All Forum Posts by: Jeff Copeland

I would certainly not engage the tenants prior to closing, especially not without the seller's knowledge and consent (and any seller in their right mind would tell you "hell no"). The fact is, you do not own the property yet, and thus have no standing to negotiate with the tenants. There are dozens of reasons your transaction might not close, or might be delayed, and you'd only spook the tenants. 

Worst case for the seller (and this happens all the time): The buyer scares off the tenants, then the deal falls through and the seller is left with an unwanted vacancy. 

As to whether or when you can give the tenants notice of termination, or notice of a rent increase, it depends on three things:

1. What does state law say? Most states define month to month tenancies in statute, and specify how much notice either party must give the other (for example, in Florida, it's "15 days before the start of the next rental period" - which is a very short notice requirement). 

2. What does the local municipality say? Even though our State law says 15 days as noted above, this is only in the absence of conflicting local ordinances. Many of our local cities actually require 60 days notice for rent increases or terminations (and some of these are recent, post-pandemic changes to local laws). 

3. What does the lease say? Even if the lease is expired, it forms the basis of the tenant's month to month tenancy. If they lease requires 90 days notice (or whatever), that is generally what a judge is going to honor. 

Our typical approach is to do nothing (other than communicating new payment instructions and contact info, obviously) immediately after closing, and give it a couple of months for the dust to settle and see if the tenant pays on time and maintains good communication, etc. If they do, then consider a phased in rent increase. If you tell them their rent is going up by $500, but it will be phased in over 5 or 10 months, they will either happily accept the new rent increase (because they already knew they were below market), or they will start making plans to vacate. 

One thing I've learned is never terminate a good tenant just because you think they won't or can't tolerate a big rent increase. Often the tenant knows they don't have any better or cheaper options, and in the long run it's easier and cheaper for them to stay put than to move. 

And vacancy and turnover costs will always be one of your biggest and most painful expenses as a landlord, and are often (not always) best avoided whenever possible. One exception would be if you are planning for a refinance down the road and need to renovate the units for appraisal purposes. 

Survey's are usually not terribly difficult to read. Especially if the improvements are from 1980 and nothing has been added or changed since. You might even be able to pay a local surveyor a few hundred bucks to meet you at the property and explain the survey to you (probably money well spent). 

And there's your choice: Take your attorney's advice and kill the deal, or mitigate the risk as best you can with an existing survey, determine if the level of risk is acceptable to you, and move forward with the deal. 

The Fannie Mae underwriting guidelines are actually 70% LTV for multifamily investment properties in a cash out refi:

The following is from https://singlefamily.fanniemae...dated October 2022:

What often happens is a loan originator will tell you "Sure, we can go up to 80% LTV on investment properties". But they are referring to the max LTV for a single family home purchase. Once they realize it's a duplex and a refinance, and they run it through their underwriting program, it's probably going to come back at 70%.

You may find a local portfolio lender, or a DSCR or other non-QM product that will go to 80%, but the rates and terms are not likely to be as attractive as conventional Fannie/Freddie backed options.

$200/mo in cash flow is acceptable, and fairly typical. But while cash flow is necessary of course $200/mo is not going to make anyone wealthy. 

What is going to make you wealthy is debt reduction (your tenants will pay off your mortgage) and appreciation. Debt reduction is nice, but appreciation is key. What will this property be worth 10, 20, or 30 years from now? (And what did it sell for 10 or 20 years ago). 

If it is in a stagnant area, it could end up being a ton of work for not a ton of reward. 

But it is in an appreciating area, that is the cherry on top. 

BTW - I rarely meet an investor who regrets buying a property. But we all have dozens of properties we kick ourselves daily for not buying when we should have!

I generally agree with @Cason Acor. 

You might also be able to ask the seller whether they have a previous survey. It's usually fairly easy to determine whether there have been any land use changes since the existing survey. And if the seller certifies it as such, some title companies will accept it.

Even if the title insurance doesn't accept the old survey, it could help put your mind at east about the title policy. 

Your attorney is not wrong, but she has the luxury of looking at just the issue at hand, while you have to look at the bigger picture. Her job is to err on the side of caution and advise you. It's ultimately up to you to make the decisions. Does a 30-45 day extension and an extra $6k in expenses kill the deal or cause hardship for you or the the seller? If so, these are factors you have to take into consideration (while your attorney does not).

Don't knock 1/1 units - They are very easy to keep rented, and fairly recession-proof (in the sense that they are a low cost housing option for 1-2 person households and there will always be demand for them). 

Your numbers seem to be right at the 1% rule, which remains difficult to achieve in most markets with an ongoing supply and demand imbalance. 

 The answer to the question "Is this a good deal?" will vary from market to market. So you really need to ask yourself (and research) What else can I buy in this market for around $120k all in? And there's your answer: If there are much better deals out there in the same price range, so buy one of those instead. If not, snap this one up with confidence!

I'll send you a PM with some more info. 

In many states, this information is a matter of public record and you can easily look it up online. But I seem to recall that Texas may not be one of them. 

If the property was sold via the MLS, then yes, any agent can easily look it up. 

But in the vast majority of cases, the previous sale price is completely irrelevant. Many people spend far too much time worrying about what the current owner paid for a property, but it has zero bearing on the current value, and it tells you nothing about what they owe on it.