All Forum Posts by: Johnny McKeon

Hi biggerpockets 👋

I'm working with an off Market seller who has five 4-plex's (20 units) in Mesa Arizona. 

Him and his wife are selling off all their properties except for a beach front property that they purchased in Madera beach Florida. They are selling everything because they are in their 60s and don't want to be in the rental business anymore and don't want their rental properties anymore and don't want them back and they want to move to their new property in Florida to redevelop it and they said they needed approximately $900,000 in their pocket to renovate their Florida property.

For the five 4-plex's they want to seller finance them. The buildings need interior renovations and the seller has approximately 6 empty units out of 20 and the rents are all below Market so this would be a value add project

Originally, they wanted to seller Finance doing a deed of trust and promissory note but now they want to seller finance doing an "agreement for sale" or "contract for deed" 

because they said they are worried about foreclosure. they don't want to go through a Lengthy foreclosure process and they just want to get their properties back easily if i was to default. 

They said part of selling to me is though they don't want their properties back and they just want to be done with them

I currently on 10 properties with 45 multi-family units in the Phoenix Arizona Metro Market and I showed them my bank account balance and I've showed them my credit score and that I've never missed a payment on any of my mortgages including the anyone deal that I did sell her financing and I paid back that seller. And the current seller finance deal that I have that I make payments on time every month

I am a licensed realtor here in the Phoenix Metro and I also am helping my 20yr old brother find a 4plex to house hack so he can follow in my footsteps. He's pre-approved with FHA 3.5% down at $600k so a little less than what some of the 4-plex's are selling for in the valley.

 The seller wants $720k for all 5 buildings but he agreed to sell one 4-plex to my brother for $600k but the $120,000 difference will be tacked on to my seller financed loan amount

Here's the seller financed purchase price when i buy the 4 buildings and my brother Purchases 1 building with FHA. The seller is not paying any commissions or any concessions

 Purchase price: $3,000,000 (4 buildings at $750k per)

Down payment: 10% = $300,000

Loan amount: = 2,700,000

Interest rate: 5.5% interest only

 monthly payment: $12,375 (due to sellers every month)

My main question and concern is does anybody have any familiarity with doing

 An "agreement for sale" or "contract for deed" that they can shed light on ?

I have done two seller financed deals where we just did a deed of trust and promissory note and I have some other properties that I just purchased out right using conventional loans, DSCR loans, VA and FHA for my house hacks

What are the pros and cons as a seller wanting to sell as an agreement for sale? 

And what are the pros and cons as a buyer wanting to buy as an agreement for sale?

How would this affect me remodeling the properties, getting a HELOC or doing a Cash out refinance later? From what I was reading it says I wouldn't actually own the property.

would you personally want to do an agreement for sale? Or Would you just explain better how a deed of trust and promissory note work?

Thank you so much to everybody for your help! I appreciate any wisdom or guidance that you can share

@Brennen Waldron thank you for sharing your story with your land contract. It really helps!. I'm Currently negotiating with a seller right now that wants to do a "agreement for sale" on 20 multifamily units in Mesa, Arizona which is the same thing as a "Land contract" just called something different here. I'm still learning and I wanted to ask

if you have a land contract on your property and it is locked in at a 2.5% interest rate.

why would you want to go to the bank to refinance at a higher interest rate? 

and since you don't actually own the property and the deed isn't in your name because you're doing a Land contract. Are you able to go to a bank to do a HELOC OR is your only option to sell or do a Cash out refinance?

and if you don't actually own the property can you receive any tax benefits such as completing a cost segregation study and using depreciation?

and what if the seller goes and gets more debt on the property and put liens on the property and what about property insurance?

I don't mean to bombard you with a bunch of questions but this is all so new new and it's cool learning a new strategy

thanks again for sharing your story for everyone!

how does FHA 3.5% down work in California with a 2-4 unit?

i know you have to meet the self-sufficiency test when it comes to the rental income.

has anyone else ran into any other challenges with FHA on a 2-4 unit in California?

Thank you , @Dan Schwartz!!!!! for sharing your resources and your experience!!

 I spoke with the property management company that manages the apartment communities branded as the Tides here in Arizona, and several other owner/managers and they all said the same thing as you. they are only collecting  the city tax for the transaction privilege tax which is paid by the tenant and then owners need to pay to AZ Dept. of Revenue. They are not paying the county anything

I also met with a family friend who happens to be an Asset manager and he showed me their TPT (Transaction Privilege Tax) license which only had code 045.

Thank you so much for confirming that I have the wrong codes ( 029) on my TPT license. I am having my CPA company called Fox Peterson do my taxes for the properties and handle the monthly TPT reporting. They have made several mistakes already that I am finding.

 They are charging me $80 per month for the monthly TPT reporting. Now, I just need to figure out how to have them correct this because the GOV thinks I owe them extra money because of the wrong codes..

you wouldn't happen to know how to make corrections to a filed TPT would you?

@Doug McVinua and @Bruce Woodruff



Thank you Doug & Bruce for the quick reply! it really helps. All my 41 units are multi-family long-term rentals (4plex's up to a 7 unit)

I attached and highlighted my transaction privilege tax license. Where I am being charged 5.6% for Maricopa county & 1.5% up to 2.3% for the city. 

are you also being charged for the county?
And if you are being charged for the county are your tenants paying for the county and City?


Let's say for example in the city of Mesa, AZ the tenants will be charged 2% for the city and 5.6% for Maricopa County. all together that is 7.6% on the rent & other income. let's say the rent is $1,500 per month . and the supposed combined tax is 7.6% (5.6% & 2%) that equals $114 per mo the tenants are supposed to pay and then I collect and pay to the AZ Gov. That just seems like a lot of tax to pay for tenants living in apartments

I reached out to other property managers and property owners and they said they are only paying the city tax

I looked on the az dept of revenue website for the transaction privilege tax license and I don't see where it says rental real estate pays the county. it just has a rental matrix for the different city tax rates.

Side note. what do you charge Doug to manage multifamily?

Thank you so much for your help!! 

Hey BP, I need help with the Arizona transaction privilege tax license. do you guys know or do you know someone that would know how to help with this?

I have a question about the Arizona transaction privilege tax

Do you just have to pay the city a percentage ? For example the city of Mesa is 2% I believe and that is passed through to the tenant

or is it the city, county and State each owed a percentage? For example the city of Mesa 2% Maricopa County 5.6% and the state x percentage? 

And which one do you pass on to the tenants? Just the city or all of them

Thank you for your help!

on the Arizona MLS there's currently 14,828 (active 13,923) and (coming soon 905) residential properties. on 06/26/2022

in April 2022 we had 8,726

in beginning of June we had 11,371

Supply is increasing and I'm seeing more price reductions and some properties come back on the market.

we still have less than 6 months of Supply but it is increasing and there are less people competing and submitting offers

where you able to find the "Just Cause" Eviction Disclosure? How is it being a landlord in California so far? I'm curious to hear because I'm interested in owner-occupying a small multifamily in San Diego County

Have you guys learned anything new on California Rent Control and evictions? about AB1482 

check this link out. should help explain some things

https://cal-rha.org/advocacy/a...

 Hey guys just wanted to follow up. on your Mixed use deals. Did you end up submitting your offers?