All Forum Posts by: Jake Wiley

Not exactly sure where you are in the world as that does have an impact.    

I am assuming that you are focused on the price.    It's not a slamming deal, nor is it egregious.    Is this from your contractor, or are you trying to sub out all the work yourself?     I am picturing this space as either gutted or simply framed at this point being that we are talking about all the wiring needing to be run.    

I don't see any mention of service entrance/breaker boxes or sub-panels for this space.   I'd make sure you understand how that is going to work.    

California is a strange land when it comes to tenant rights etc.    I'd make sure you see if you could get a quick conversation with your attorney, if you have one, to ask this question specifically.  You could find out what it would cost to draw up the appropriate agreement and tell your tenant that you can do it, but they will have to pay for it.   You know the saying about free advice.

With that said, thinking through things, you could structure the sublease for 29 days, make sure you have approval on who is subletting, and do your normal diligence.   Ultimately the original tenant is responsible, but does that provide you any comfort?    I applaud your willingness to be helpful, if we all remember we all have times of need it makes the world a better place, just make sure you are not taking on too much risk for someone else's problems.    

The concept sounds good on paper.    Assuming this is a property you own the banks are going to look at past tax returns and bank statements to prove out the rent numbers, however the home still has to appraise and it sounds like it is a residential home thus it's not really a Cap rate thing but a market value based on comps.   I'd think you are going to have a hard time getting the jump from the two bed house to 7 with the same square footage and could attract code enforcement.  It would be a very specific tenant that is okay being crammed in like that.       Not to mention it wouldn't be a very appealing property with every possible room occupied as a bedroom on a resale. 

Long story short, unlike true multi-family (5+ units), you would still be in the Resi world from an appraisal perspective and are subject to comps from surrounding properties.    I'd say, if you can make the cash work for you that's likely the play.     

David - Welcome to the forum!    

Here are a few questions I'd ask.

1) Are houses in the area really selling or are they sitting?    

2) Who are they selling to, investors or homeowners?  Look at the sales info on Realtor or Redfin and call both the buyer's and seller's agents and ask questions to ascertain the market.    2 Comps are not a lot to go off of, especially in a pretty active market.

3) What are homes like this renting for?   This is really important if you are likely selling to an investor.  

4) How many other houses are available on the market?

Here's the lesson I've learned the hard way.   Sometimes you have a budget that tends to drive you into lower/rougher areas.    You may deal with theft, vandalization, harassment, squatters, etc along the hold period.     Demographics generally tend to be renters rather than buyers, which means your offtaker is likely an investor who will drive a hard bargain.   The number of potential buyers is very small, thus not giving you much leverage and you may eventually just be glad to be rid of it.     

If you find that it's a good blue-collar area with home buyers and opportunity, jump on it.    If you find that it is an investor play, I'd be really certain of your numbers, including rents etc.   

In summary, don't let the fact that you can make it work based on the numbers drive you into a less than ideal situation.    

Good luck!

@Chase Stewart don't be worried about getting out there and making some phone calls.    Look online for other room rentals in the area you are looking.    You should feel confident in your decision, but the only way to do that is to really dig in and ask the right questions.     If you find some rooms for rent, call the numbers and ask the questions you have.     You can be honest and say you are looking to do the same and would like to have a candid conversation with someone that is already doing it before you jump in.   I'll bet you get some good answers and you might even make a friend or two.    

How much are the rooms going for, how many calls are they getting, where do they advertise, and how do they screen?     

Good luck and don't get discouraged.   

@Jace Holt - I am having a bit of difficulty linking the first paragraph about providing Mezz financing vs. equity to the second about taking over construction and how they interplay.   I think the linkage is obviously important and would be helpful to replies.    

It's not uncommon.   Especially if its a credit union, have a checking account is your membership.  Deposits on account are what create a banks ability to lend.   There is a lot more behind this and you didn't ask for a lesson on how banks work, but I wouldn't assume that it is simply a bad thing.    Often times these extra hoops provide for better rates/benefits.    I'd shop around, if there is no true benefit then there is no reason to do so, however you also may find that there is a nice benefit to playing the game.   

@Lais Keese - Congrats on the success.    Excited to here you are looking to up the game in the business and put yourself in a position to succeed.   We all need to do more of that.   

Good luck!

Agreed with @Matthew Crivelli - The way I look at it is if you can pull the equity out, REINVEST  it in something that increases your cashflow, that is a the right move.    If you have a tendency to let the money burn a hole in your pocket, leave it in there!   

Good luck!

I'd get all the facts together in a nice package and start calling the local community banks as they may have more flexibility than your current lender.     It's really not so different from a house with a back house that could be rented out separately if they are selling as one property.     You're just going to have to make a bunch of calls to find someone that can help.

I'd also reach out to your local REIA and ask who is an investor friendly lender that can help.

I'm assuming you are under a bit of a time crunch too!

Good luck.