All Forum Posts by: Devin Marlowe

Hi Everyone,

I have had my eye on a commercial property located on Vancouver Island, in a smaller area slated for growth in the coming years. As far as I know, its a 6 unit residential with commercial space on the ground floor. The building began construction in 2011 but stalled in early 2012 and has been sitting in its nearly completed state since. I'll attach a picture of it below. 

I, with great difficulty, tracked down the owner of this property and got a pretty good understanding of what happened to it. There were/are 5 lawsuits against the owner for failure to pay. Various contractors and companies have filed against the owner for sums from $8,000 - $40,000.

I spoke with the owner and asked that he meet with me and talk about selling me the property to finish with my small team. We are more geared towards residential single family homes, but this building seems to only require some minor exterior work to be completed, clearly with more investigation needed.

Obviously the owner has had some legal trouble, and is agreeable to selling the property. The first time I spoke with him he said "Sell it? Sure. How much are you thinking? Make me an offer." I told him I would need to consult with my team and look at the place inside before coming to any kind of offers.

Im hoping to get the opinion of members here on how you might proceed in a case like this. I think I will need some diplomacy and some delicacy here as this guy has been burned by this building and likely wants to get rid of it and make as much as possible. There are also going to likely be a few legal snags that will need working out.
How would you approach finding a number for an offer in a case like this? Does anyone have experience purchasing a building that has gone through legal issues like this one? 

Thanks very much everyone, this community is an absolute godsend for me.

-Devin  

@Joyce Tavares   Im actually not too concerned about the landlord side of things. I have worked for 8 years in residential care facilities with mental health and addiction clients, so I've probably seen and had to deal with some of the worst of the worst as far as tenants go. 

I said I would walk away from this property, but the landlord is really desperate to get rid of it, so I had another look around with my potential partner. We're going over the numbers again and putting together an offer. If he doesnt take a serious reduction to the asking price, it just wont work. Still working out exactly how far to drop it though. 

Has anybody any experience offering about 75% of the asking price on a property? I imagine he'll likely try to fistfight me, but going much higher than that doesnt make sense based on the work the property needs. 

Thanks everyone for the advice. I've done all the mental gymnastics I can on this property, and it looks like walking away is the only choice. 

Hopefully something comes along that isn't such a mess. 
Im sure I'll have more questions as I get deeper into this industry. 

The meeting with the city concluded and there was some updates to me that aren't great news. First, the owner admitted that he built the rear carriage house in 1989 without a permit. For the city to allow it to stay, it will need an inspection to ensure it is up to building codes - opening the walls and the ceiling etc. Not great news, but I'm more concerned that the loft which is connected to one of the upper suites brings the house to 4 floors, and therefore is subject to fire codes that require a sprinkler system for buildings 4 floors and up. 

The city recommends that the loft be blocked off permanently, and that the carriage house be removed. Both these areas were in better shape than the rest of the house and I'm wondering if anyone has experience pushing back against these kind of things. 

The house is on the market for $750k. I'm on the fence now, moving forward or not on this deal. If I'm to move ahead with this, with the removal of 2 of the higher value suites I will have to adjust and make a substantially lower offer, which I'm having trouble calculating and landing on a number.  Any tips for calculating a lowball offer?

Thanks again everyone, this is a huge help. 

@Roy N. 

Wow, thanks for the detailed response.

Yep its in James Bay, about 2 blocks behind the Legislature. The building is mainly set up as a rooming house, although the owner calls them housekeeping suites (they don't look like they've had much housekeeping). They are basically bedrooms with a hotplate and a shared bathroom. 
The longterm plan would absolutely be to renovate, remove some walls and divide the main house into 2-3 bedroom units that would command higher rents and a better clientele. 

The property was inspected by the city not long ago and a copy of the report has been given to me. It seems that the only major concern they had was the firewalls needing to be installed in the basement and the removal of a small shed outbuilding that extends past the property line. 
I have a meeting with the city this coming Tuesday to confirm this and, like you say, get in writing an assurance that no other legal surprises are waiting. 

Just yesterday I have found a partner here in town who owns a contracting business and has access to much more capital than I have. So it looks like I can avoid having to use secondary private funding which is a huge relief. 

I'll also look into a buying agent to help with our side of things. 

@Colleen F. 

The utilities are renter-paid for about half of the units. I would try to update the carriage house for a higher rent right away. Its a large space, about 1000 square feet, and a few modern fixtures and some paint would really make the place nice. 
All the units are currently occupied though, I have to do some more research surrounding the protocol for evicting residents to rehab units. 

Hi everyone. 

I am new to the forum but I've been putting in a lot of time going through the posts and learning as much as I can about real estate investing. 

Ive been looking at a property close to where I live here in Victoria. Its a bit of a unique case, and being that I'm new to this I'd really like the opinion from some more experienced investors. 

The property is located in a high-end part of town, in a heritage residential area about 3 blocks from the edge of the downtown core. Other houses around it are immaculate and of the same era, a very affluent community. This house is larger than most and is frankly an eye-sore. Overgrown garden, broken down cars in the driveway, garbage bags being used as window-blinds.  
It is listed on mls for $750,000. The average single-family home price in Victoria was $700,000 in 2014. 
Built in 1910, the house is 5500 square feet, a grand old mansion that has been converted into 10 units. The units are tiny, many of them sharing a bathroom. The tenants are all very low income but being that there are 10 units in the house, and a detached carriage house means the property nets $6100/month. 

A building inspector from the city looked at the property and mandated that basement suites, two one-bedroom units, be divided by a firewall and had their ceilings fireproofed as well. I would, over time, update the suites and repair the building to restore is former glory. 

I am a recent grad with an urban planning degree, but that means Im lacking the capital for a down large downpayment and therefor creative financing is my only option, and the owner has agreed to $100,000 in vendor financing which would have to be met with a traditional mortgage and secondary private funding. 

I would really like some experienced opinions on whether or not this would be a worthwhile undertaking. I realize going into such a large property without a substantial downpayment is risky, but I think the property has a ton of potential and I read somewhere that history favours the bold. 

Thanks very much BP, this community is incredible.