All Forum Posts by: Edouard Pierre

@Account Closed 

Thank you very much for your suggestions! I have already started getting the assignment of rents from the current owner and will be meeting with each tenant to get estoppel agreements signed indemnifying me of any security deposit claims. 

@Russell Brazil That's true. Some of the tenants are behind on rent and made it obvious that they were hoping to get this lawsuit finished so they can pay rent with the proceeds. If I pursue any evictions I can see this getting a little messy. Oh the fun! 

@Russell Brazil Would you recommend I nip it in the bud and refund their security deposits from Day 1 so they can pull their class action lawsuit? Of course this would have to be in writing so I don't give them money and they continue the suit. I spoke with the tenants and already have a good relationship with them...what I do know is they're seeking security deposit x 2 (plus attorneys fees I'm sure when they realize how much they are). 

Any recommendations on how to protect myself? Other than this issue this is a great deal well under market value with great value-add opportunities. Thank you Russell!

Hi BPers! 

I'm set to close on a 9-unit building in Chicago in the beginning of next week. Everything is as smooth as can be for an off-market estate sale (judge involved), however there is definitely a point of concern that even my attorney isn't 100% sure about. 

In the last 10yrs there was a person/investor that has an installment contract for deed on the property, they stopped paying their payments, and also collected security deposits from the tenants. This person has now waived all claims and rights to the property and it has been recorded against the property, however the tenants (4 out of 9) have pursued this person in a class action lawsuit. It's been denied 3 times by the judge but they're still fighting it. The "owner" at the time claimed that he no longer has the security deposits because the tenants were behind on their rent payments. Besides this lawsuit this person is no longer tied to the property...it's back in the hands of the estate partners. 

All this being said, I want to cover myself as much as possible from this. I'm getting a letter certifying that I have not received any security deposits from the estate and that the estate itself never had security deposits to give me. I'm going to have the tenants sign estoppel agreements, however my attorney tells me that the tenants may come after me as new owner of the property. 

Any and all advice would be appreciated! Thank you!!!

Hi BPers! 

To keep a long story short I'll get to the point. I'm under contract on a 9-unit building in Chicago. Found it off-market and it's an estate sale. It's a corner building next door to a 7-unit building I acquired last year...it couldn't have worked out better in my opinion (I'm a broker and was asked to list it so of course I bought it cheap..the luck!). It's been mismanaged for a while and there are 4 units out of the 9 that are occupied. Rents are under market value at the moment and all but 1 tenant are current on their rents. 

I'm aware that "re-training" (as @Brandon Turner would say) will be part of the work involved in getting this property churning at full efficiency, however I think I have more important decisions to make (see below). 

As we are doing our due diligence (FOIA, Estoppels, etc...) I'm getting contractors lined up to get estimates for the rehab. My experience rehabbing the next door 7-unit building wasn't terrible, however it was done in the timely manner I had expected. 

MAIN QUESTION (1 & 2):

1) Besides due-diligence...what would your first moves be in establishing yourselves as the new owner (learned not introduce myself as the owner but rather property manager)? What would be your advice on increasing the rents (5yr+ tenants and very under market)? 

2) This building is being heated by 1 big gas boiler and is relatively new. Bill is on a budget plan and cost $1500/month year-round ($166.66/unit). Installing individual high-efficiency furnaces including ducting would cost around $5,000 per unit and result in me not having to pay the bill year-round. Doing the math isn't that difficult in terms of return on investment but the biggest question in my mind is...is it worth it? This is a C-class property and heat included is sought after. I'm unable to come to a conclusion on whether it would be more financially advantageous to keep what's there since it's not broken and increase the rents accordingly rather than add on such a project. To give a little more perspective:

Each unit would rent for:

$900 = individual furnaces

$975-1025 = keep boiled/heat included 

I assume most will need more information on the building and its financials to really advise...ANY advice is a huge help. Thank you!!!!

I just ordered several signs from Fast Signs. $35 each for aluminum 12 x 18 with 4 holes to screw into the brick. 

My question is can you use a PO Box in another state if your partner is located there? 

Hi BP-ers!

I'm looking for a lender to refi two properties in Chicago. Both are 100% owned and were paid with cash less than 8months ago. First is a 2-flat (duplex for some) that's fully rented and cash flowing very well. The other is a 7-unit building undergoing some rehab and will be done in 1-2 months. This will cash flow very well once fully rehabbed and without vacancies (easy to rent in the area).

The most important quality in a lender is being able to refi without any seasoning of the purchase - meaning not having to wait 2-3yrs to be able to pull out the current appraised value of the property since I bought them both well below market value. I have know of some lenders but they keep telling me that I have to season the buildings since the purchase happened less than a year ago.

Thank you! 

I whole heartingly agree with @Crystal Smith . I just closed on two multi-family buy & holds with 27% Cash on Cash return. Both off market but there are some sub markets in Chicago that look real nice no matter what your style of investment is. All about research, due-diligence, and patience. Don't get caught naked when the tide goes out ;). Low inventory, low interest rates, and high sales prices can only last so long...

I wouldn't go as far as to say appraisals are a chance of luck or a crap shoot, but they can be a bit unpredictable. The appraiser is going to use like-kind properties with the most similar charecteristics. The radius in which they search within is subject to the appraiser from my experience but if there are 2-3 properties close by and similar than those will be the chosen comps. They rarely go back farther than 6months. The biggest risk with an appraisal is whether or not that appraiser is taking condition and upgrades to the property in consideration. Some say a new $50,000 kitchen is really only worth $25,000 and some say a finished basement in a 2-flat is below grade and won't increase the appraised value (it can work the other way and to your benefit as well but that happens rarely).

You probably won't meet your appraiser prior to them coming out to the property. You may want to prepare (or have an broker do it) several comps you had in mind and staple them together. Don't make it official or anything too put together...just MLS sheets. Warning: Be very careful when giving them your comps during the appraisal. Try a sniff them out before doing so because some can claim that you tried to "influence" them during the process. It's been reported much more often since the recession when appraisers were taking a little cash under the table (shhhh). As long as your cool, calm, and natural then it's all well and good.

All in all...they're going to use facts. The problem is every appraiser looks at them differently and that's where the unpredictability comes into play...human 'error' for better or worse. 

@Syed Lateef I guess if you bargain a bit ABT would be a good bet but I find it hard to believe they have the best pricing. I'll look into a bit. I have a new 7unit and a new 2unit...so I was thinking the 7unit gets the laundry service that @Kathryn Daniel spoke of and the 2unit will get used (in good condition of course) coin-operated machines. Thanks!