All Forum Posts by: Jeff Copeland

@Elise Bickel Tauber - You pretty much just outlined the reasons why wholesaling (as it is sometimes practiced, and often taught by guru courses) is actually illegal in most states. 

Any person who performs the following activities, for another person, for a fee, is practicing of real estate, which requires a real estate license:

"appraises, auctions, sells, exchanges, buys, rents, or offers, attempts or agrees to appraise, auction, or negotiate the sale, exchange, purchase, or rental of...any real property or any interest in or concerning the same" or advertises the fact that they are doing so. 

This definition is from Florida, but is presumably similar in other states. 

At their core, real estate licensing laws are about consumer protection, for all of the reasons you outlined. 

The original lease was not month to month, it was a one year lease. That lease has expired. 

Now the tenant is month to month. You can think of it as a one month lease (as opposed to one year) that resets every month, and can be terminated (or changed) by the landlord with 30 days notice. It can also be terminated (but not changed) by the tenant with 30 days notice. 

You do bring up a good point though, in that you still want to thoroughly review the original expired lease. I've seen old expired leases that had odd clauses in them such as a 60 day (instead of 30 in NC, or 15 here in FL) notice requirement, and a judge will normally defer to the old written lease if there is a conflict (for example, it you gave them a 30 day notice of termination, they might have a leg to stand on in court if they chose to argue that the lease, which was the basis of the tenancy, required 60 days notice, even though it has since expired). 

Even though the written lease has expired, you don't want something buried in it to catch you by surprise. 

But this situation is definitely not a deal killer. I would much rather take over a property with month to month tenants than have 6-12 months left on a lease with a tenant I know nothing about. It gives you maximum flexibility.

Great answer and suggestions from @Kevin Sobilo, but this should have also been part of your due diligence prior to buying the property. 

Does STR use conform to zoning for the parcel? This should have been one of the first questions asked before going under contract if this was your plan for the property. 

If it does (and sounds like perhaps it does as a conditional use - based on what conditions?), then it's more of a permitting issue and there are usually ways to navigate the red tape, as noted above. 

Rich Dad Poor Dad is a great book. Just don't get sucked into the Kiyosaki Training Empire with its $30k training seminars!

The answer to some of your questions above is you plan for these contingencies. If you go into a BRRRR deal needing to be 100% accurate on your rehab costs and ARV, you will fail every single time. Nothing ever comes in exactly on time, on budget, or on forecast.

It often makes more sense to prepare and analyze a range of outcomes on a spectrum from 

Worst Case to Probable to Best Case. 

If you do your due diligence and inspections correctly, your worst case scenario should be break even - Sell the property for what you paid for it, walk away, and let someone else take on the project. It should only look up from there. 

For more info on the "rent by the room" aka co-living strategy,see https://www.biggerpockets.com/... - We recently implemented this strategy on a 5 bedroom 3 bath home in St Petersburg FL, and we have indeed doubled the rent and dramatically reduced vacancy and turnover costs. 

@Anurag Pulla - What do you do for a living? Whatever it is, I'm sure it "can be easily done with enough knowledge". 

That is the key. Property Management is a profession, and you have to know a lot of stuff about a lot of stuff. So just go into it with your eyes wide open and don't be fooled into thinking it's easy just because your professional property manager makes it look easy.  

Can you learn property management? Sure! Is it a wise use of your time? That depends on your location, employment and financial situation, investing goals, and several other factors that only you can answer. 

For a great overview of the breadth and depth of information you'll need to integrate be an effective property manager, check out http://www.evicttv.com/all-vid... (no affiliation, just a great repository of info and training topics for PMs and landlords). But note that even this comprehensive list still does not even touch on the systems, software, and other tools you'll need to have in place.

You can also do your own taxes and file your own lawsuits. But that doesn't always mean you should. 

All of the above posts are spot on. 

How much would it cost you to rip out all of the unpermitted work after the unlicensed contractor finishes it and it is discovered later on by an appraiser, another City inspector coming to inspect a permit for something else, a future buyer, or your future listing agent?

Or worse, a plaintiff's attorney who gets electrocuted by the unlicensed electrical work you did (which your insurance company won't cover)?

You're saving $7k, but creating hundreds of thousands of dollars in potential liability.  

Whether, when, and how you can cancel (and what the penalties are) will be dictated by the language in your contract. Find the paragraph about the inspection contingency and read it, or discuss it with your agent and/or an attorney. 

Worst case scenario is usually the forfeiture of your earnest money deposit. 

If they are legit hardwood floors, they probably can be refinished, up to a point. It's hard to tell from the photo, but it looks like there may be some buckling and warping from water damage (which is not uncommon near exterior doors) in addition to the scratches. This is much more difficult to fix than scratches. 

If they are laminate or some other product, then no. They would have to be replaced. A water resistant laminate plank, or high end LVP, might actually make more sense here if people are coming in from the beach/pool and wetting the floors on a daily basis. 

Duplexes, much like single family homes, will be mostly comps. The appraiser may give some weight to income/cap, but probably not a lot.

The truth is, you can calculate, guess, and hope all you want. But you will be paying for a professional appraisal anyway, and it will be gospel for the most part. Ultimately, the V in LTV will be determined by one individual on one particular day: The Appraiser.

The good news is appraisers use a very standardized methodology, and there's no reason to think you're going to get a value that's way out in left field. 

And because of this very standardized methodology, one thing appraiser love is data. 

Rather than doing your own self-appraisal, I would spend my time putting together a packet of information for the appraiser that consists of:

1. Any recent past appraisals done on your properties (or on comparable properties nearby if you can get your hands on them somehow). Also note, if you have an appraisal of your property from two years ago, and you know your market has appreciated by 10% (or whatever) annually, that alone can give you a pretty good idea of the current value. 

2. Details info about any improvements you have made to the property. Focus on value add things like new kitchens and bathrooms, floorplan changes, new flooring, landscaping, etc. Sure, it's nice to let the appraiser know about new roofs and HVACs, but these are capital expenditures, not improvements, so they won't add as much value as one might think.

3. Any recent comparable sales you are aware of, with as much detail about the transaction and the property as possible. Especially anything that was not listed in the MLS. There might be 10 comps in the MLS that sold for $400k. But if you know the duplex next door that's just like yours sold for $500k off market, the appraiser might completely miss that if the data isn't readily available. 

4. Copies of your rent roll and leases. They will need this for their rental analysis. Make their lives easy. 

Finally, speaking of making their lives easy, make sure you are on top of the actual appraisal appointment when the appraiser visits the property: Make sure your tenants receive proper notice, maybe hint to them to tidy the place up as much as possible, make sure the grass is freshly cut and the exterior is spic and span, and make sure someone is present with keys and all pets are secured. Nothing will annoy your appraiser more than having to make two trips because your keys didn't work, or your tenants refused entry or left their pit bull roaming the apartment when they left for work. 

As an experienced PM, if the husband checks out and qualifies on his own, a foreign spouse is not a major red flag for me. "US Citizenship" is not one of our tenant screening requirements. 

I would be extra thorough in verifying employment, income, etc just to make sure nothing fishy is going on, but otherwise would probably move forward.