All Forum Posts by: Graham Mink

Hi Alex,

Congrats on finding a property to buy. Here is a couple things I see that you might want to be aware of:

1) depending on the contract that your brother signed with the real estate agent he may be required to pay him 6% by law. Consult with a quality Vermont attorney and read that contract yourself.

2) Vermont has a property transfer tax of 1.45% of the purchase price due at closing. (Welcome to VT)

3) You and your brother should ask around and do some research to find a good real estate attorney who has handled family gift situations before in VT. Any old attorney may do but if it were me I would want someone competent with a great reputation.

4) I would also consult with a CPA regarding the tax implications of the family gift. You will probably need to pay income taxes on the value of this gift over whatever the current gift allowance is by the IRS.

Sorry to be a Debbie downer, but taking these steps will protect you and allow you to go into the property aware of the impact. Good luck!

Graham

Hi Katherine,

You are in a difficult spot. The State of Vermont is one of, if not, THE WORST state to evict a tenant. If they contact legal aid this process will take at least 4 months, maybe up to 8-12 and will potentially cost you 5-10k. My advice:

1) offer the tenant a cash payment to vacate within a week or two. The amount should be negotiated by you and them. Could be $500-$1500. Don't give them a dime until they have completely vacated and signed a contract giving up their rights to the apartment. This may seem like a tough pill to swallow, and it is, but it will be less stressful and much cheaper than the eviction process, trust me.

2) if they refuse to leave after being offered the money contact an EXPERIENCED eviction attorney who charges a FLAT FEE for the eviction. Otherwise you may end up hiring someone who will cost you a fortune and/or make mistakes which will drag things out longer. This is a very important point. Vermont courts are not forgiving to landlords and the service process must be adhered to entirely by the book. I would recommend contacting Angela Zaikowski at the Vermomt Landlord Association, she is one of the best and literally wrote the book on Vt landlord/tenant rules. She charges a flat fee I believe to handle evictions.

3) in the future screen all holdover tenants as if they were new prior to purchasing the property or have the current owner kick them out. People usually are selling partially because they have issues with tenants they don't want to deal with. 

4) don't waste a single day. Start the process now and if you made mistakes start over and don't relent until the problem tenants are gone. 

Good luck

Hi Rob,

Samantha is correct, it all depends. As a rough budget you can plan on $150/sq ft for just the building with foundation, then add on the land and site work after that, which can vary greatly depending on the depth of the well, type of septic system (conventional, mound or pretreatment). The house cost can also vary quite a bit. Is it an open floor plan or lots of little rooms? Granite or Formica? Tile or linoleum? Once you have a floor plan get three bids from local contractors and don't necessarily pick the cheapest one. Check the contractors references. Good luck!

Hi Germain,

Long time no see, I hope all is well, sorry to hear you are moving out of state. You should be very careful entering into a financing arrangement with someone who may not qualify for a residential mortgage on a primary residence. You should research the Dodd - Frank regulations and make sure you follow the requirements. From my understanding if you lend or lease option a primary residence to someone who does not qualify and there is an issue you could end up in a very bad situation, like lose your house bad. Selling to an investor this way is no issue, but for someone who is living there it's very different. Given how hot the Burlington market is I would think you could find someone else to purchase, maybe give Realtor of the Year @Blair Knowles a call? 

Best of luck to you and your family!

Hi @Mike Kalob

A couple of my properties are in my personal name but most of them I own under a single LLC. I don't buy the multiple LLC liability protection argument. I don't think many judges would either, especially in the liberal state I live in. I feel it complicates everything tremendously to have multiple LLCs not to mention the added cost to create and maintain them all. I don't know why a commercial insurer would care how the property is titled, but some companies have weird rules.

