little reserve if possible for dealing with issues that may arise based on the quality of the current tenants. 

Other people may do this differently, but my advice is that if you aren't willing to own it for 10 years, don't own it for 10 minutes. And I personally learned the hard way that applies equally as much to how you own as it does to what you own. In other words, there's no guarantee that interest rates are going to go down in 2 years, they could even go up. If that's the case and you can continue to float the difference, that's okay, but do you really want to invest all this money into something that's cash flow negative? Is the appreciation going to be strong enough to cover it?

If you buy it right, it won't matter what happens with interest rates later. The numbers have to work right now.  And that's coming from somebody who once bought a property with a plan to refinance it later, but ended up having to sell it short for a fraction of its value.

I do have a series llc, but it's not in texas. For that reason, I'm going to skip number two. 

Regarding number one, while it may or may not be legally necessary (not sure), I think it's a good idea to have a separate account for each entity. I always operate under the principal that each entity is its own business. In the case of a successful tort against you, you might regret commingling funds in a single bank account, but I can't see how keeping them consistently separated would ever burn you, even if it is a bit less convenient.  

Yes, you can usually get PMI removed if you have enough equity. Contact the mortgage company. They will probably want to see a full appraisal, at your expense.