All Forum Posts by: Jean G.

@Simon Shih,

you're definitely right that the number of calls doesn't matter as much as the number of deals, and where you got 1 call and 1 deal, I've gotten 17 calls and no deal. Because I mailed (or intended to mail) multifamily properties, the owners calling me are going to be fellow investors, and probably more difficult to negotiate with. One caller had a nice duplex that I would buy immediately, but he wanted way too much... Another one had a 18-unit complex, but looking to sell it on a 5% cap rate!

Jean

Hello,

thank you for all the answers so far. I just wanted to clarify as there is possibly some misunderstanding: the quotes I was given were obtained by the current owner, and are not 2 alternatives, but 2 requirements.

So $22k to repair the foundation PLUS $130k for the inside of the 1350 sf unit and some inside and outside crack repairs on the rest of the building and the rest of the units.

I will definitely get my own quotes if I choose to proceed.

@Skyler Smith The ARV is for a building that does not have foundation issues, in the same city. So ARV is maybe the wrong word, I should say COMP. But this particular building, we'd probably not get this amount because we'd have to disclose the issues. I will be in touch if I decide not to move ahead. But understand that at $51k, if you don't do any repairs at all, you risk the city shutting the whole building down eventually. So it's not really a $51k fourplex :-)

@William Hochstedler The location is Cedar City, not St George. The $10k value for the land was given to me by the realtor, I didn't verify it myself. He said that's how little the lots go for because you have to spend so much on preparing the land before you build (excavating and replacing with new soil). I did involve an engineer who saw the property with me the other day, but so far he hasn't provided me anything conclusive to act on.

@Kathy McKenzie The one thing I got out of the engineer so far is that if we can determine that the piers from 1999 and 2006 haven't moved since they've been installed, that would give us some indication that they are holding, and would make the whole outlook a bit better. Now I'm waiting for him to see how/if we can determine this.

Hello,

so I recently got under contract the following property located in Southern Utah (well, we're still waiting for the bank to countersign, but they gave their verbal approval):

- Fourplex built in 1996, 5400 sf total (so each unit about 1350 sf)

- 2 stories - 2 units downstairs and 2 upstairs

- Short Sale

- Contract price: $51k

- 3 units rented at average of $550/month (market rent, if fixed up: $600), 4th unit unhabitable

- ARV if there wasn't a foundation issue (which needs to be disclosed to a future buyer) would be somewhere between $250 and $300k

- Value of the land (about 0.25 acres): $10k

The property was apparently built on soil that is rich in gypsum, and the proper procedures were not followed at the time (the proper procedure is apparently to excavate the soil down to a certain depth, then replace it with new soil that does not contain gypsum).

Poor drainage around the building caused water to get into the ground, which washed out the gypsum and the property started sinking. In 1999 piers were installed on one side, and in 2006 on the other side. It now seems that the perimeter of the building is stable due to the piers, however there was some sort of plumbing leak under the slab in the one downstairs units, which washed out some more soil, and the slab collapsed by as much as a foot, rendering the unit inhabitable.

There is a quote on hand for $22k from a foundation repair company to take out the collapsed slab, add some new soil, compact and pour new slab (all of which they supposedly can do without vacating the other 3 units), and another quote for about $130k to redo the inside of the affected unit, and correct other inside and outside cracks around the building and the other units. There are also 2 cracked windows because the building moved so much!

The $130k seems a bit excessive to me. I know that I can rebuild the inside of the affected unit (new kitchen, bathroom, flooring, drywall, painting etc) for $30k to $40k. And fixing some drywall and stucco cracks throughout the building can't cost all that much (even if we would restucco the entire building, we're talking +/- $10k).

So my question to you: what would you do?

I know that some will say "run", which I'm considering doing, and I would like to see how many people on the other hand would go ahead with this, or have had similar situations, and what your strategy would be?

One possible strategy would be to fix the slab for $22k, so that the building doesn't end up collapsing, but not fix the unhabitable unit, and just keep collecting rent from the 3 other units (tenants are paying slightly below market to account for any cracks they may have in their walls).

Demolishing the building and starting over is not an option, because the demo would cost more than a vacant lot nearby.

Thank you in advance for your ideas.

Jean

Hello,

I recently tried direct mail for the first time, to try and drum up some deals as they are more and more difficult to come by, and wanted to share my experience. The bottom line is that, as with most of the things we learn on Biggerpockets (in this case I heard a few interesting podcasts on the subject), it really works in the real world, you just have to do it!

So here is what I did: I decided that I wanted to market for small multifamily properties (8 to 100 units), because those are more attractive to me than single family homes in terms of cash flow, hence a better use of my marketing budget. Also I assumed that these received less mail from other investors.

So I went on ListSource.com, I created a list of properties with over 8 units, and focused on more rural areas within a few hours drive (again I suspected that those would receive less mail than metro Las Vegas, so more bang for my buck). I narrowed it down to about 300 addresses which I thought was a good sample size for my test.

I did a quick spot check on the list and it seemed to indeed include the right types of buildings.