As an insurance agent in my previous life I find most people in the real estate investing business are underinsured and many don't truly understand the purpose of liability coverage. An umbrella, and insurance in general, exists to protect the insured against CATASTROPHIC LOSS. In other words a loss so great that their life would never be the same without the coverage. The value of your current assets and current net worth are almost irrelevant if you consider that once a judgment is levied against you it will also attach to any future income or assets you may get. For example, you manage your own property and there is an issue with the smoke/co detector in the furnace room of a 4 unit building you own. You replace the "faulty" unit and everything seems fine for a week. Then the furnace malfunctions and carbon monoxide leaks into the building, killing multiple people. Do you think $300k of liability coverage will get you very far when you are found negligent for multiple deaths? You will need millions of dollars in coverage and even if you have that you will be praying that the lawsuit will settle out of court. If you don't have the coverage or have a small amount once that is used up the insurance company is off the hook and you are responsible for the rest. Bye bye house, cars, retirement, rentals, and any future earnings if those don't cover it. It's morbid and unlikely but it will happen to SOMEONE, it's just that no one knows who. That's why we have insurance, to protect individuals and society from life changing events. My advice is to buy as much liability coverage as you can with your primary policy and then add an umbrella over that. All my units are covered by a commercial policy that has a $2M/$4M limit, and then I have a $3M umbrella over that. The umbrella costs me $1000/yr and it sucks to write that check, but averaged over my 50 units it is $20 per year. I hope I never use it, and the reason most think insurance is waste or scam is because 99% won't use it. But if you get unlucky and something major happens, you'll be happy you bought it. My father has been an agent for 30+ years and he always says that he never got sued when someone was over insured, only when they were under insured. I also advise anyone to sit down with a good, local independent agent who is familiar with REI and see what they think of your current coverage. It won't cost you anything and may save your financial life. Ask other investors who own multiple properties who they use, and if they recommend theirs. Good luck to you!

Andy Perez This smells like a bad deal. The only thing worse than no tenant is a bad tenant. An estoppel certificate is an absolute must if you are buying a property and carrying over a tenant. However, if I were in your situation I would ask the current owner to remove all of the current tenants and delay closing until they did. Where I come from evictions are costly and time consuming. Having to evict multiple tenants at once would be a nightmare. Also, one thing that always goes unmentioned with evictions is the enormous amount of negative energy that you are bombarded with. YOU are the bad guy(gal), YOU are cold, YOU are a greedy jerk, etc etc. Although this couldn't be further from the truth you still need to deal with that pit in your stomach for months until the evictions are final. It sucks. Do you have an extra $20k to carry the property, pay for attorney's fees and repair the units if you need to evict after closing? Have you taken these expenses into account in your calculations? Is the property still a good deal when you do? This smells like trouble to me, I would be careful.

Hi Michael,

Welcome to BP! You have found a great resource, and it's good to see another Vermonter on the site. 

I would have to disagree that South Burlington is a great buy and hold market for cash flow. It's a great market to buy and hold for appreciation, but the cash flow you get from a $300k duplex (if you get a deal) is minimal, you would be lucky to break even every month. While South Burlington has a strong chance of continuing to be a popular area to live in, and thus has a strong potential for property to appreciate, this is not guaranteed, and therefore in my mind any investment there is more speculative in nature and a little more risky than buying a property that from day one has a double digit Cap Rate and 30%+ CoCR. However, everyone has different reasons for investing in real estate and different goals, so South Burlington may be great for you, and not for me. It certainly is a wonderful place to live, one of only a handful of towns in Vermont that I would move to, but I feel there are better places to invest for cash flow elsewhere.

Best of luck to you!

Graham

I believe that if she gets the property under contract with the buyer name as "Autumn and/or her Assigns" then she can assign the contract to another party without acting as a broker. Was this the way she was going about that or was she just hooking up buyers and sellers? I have my real estate license and the State is very strict about what we can and cannot do but I believe that assigning purchase and sale contracts is legal. The downside is that you have to put down a deposit and risk losing that if you can't find a buyer, but I think that is how most Wholesaling is done. I have never wholesaled anything though, and I am definitely not a lawyer, so please consult with one before doing anything.

Hi Autumn! Glad to have another Vermonter on the site, we have, like, doubled the amount of Vermonters on here in the past week! You found a great place to get information. Start with the beginners guide and go from there. If you have any specific questions feel free to message me directly. Best of luck to you!

Graham