All Forum Posts by: James C.

Jason,

You could use a call center. There are also individuals who do cold calling for you. If you look at places like upwork you can find them.

Alot depends on what volume of call you can expect,  and what your scripts look like.  If you need some assistance with writing scrips for calls, a call center may have more resources than an individual. 

Hope that helps.

Good luck, 

Jim 

Kelly,

It varies. If you only have a 50k spread on 900k, it's only a 5% difference. I'd be shooting for a bigger difference (lower cash offer) to make the owner financing more attractive. I've seen as much as 50%. To do that you really have to know your seller. Your thought about bank/owner is probably easier for the seller to swallow, since they seem to be unsophisticated. Again,  know your seller. 

Also, I read through some of your other responses.  Don't get to hung up on the market cap rate. Cap rates are very compressed at the moment and not reflective of actual cost to run a building. The broker provided price is a pro-forma price and it's a lie. You need to buy the building based on how it's performing now. If the sellers want more, then they need to get the building perfoming better. Don't pay for their incompetence. 

The cost to rebuild isn't particularly helpful in determining a sales price. It's good for determining what level of insurance you might want to have and that's about it.  Cost to build isn't really a barrier to entry for a couple of reasons. One, brand new units will always carry a  premium rent over older units.  Two building new units is a long game for guys with deep pockets where money isn't the object.  Barriers to entry are lack of available land and lack of available permits. 

Hope that helps.

Good luck,

Jim 

Christopher,

I would do both. Mail a handwritten envelope/card or even a postcard. Keep mailing every week or so, maybe more frequently. 5-7 days later (after each mailing) follow up with a phone call. If the secretary asks what it's about, you can say it's personal, or it's business related, or you are following up on correspondence from last week. 

You could be a bit sneaky and indicate that you are returning his call on a business matter, and then whoops, must have the wrong person,but you wanted to talk to them anyway (this is a bit risky).  Be persistent but not creepy.

At some point you might want to ask what is a good time to get him directly, or when could you make an appointment to see him about (personal) business. 

If the secretaries mention anything about the 10 unit, then there is your opening. 

Good Luck!

Jim

Kelly, 

Without digging too deep, your numbers look ok,  with one VERY BIG exception, management.  Put it in at 10%.

That drops your net to 62380. At $1mm it's about a 6 cap. 950k is a 6.7 cap. Both of those leave little room for error. At an 8 cap you're looking at 780k. 

Also, if you are driving for owner financing,  your spread between the owner financing and bank offer is way too low. 

Hope that helps.

Good luck, 

Jim 

JR,

The cleanest way to handle (IMHO) this is to do the following:

Close the deal. As part of the closing, the seller signs an affidavit that can be used in court about the missing rents. Transfer security deposits from seller to buyer at closing as normal. If you want to ask the seller for eviction costs go ahead,  but I would take it out of security deposits.

Now for potential damages. Seller deposits $5k in escrow at closing to cover damages above and beyond the security deposits from evicting tenants. If there is no damage, the seller gets his 5k back. If there are damages, then the seller gets the leftover of the 5k (if any), plus the receipts to write off as a loss.

This means you have to do the eviction. If the seller was a jerk, he would say one of two things. Either 1) There are no security deposits and rent is up to date or 2) pay the rent out of his pocket. Either way, you would inherent bad tenants without knowing it, and you would end up in a worse situation.

I'd just chalk it up to doing business and not be so worried about it. No one likes to do evictions,  but just like pulling a bandaid off,  quicker is better. You could also negotiate that the seller pays for an attorney to do the eviction. 

Hope that helps.

Good luck!

David,

I find owner's title insurance to be a cheap one time insurance policy in the event that your title attorney was not paying attention. 

I've known a couple of folks who had to use it and it worked for them. I have heard stories of folks who tried to use it and it didn't pay, but I could never get why.

Overall, I have taken the owners title policy on the properties I have purchased. I've never had to use it, but I like knowing it's there.

Things to look at: who is issuing it, any exclusions, and the price/coverage. 

Hope that helps.

Good luck,

Jim 

Grayson, 

A CO is a certificate of occupancy. It sometimes has different names. it's generally issued by the city/town government and details the number of units in the building allowed by the city/town. 

Theoretically, the building you are buying is legally 5 units at the town. You should check, very discretely, to be sure it's a 5 and not really a 4 with an illegal unit. If you find it's only a 4, then you need to reevaluate. It could  be grandfathered, so keep that in mind.

What you want to have happen is that your appraiser indicates on the appraisal that it is a four unit. Since you want to put the other unit back in service at some point in the future,  you want the city/town records to show 5 (or grandfathered ).

You don't want to have the city/town change it to 4 because then you have to have the city/town re certify it for 5, which is a ROYAL PAIN.

The best thing to do is stuff it (unit 5) full of boxes of stuff, put a sign on the door that says "private", "storage" or "no entry" and ONLY show it to the appraiser if he asks. All, and I mean all, of the paperwork, including the MLS listing needs to say 4 units.

Hope that helps and makes things clearer. 

Good luck,

Jim 

Lori,

Great job making a potentially bad situation work for everyone.  

Good luck, 

Jim 

Grayson,

Convert the 5th to the laundry room (or dead storage), and then buy it as a 4 unit. If there is an issue along the way (remove kitchen, etc, etc.) just do what they ask. 

When you have the loan, convert it back to a 5 unit, and insure it as such.

Things to look out for: Watch your loan documents to make sure there is nothing that prohibited about increasing the number of units. Secondly, make sure that you don't have to have a new CO issued specifying 4 units. 

You can manage this to a certain extent by your network. If you have a favorite banker, then find out who they use for an appraiser. Go make friends with the appraiser. If you have a good relationship with your appraiser, then you can find out what your pinch points will be ahead of time. An appraiser can't break the law, or make a 100K property into 200K (well, not usually), but they can help you to know how their business works, and how you can make their life easier. If you make their life easier, your life will be easier.

Hope that helps.

Good Luck!

Jim

Daniel,

Nope.. it's just how the docs written. The docs control the application of payments. On a current loan, you should be able to send in a principal payment at any time. If it's not specified as a principal payment, the they will probably follow what they are saying (apply to accrued interest, then principal). 

Double check your docs about the application of payments and how to pay a principal payment. Once you read that, you should be able to tee them up and get it to go.

You could, when you talk to them again, ask them how you would send in a principal payment in the middle of the month. If they give you the same line, then ask them how you would go about doing it with the monthly payment. 

You aren't going to get a conforming loan (or probably any loan) with a different set of application of payments rules. They are pretty much all boilerplate. As long as you know what you are getting into going in, then you can maneuver as best you can. The lender is the house, and they always win.

Good Luck,

Jim