All Forum Posts by: Sam LLoyd

Wow.  Sounds horrible.  The only thing I would add is to journal any conversations if you ever want to go to court to get the money.  Summarize every conversation that isn't in writing and have dates.  Weather it's worth going after would depend on how much money we're talking here.

Oh, and my personal 2cents.  Don't threaten to sue unless you're willing to follow through.  As far as your word is concerned, be better than them.

Personal experience: HELOC funds are borrowed against a different property, so regarding the subject property they are not 'borrowed funds'. I refinanced 2 properties this last year and bought a 4plex with 25% down with the funds (can't find a better LTV than that without jumping through some impossible hoops).

So, if your lender says you can't use the HELOC from A as a downpayment for B, find another lender. If your lender says your debt to income is too high because of a huge loan on your house... that's another matter. The properties I refinanced are rentals that still have a positive cash flow with the new financing, so they helped my DTI, rather than refinancing one's own house with no income to offset it.. this does not help your DTI.

I hope this helps.

I looked through the numbers... and not knowing more about the location, it looks good to me until I see the returns... which don't seem realistic.   Here's what I found... maybe I'm missing something. You have $2,600 as rental income, and $2,600 again as 'other income'.  So, take off one of these 'incomes' and you're returns should be more reasonable.

As far as expenses... I'd get a quote sheet from a manager even if you're managing yourself... around here it's 10%+... so I'd use $280.  Also, taxes and insurance seem low, as was pointed out... Around here, that would be around 300 and 100 respectively.

I bought a 4-plex from a real estate manager, with the agreement for him to manage it for me.  With the amount I lost on that deal, I could have bought one of your properties with cash and then some.... so stay on top of that.

As far as how heavy to rehab?  I agree that doing the full rehab and opening up your pool of buyers is good.  However, if you are confident that other deals will be available, and you could sell it for 160 quickly, I think pulling your money (or buying power) back out and putting it to work again is also a good idea and doesn't expose you to the risk of a market correction... summary: Can you keep the money moving?  If not, go for the full rehab IF you do not think the market will go down.

That's so sad!!

Proactive is definitely the best... especially when you're risking collateral damage.

From an investment perspective though... if you can extend the life of anything, you'll have huge savings... for example, I had carpets that were trashed, but I found tenants with dogs that didn't care because I waved the pet deposit... and I got another year of life out of the carpets.  This saved me at least $300, and got tenants into the building sooner since I didn't have to wait for carpet install.

Same with a roof.  If you can be 100% sure that the roof will make it through the season, I'd give it another season.  If you have doubts about a heating system, get it inspected before the cold hits.  Also... if it's a heating unit, and you have tenants there that will let you know if it starts to get cold... I think the unit can get changed before things freeze up... unlike Patrick's story where it was a new heating system that takes more time/plumbing, and it sounds like there were not tenants there to give him early warning.

NOTE: Extending the life of something that has cosmetic effect like paint, will cause the quality of tenants to waver... and it could be a downward spiral... so keep the place looking nice.  This expense will always be cost effective.

Fun topic.  This is my least favorite part of landlording... here's what I've found.

Going back to the initial post and the 'lots of applicants'.  I tell applicants that I need an application before showing, or they can bring out a filled application to the showing.  This saves me a ton of time.  I also try to put a youtube video of a walk through online, and this answers a lot of the simple questions.

As far as screening goes. No one is perfect, so you can always find a clean way to turn down a tenant such as 'not wanting to sign a long enough lease... Unable to get in touch with previous landlords... Does not make enough money... things like that, but only if they ask for a reason.  I've learned that saying no quickly if you have any doubts helps both parties... even if you have more vacancies.

Gut feeling:  I think this is very important.  The one time I let a tenant in without meeting them in person... just phone calls and reference checks, it was the worst tenant experience yet.

I like Brie's idea of meeting them to form the first impression, but I don't think I'll be able to use it since it saves me so much time reviewing applications before going to show the place.

So, what does an apartment in Boston rent for?

Very good advice Joel.  I came to pretty much the same conclusions... and it looks like I can get my earnest money back since I found even more inconsistancies with the deal.  You asked about rents, but that's the worst part... the rents that are stated (on leases no less), are above market, and with the location, it's already past the highest and best use... so no appreciation forced or otherwise is possible.

After telling the seller I'm backing out, he wants to re-negotiate.  I'm waiting to get my money back from the first scary contract before bringing another offer using my own numbers that will not be scary for me.  If I loose it, I loose it... there will be another best deal tomorrow.

Here's the deal:  I could use any advice out there before I put money up to order the appraisal in a couple days.

7 detached cottages on 2 lots.  I'm able to purchase them with 2 residential mortgages.  I'm trading equity in some other land as the downpayment... after which I'll purchase the other land back from the seller with a 5yr balloon.

Pros:  Almost nothing out of pocket.  I calculate that I'll make enough money to pay for my management services, and another $100 to $200/month... not a lot of money, but the income is very important to my mid-range goals right now.

Cons: Property is not in the best neighborhood, and I know that the seller is misrepresenting the income/expense... I'm not sure by how much.  Buildings are in great shape, so there is not way to force any value into them... only exit strategy that I see would be to sell them.  Also, the 80k balloon in 5 years is doable from my perspective right now... but that's 5 years from now, do I want to bet on the market staying level?

Note:  After the balloon, the property should be making $1700 plus management income... which is why this is tempting.

Any red flags?

Thanks for all the advice on this post.  I'd dealing with the exact same issue (detatched  7 plex).  Having a hard time verifying the rent and expenses since any document provided by the seller is suspect or known to have been altered.  Also, rents have been raised in the last couple months, so... am I  going to be faced with vacancies as soon as I get it?

Great fun... other than the loosing sleep and money part.

Keep us updated

To help with this, I'd have to know what returns you'd expect (and be realistic) from the multi-commercial. In my recent experience, getting commercial money is a bit harder than residential, and the LTV as well as interest rates are worse. Having more duplexes will have to more liquid, get you into the residential financability, and also have a bigger pool of buyers if you need to get out. I'm not sure about your area, but here in Alaska, there are some rules that make duplexes easier to manage. For example, here if it's one or two units, the landlord does not have to pay for trash service.

Summary: Without more information, I would refinance right now, taking advantage of 30 year money at great rates, and put that money into the highest return investment.  And by highest return, I'm taking into account that managing duplexes is easier, and time is money... so not necessarily the highest cash-flow, which could be the apartments.