All Forum Posts by: Harriet Baldwin

Agree with "get seller to deliver vacant" consensus.

If that isn't possible, talk to a landlord/tenant attorney - if the house is being used for an unapproved use, and/or if the occupancy is over allowable limits, you might have an easier time in court.  I wouldn't count on "gauge their characters" - folks who are big on following rules wouldn't be 5 to a home with no written lease.

The landlord/tenant attorney could also give you guidance on how long the process is likely to take - investor could agree to pay for process but not close until after vacant (so if it becomes an unending saga your investor could walk away) - although that would make more sense for an owner/occupant, as an investor I'd be more likely to go to the next deal. 

If the home were in an area with more landlord-friendly courts, I wouldn't be so concerned.  We have purchased homes and then given notice to tenants - but around here that's a little less than 3-month process worst case, more like 7 weeks best case for a 30-day notice.  I would be a bit concerned about the estate's lack of disclosure - typically occupancy and rents would be known before making an offer...

Each state law is different!  In NY state even though interest on the security deposit may be due the tenant (as with much legal stuff, it depends), the landlord can charge a small administrative fee.  Meaning with rates well below 1%, that interest goes to the landlord and not the tenant.  If/when interest rates rise significantly, then the tenant will actually get some of that interest...[not legal advice]

@Christian Bors to clarify, I wouldn't follow up in any way on the different keys.  If I am getting those keys, I have everything I need.  Even if it was in violation of the lease for the tenant to change the locks, if I get the keys, no harm/no foul in my view.

If I am not getting the keys, that probably means the keys are the least of my worries - legally or condition-wise.

Exception: if I weren't already evicting (or the tenant wasn't already vacating), and if the lease wasn't near the end, and if the tenant was troublesome but paid on time, then I *might* use the change of locks as an excuse to terminate the lease (if the lease allowed me to do so) and then serve the tenant with a 30-day notice.  But I'm guessing my lawyer would say that if changing the locks were the only violation, that I could be on thin ice if the tenant supplied keys and fought the lease termination in court... [not legal advice]

There are online mortgage calculators or you can build an excel spreadsheet.  You can also buy a physical mortgage calculator, or use a financial calculator.

In addition to monthly PITI you will need to know (or estimate) what portion is tax & insurance, to get to just P&I.

Then you'll need to know (or assume) a term (length of loan) and interest rate - that will get you from P&I to loan amount.  Don't forget to state term & rate in months, not years.

Then you'll need to know (or assume) the amount of down payment, to get you from loan amount to purchase price.

Don't forget to budget for closing costs and/or due diligence paid outside of closing - not to mention any rehab monies not funded by the loan.

Many investor-realtors eventually get their broker's license so they can be a one-person shop and work (mostly, or completely) for their own account.

Spouse is a broker, when we make an offer to a listing realtor who's new to us, he does a little explaining before making the offer.  He explains what we do and that an owner occupant might offer more $, but we can close quickly and as-is.  He stipulates up front that if the buyer wants to wait for a better offer, we understand - our offers tend to expire quickly, but several times the listing agent has called us back a few months later and asked us if we're still interested in making an offer.  If it's a property that an owner occupant is going to want, we're likely not making an offer anyway.  Also, if he is making an offer for a house we are buying, he usually foregoes the buyer agent commission - makes it clear how we intend to make our money.

Our first deal in Elmira the listing agent tried to talk us out of making an offer (too low, seller would never accept).  Less than an hour later she got back to us - 'much to my surprise, the seller has accepted your offer'.  Sometimes the seller hasn't told the listing agent everything.

Tone and explaining can help, but don't be afraid to insist that the listing agent presents the offer to their seller - at least in CT and NY, an agent is required to present all offers.

On the buyers-disappearing front, many folks think they want to buy but aren't actually ready.  I would suggest interviewing them more carefully up front, laying out *your* expectations and a typical time line/activity level.  That way if the buyers aren't serious, you can adjust your investment of time more quickly.

Stripped of the drama, the tenant changed locks without telling anyone - that does happen.  It's not right, but it's not a bridge I want to die on, either.  I tend to avoid confrontation anyway, but on the tenant's turf with threatening friends and no long-term track record with the tenant, I would have taken a more "oh, new locks? seems wise in this neighborhood.  well, when you turn in your keys, you'll get your deposit back" approach - no need to "call them" on changing the locks.  Usually "after I do a walkthrough" would be part of that speech, but not in this case.

At least in our area, getting the keys back is very helpful from a legal standpoint (clearly shows tenant has given up possession).  I wouldn't have called the seller at all in this case.  If it was an issue I wanted to check with the seller on, an issue that was a potential conflict with a tenant, I would do it after getting back to my desk.  If the issue is something the tenant thinks the seller might be helpful on, I might make the call in front of the tenant.

We've had tenants change locks and then disappear.  Depending on neighborhood, we call a locksmith or just force entry ourselves and change the locks.

 Usually, no (at least around here - unless they have all their paperwork with them for another job).  Technically their insurance does you little good unless they get a declaration (or whatever the agents call it) from their agent specifying your property address and you/your company.  Most agents can do this in less than an hour and email to you.  Some (all?) contractor's insurance is in effect only if they have pulled permits, *if* the job requires a permit in your area.

If "ride it out" is more attractive than a short sale, could your friend move back into the home? Unless the friend's current personal housing costs are lower than one of the rents he is charging, that would at least slow down the bleeding.  Might also make him eligible for HAMP or whichever program helps owner occupants refi even if value > loan balance (did a quick web search and HAMP does seem to apply to 2-units, not just sfh).

Different tack, is either of the current tenants interested in buying the place? That could be a way to raise the rent...check out the Rent To Own bp forum for ideas.

Had to read these deal details to my spouse - he reminds me that 15 years ago we paid $2k/unit for a 24 unit in Bridgeport CT.  $1.6m later it was renovated.  So, do the math!  We had a 'turnkey' contract to sell it for $2.1m to the housing authority, so that was a good deal.  Of course in that case the roof was gone and so was the floor between 2nd and 3rd story...exterior walls were generally sound.

There doesn't seem to be nearly as much room on the valuation in this case...What is the value of the land, and what would cost of demo be?  Agree with comments of @Wayne Brooks (we had to do a friendly lawsuit to settle title for our $2k/unit multi).  

If repair costs are higher than ARV, someone should pay you to buy it ;)

Another thought - since it sold for $23k pretty recently, it could be hard to find someone to wholesale it to for much more - unless there's a twist I'm missing.

Depending on area and specific property, you may also have some utility costs and/or landscaping.

Trash service - some areas included in taxes, others usually tenant pays, but if landlord typically pays, add that in.

Maintenance and cap ex, when you have a specific property you can fine-tune those numbers.  Just like humans, some properties are a lot more low-maintenance than others.

Your entire mortgage payment does hit cash flow, but technically the principal repayment portion is not an expense (it is repayment of debt).  Cap ex ask your accountant, in many cases you may have a choice whether to capitalize or expense a given item.  Also for tax accounting, don't forget that depreciation is a non-cash expense...