Then I decided that I wanted to send a formal printed letter on white paper (not handwritten and not yellow), but that I wanted the letter placed into a handwritten envelope with a real stamp. I also added a picture of our family on the letter, to make it more personal, a tip I heard on a podcast. I used Gobigyellowletter.com who was able to provide the combination I wanted (printed letter, handwritten envelope, real stamp) and off we went.

The cost, including the list, came to around $350.

Letters went out with a few clicks, and a few days later, I started getting phone calls! 

So far I got a total of 17 calls, which comes to almost 6%. That's much higher than I expected, specially considering that my target addresses are not distressed or anything like that. Note that my letters went out a few days before Christmas, I don't know if that affected the results positively or negatively.

However here is the bummer: 10 of the calls were from people looking to sell me a single condo, all of them from 2 specific condo complexes. As it turns out, my list somehow caught these condo owners. The way they are populated in the Listsource database probably shows multiple units because of the complex having many units, yes the parcel and its owner are a single unit. These condo owners are the most eager ones to make a deal, but I don't usually buy condos, so I ended up having to tell each one that my letter reached them by mistake, which didn't make me look like I know what I'm doing. And a portion of my marketing expense ended up being utterly wasted...

I'm working on some ideas to prevent this type of list problem in the future. One idea would be to sort the list by property address, and take a close look at any addresses that repeat multiple times (those would likely be condo complexes).

But the bottom line I want to get across to everyone is: direct mail works. Test it, refine it, scale it and get some deals!

Jean

@Brian Eastman

are there any IRS documents you could point out that talk about prohibition on future funding in Partnership SDIRA LLCs? I was doing some research on this myself the last few days. I didn't find any information from the IRS, but found articles from several 3rd parties (custodians) that said it should be allowed. Their rational was that the only person benefiting from a further contribution were the beneficiaries of the IRA and that it should not create a prohibited transaction. That explanation doesn't necessarily make sense though, so it would be great if you know of official IRS documents on that subject.

I also contacted the company that did the paperwork for my self directed IRA LLC, MySolo401k, who can recommended by my custodian Ira Services. They said that it was OK to do future funding, as long as we would update the operating agreement to change the ownership ratio between the 2 IRA accounts if the 2 contributions were not in the same ratio as the original funding and ownership. Is this in your opinion not proper advice?

I am also a fan of using cells in my NV Series LLC for everything, and I'm not happy when banks tell me I need a stand alone LLC to get a loan from them, but for my SDIRA I also created a separate stand alone LLC, just in case, because there are no IRS rules on the subject.

Jean

@Wade Sikkink,

just to clarify, I understand that 10 acre feet wouldn't be of interest to an industrial user. The idea was more to sell them off in 1/4 acre increments (or whatever the amount required is to get a building permit for a home) to people building cabins on land in the area, as @Douglas Larson was mentioning.

It's not going to make me rich, just something to perhaps put my self directed IRA money to work...

Jean

Thanks for both of your comments. Yes @Becca Summers you're right that second home starts are affected as soon as the economy hurts. So it's important to make sure that I can sit on these water rights for a long time if needed.

This is what I have found out since yesterday, which may be interesting for others:

- water rights have a priority date, of when the water right was initially granted. The older the priority date, the more valuable the water right is. In case there would be a shortage of water, the water rights would be served starting from the oldest ones, so the newer ones may not get their share of water if there is not enough for everyone.

- water rights can be revoked if not used. I'm investigating this further, but it seems that it could be necessary to have someone use the water rights temporarily if I'm going to have to sit on them for a long time, in order for them to remain in effect.

I'll update this post if there is anything further to add.

Jean

Hello,

a realtor in Southern Utah has offered me an off-market deal to buy 10 acre feet of water rights in bulk at substantially below the going retail price. The idea is that people building new cabins in the area need to secure small chunks of water rights in order to be get a permit for a well which they need before they can get a building permit. The realtor believes it will take between 5 and 10 years to "retail" these 10 acre feet, and I calculate an IRR of about 24 to 47%, after commissions, depending on how long it will take to dispose.

I was wondering if anyone out here has experience with water rights, and can point out some of the risks? I figure that the regulator who makes the laws is one risk. They could always decide to appropriate water rights or revoke them in case water would become really scarce. But what other risks am I missing, and has anyone followed the above strategy successfully?

The 5 to 10 years illiquidity is not a problem for me, as I was planing to use IRA funds for this.

Thank you!

Jean

Hello,

I am looking for people who have access to foreign buyers of properties in the US, and would like to discuss a cooperation on a particular product. I am particularly interested in reaching Asian (Chinese and others) and European buyers.

Please message me if you have access to such buyers or leads so that I can discuss further. I am looking to form long-term mutually beneficial partnerships.

I would also like to hear from people who offer marketing services to foreign buyers.

Thank you!

Jean 

Hello,

we recently took back one of our properties in Fort Mohave from the property manager in order to manage it ourselves and get it rented quicker. We live in Las Vegas about 90 minutes away, and can do most of the management remotely (we have local handymen that we can dispatch in case of a problem) but our current challenge is with showing the vacant property to prospective tenants.

We are looking for someone (ideally an agent, but could also be someone else) whom we could pay per showing each time that the property needs to be shown. We'd also need that person to do the initial and final walkthroughs.

Please message me if interested.

Jean