All Forum Posts by: Todd Campbell

I've found this thread amusing. Firstly, rookie mistake @Dominick Longbucco, never make the subject of your post "Realtor Fees." : )  That's like chumming the waters around these parts. I am sorry this happened on your first post, especially after I recommended the forum. The subject line alone drew realtors to the thread to defend their profession.  Some realtors on the thread asked what kind of leg work does a buyer perform, I'll touch on that. Doing your homework as a buyer means, finding the right location. This is an area where a realtor is hindered by law. There are simply some things a realtor is NOT allowed to advise on. The right neighborhood could mean the difference between making a good or bad investment. For example, I ingest terabytes of public data and perform data analysis on 20 different factors to help identify what a neighborhood will do next. Depending on the property, a buyer may be inclined to do their own title abstraction. It's not hard, but there is a lot more work involved than managing a purchase agreement and having the title company prepare your documents for you.  

Now, @Dominick Longbuccosome people on the thread provided some suggestions and tips that I found were very helpful. What I didn't know, was that Illinois was one of the states that requires a lawyer as part of the transaction. My suggestion is to see if you can find one in your area who is both a real estate lawyer and a broker. They exist, and they tend to understand the concept of negotiation. 

While many here would disagree, it is a fallacy to believe that the buyer doesn't pay for both realtors. It doesn't matter that they get paid directly from the other column of the equation, it is still part of the equation where the buyer is the only person putting money in. It is not impossible to renegotiate these terms, but as some have pointed out, it may prove difficult. To that end, I think we are finally to your original question. How does one negotiate these fees. I'd say your best bet is to bring a realtor or lawyer/broker onto your team, or get licensed yourself.

After having run into a couple of no-shows I changed my tactics. Some have mentioned a few. Here is my cocktail approach, I add procedure to the ordeal.

Obtain phone numbers for all of the potential tenants.

Inform the applicants that you are arranging for someone to show the property. 

Contact applicants with a time, and inform them that you have (how many other groups coming). I never schedule less than three groups.

Schedule all showings for the same time. 

Confirm 1 hour prior to the appointment. 

Provide applications at the door.

I find I still get some no-shows, but I rarely get 100% no-shows.

Good luck!

-todd

Hey @Robert Harmon,

It's all about the terms. How long? How much interest? Monthly payments? You have to ask yourself if you can make more money on your investment so that it can out pace your terms. Then you must also consider what your loan will do for your other exit strategies. For example, let's say you do a cash out deal on your personal residence. Next, for whatever reason you need to move. Can you get out of your house or will this leave you stuck? Let's say you do a loan against your 401k. Since most loans like this require that you pay back your 401k at or slightly after a job termination, do you have the resources to shore things up without taking on tax penalties? 

I have found that most things in business come down to a mathematical equation, and a balancing act between being careful and being courageous. 

Good luck!! 

-todd

 I like to have a built in exit strategy in case things go south. 

Buy on a big enough discount to allow yourself to sell quickly and with minimal to no loss would have to be the most favorable in my opinion. 

You could go the personal loan route on something that small, most mortgage companies that I have dealt with do not like doing properties at such a low purchase price. 

In the past I would do it the old fashion way, drive by and walk around the neighborhood at different times of the day/night and different days of the week. Talk to neighbors, etc.  

I have been prototyping and testing some software that allows me to take into account some factors about the neighborhood. Is there a starbucks nearby? When was it opened? Is there a check cashing place nearby? Is there a Whole Foods? What is the median income, median education? How is the school district rated? 

Cheers!

-todd

A couple of quick notes about the first property:

Purchased in 2015, why are they selling? Did this property not work out? 

What strategy are you planning on using? Are you going to buy and hold? Do you plan on living here and renting out a portion of the house?

What is your exit strategy if you cannot flip or rent this house?

Due to the asking price you will likely have to buy this with cash or owner financing. Do you want to lay out this much cash, plus rehab on a property? (especially if you choose not to live in the property as an exit strategy)

I checked a couple of other properties in the area. It is unclear to me what your neighborhood is doing. Who is your target renter/buyer? Will they be able to afford the property at the rate you wish to rent after rehab?

Rehab: The pictures aren't detailed enough for me to determine the state of the roof or the siding. My guess is that the house has wood siding, which will require some scraping, scrubbing, and fresh paint. This job alone is likely to run about $2k every 3 years on the reasonable side. The inside needs paint throughout, new carpet, floors refinished (in some capacity). There are missing drawers, and it appears the house may have been winterized. This likely means it may prove difficult to test all of the plumbing. The carpets are really dirty, which might indicate a smoker. I cannot see pictures of the walls or foundation so i am unable to determine if there is a need there or not. 

What kind of electrical service is there? (40, 60, 100, 200, 400 amp) Fuses or circuit breakers? How old is the wiring? 

how was the house split when it was a multi-unit? Does it have multiple meters? Are you planning on using it as a multi-unit? if so, if it doesn't have multiple meters you are likely going to have to pay utilities OR split the utilities over multiple meters (this can cost you a bit). 

So, maybe it is a good buy, maybe it isn't. But on the surface it will need some work and some money.  Maybe only a few thousand dollars, and maybe it is priced right. I can't tell you that given my lack of knowledge of the area. 

-todd

 Careful! Depending on the type of transaction (short sale, others) this giving back idea can be considered an illegal kickback/mortgage fraud. It's a kind idea, but you need to be sure what you are doing is legal. 

As always, I'm not a lawyer, and I am not providing legal advice. Contact your legal professional for details.

-todd

I can't speak to your deal specifically, but I have a guess. 

I've known houses to be gutted of copper, you might have to replumb the house. If this is the case, I would recommend pex. It is easy to run, cheap, and not a target for scrappers. 

-todd

@Mary Karlecci My advice would be to ask this of your lawyer. After all, it sounds like you have some concerns of a legal nature and need to speak with your lawyer about the tardiness of your operating agreement. (that is, if you continue to stick with this lawyer)

I certainly understand your concern, but I am not a lawyer and cannot advise on your risk in this matter.  I would suggest however, that if you are concerned about the situation, you can mitigate further risk by taking no further actions that would potentially expose you until such time you have consulted an attorney. 

Good luck, 

-todd

@Joel W.  It has been my experience when providing breaks for people it doesn't work in my favor. It usually results in a large loss of income, and in most cases damage to my property. 

That said, I have a structure for payment that is favorable for both parties that I offer for properties I have held in lower income areas. First, it is important that the tenant understand ALL of the help that is available to them. For this, I have a short list of local agencies that help various tenant circumstances. The structure is simple, if the tenant pays early or on time I deduct a certain amount from the last month of rent. While it doesn't help the tenant in the now, it does provide a reward for paying on time. Depending on the payment history, I may also decide to offer up to the tenant to take the discount in December. 

The problem with this, is that you are getting involved in the life of your tenants. This rarely ends well. 

-Todd