All Forum Posts by: Edward Liu

This is not unusual.  Personally I brought a 6-unit condo building for below market price.  To me, it is a 6 unit multi-plex, but it was listed 6 times as 6 individual condos from the same building.  It was on the market for at least 6 months.  If this was listed as 6 unit multiplex with clear income statement, likely price would be at least 30% higher.   Funny part was owner is the real estate agent who simply don't touch commercial and never reported income on these units for 5+ years.

Try to take advantage of it.  Don't mention anything to the listing agent.  Try to offer lower price even if existing price is already good.  Only disadvantage is they might not have good expense and income info.

Upstate NY, Hartford CT and surrounding, Providence RI all have fairly good income small multi-family.  Many people also invest in Philadelphia.  They are not very far from NY.

Personally I have success in Hartford and Providence as out of state investor.

You should check regulations from Menlo Park and see what it will take. As someone who lives in Palo Alto, your plan is nearly impossible to carry out, at least in Palo Alto, unless you do large development, such as convert an hotel to multi-plex. Now days, most bay area cities are anti expansion, some cities even require vote by neighbors to allow split of lots. I know 3 examples by friends who tried to split lots (to build 2 SFH) and failed, 2 in Palo Alto, 1 in Redwood City.

Another thing to consider is Duplex has lower resale value vs. SFH in many areas around here. In West Menlo Park, nice 4 bedroom SFH probably cost $3.5M+. Not sure how many investor would be willing to pay $3.5M for a duplex that probably has negative cash flow of over $100k per year. For duplex in Menlo Park, you would be lucky to get $2.5M due to CAP.

You might be decreasing your investment value by converting it to condos that can not be sold separately, basically a duplex. Even if you are able to sell the 2 condos separately, still not sure it is worth it. If you must rebuild, you might as well build SFH with separate guest house for rent income.

I highly caution against taking over existing LLC and run on title does not mean the LLC don't have other liabilities. Maybe LLC has a lawsuit for a building it once owned or a loan that is not reported on tax returns. Lawsuit will not sue the seller, it sues the LLC.

If LLC, you need to get commercial loans. Commercial loan won't lock in rate for 30 years, usually 5 to 7 years. Should not have affect on closing other than the method and usually lower cost. Title company should tell you cost.

I just completed an deal (I am the seller) using LLC transfer. I would suggest to create new LLC to do transfer rather than take over existing LLC. Existing LLC could have liabilities that are not obvious. Don't take seller word for it. Local title company should be able to set up the transfer.

1% on the total cost of your purchase - more useful if you buy and hold.  Different expectation for different location.  In A areas, don't expect 1%.  In really bad areas, maybe 2+% is expected.  If owner pays for all utilities, then must raise the 1% criteria. 

Don't pigeon hole yourself into certain budget for new properties, look for best deals on the market and make sure number make sense, whether is condo, SFH, duplex, or apartment building.

I just sold an apartment building, but having tough time finding good deals for apartment buildings. Very competitive market now. I am in the process of looking for smaller multiplex and SFH, as long as numbers makes sense. I don't have a number in my head on how many deals or budget in each deal.

Between paying some taxes vs. force myself into bad deals due to the 1031 timing limitation, I will choose paying tax.  My wife is a partner in an accounting firm.  She always believe it is better to pay tax - it means you actually made money.

I mean Motel before

If it was a model before, each room don't have kitchen.  To add 18 kitchen and other rehab needs, not sure $100k is enough.   If motel rooms are converted, these are studios.  I normally avoid studio rentals given type of tenants are different.

With that said, even using your numbers, earning about $30k net profit per year on over $725k (over $250k in cash) in investment is not a good deal. 

Likely rent roll is inflated or there is payment plan agreement in place (some tenants missed 1-2 months rent, seller work out payment plan with them so tenants pay extra per months to catch up).  These type of extra payment will go away after you take over - no obligation by tenants to pay more than what is on the lease.  You have to assume lease agreements is the real rent roll, not seller's words.  I agree best to get Estoppel for those mismatch tenants.