All Forum Posts by: Joseph Belgrad

My partner rents out her family's vacation home on VRBO. 

She got a message a few days ago that said:

"Also, not sure the last time you saw the property but the back deck has exposed nails on the boards - my husband stepped on one of them. There are also multiple dry rotted boards where the legs of our chairs / shoe heels have gone through."

She then got a message from the tenant yesterday that said: 

"I know the plumber came but we did not have hot water yesterday and again this morning. I would like to request an additional refund as we had to book hotels yesterday in order to shower ($580) and the ER visit for the tetanus shot is estimated to be around $2000. What should have been a relaxing vacation for a wedding turned into a very stressful and expensive week resulting in half our party needing other accommodations."

When we talked to the plumber, he had said the hot water was working when he left and he gave them his number to call incase of further issues, but he said he didn't hear back from them again.

My partner asked her to send pictures and she sent the attached. The nail is in the picture with the sneaker and is right in front of the sneaker. It is not something my partner has heard of before and her family and other guests have stayed at the home throughout and summer, up until 2 days before this renter and they have never mentioned it. 

Also, in the rental agreement, it says:

"HOLD HARMLESS AND INDEMNITY: OWNER of rental property shall not be liable for
any damages and/or injury to TENANT and/or their guest(s), or their personal property
due to TENANT’S acts, actions or neglect. TENANT agrees to hold OWNER harmless
against any claim for damage and/or injury due to TENANT’S act or neglect or their
guests act or neglect."

It also says:

"MAINTENANCE: It is expected that major systems in and around the property will break
down from time to time such as washer, dryer, refrigerator, etc. OWNER will attempt to
repair the problem as soon as possible upon notice by the TENANT. OWNER assumes
no liability to TENANT if such should occur as all products have a useful life and break
down occasionally"

My partner has a signed copy from the VRBO tenant.

The way my partner has left it with the tenant is that my partner is investigating the issue and will get back to her.

Does anyone have any advice on how to handle this? Is my partner liable to pay for those costs? If so, how much would you pay? If not, what would you say to the tenant?

Hello Everyone,

This is in St. Kitts. 

My current landlord is a general contractor and built the apartment complex I live in. It's a nice complex with maintenance performed expediently. He's a great landlord and well liked by myself and the other tenants.

I've been in real estate for a few years and have managed several multifamily full-building renovations and have decided that full-time construction management is not how I want to spend my time. 

I approached my landlord and told him that I was interested in building some student housing and asked if he and his partner could manage the construction and furnishing of an apartment complex and then manage the property after it was finished. My fiancée and I would be financing everything and create the overall vision and direction of the project. He said he had just the piece of land in mind as he had previously planned a project with another investor several years ago who got sick and was no longer able to do the project. 

We used his attorney to acquire the land, and he's also working with the city to acquire the government owned plot next to it for me. He sent a crew out to clean the land and prep it for construction, and we've had an architect come out, and we have some preliminary drawings. So far, he hasn't charged me for any of the work he's done. I've just paid for the land, legal fees, and land cleaning. I've brought up compensation a couple times, and he's told me that he's more interested in the long-term relationship than getting paid right now. We do plan to draw up a full contract once we have the completed site and architectural plans so he'll be able to do a cost breakdown of the construction. 

My fiancée and I hold weekly meetings with him and his partner to stay on track with all the preparations. Originally, my fiancé and I had planned to pay him a salary to manage the construction and then pay him a percentage of income to manage the property. However, given the amount of involvement he's had in making this project come forth, our long-term relationship plans, and that I wouldn't be doing this project without his and his partner's involvement, I'm beginning to think that an equity stake in the rental profits might be more appropriate. 

My preliminary thoughts would be to do a 60/40 split on the rental profits and sale, if it comes to that, where he and his partner would put in the sweat equity of managing the project and rentals while my fiancée and I maintain ownership and supply the financing. While giving 40% profits would be quite a bit more than paying him to do the project and managing, I feel it's more representative of what he's contributing and ensures he has a vested interest in the property and its success. What are your thoughts?

Jose, look for Brian J Allen here on BiggerPockets. He sees every multifamily property that comes on the market in the Worcester area. He's been in 1500+ over the past year alone. Multifamilies in Worcester are truly his specialty, and he has an ear on many off-market deals that are not on the MLS. He will teach you everything you need to know when purchasing in the Worcester market. He is a wonderful source of information, and I highly recommend him. He is perhaps the most valuable member of my team.

Hello Paul, and welcome to BiggerPockets. I do not have a whole lot of experience with legal and zoning, but I have been recently acquired a property that has been assessed as a 3 unit for the past 30 years, and the building inspector says is a 2 unit. He wants me to get a change of use permit requiring zoning approval. With the research I've done around this, here are a few things to look out for. This is in the Worcester area so some of the laws may be different. 

1. Check the zoning laws http://www.bostonplans.org/zon... to see what requirements there are for three family houses. Yu need to make sure you have enough off-street parking spaces (usually 2 per unit). You also need to make sure you have enough land (7000sqft for a 3 unit in Worcester). If you do not have enough of either of those, you can either include it in you plan to create more parking, or you can apply for a variance. A variance is basically a request to the zoning board to make an exception. The permit will have the checklist of items that you need, some of them are listed below.

2. You'll most likely need a plot plan confirmed by physical measurements. This can be done with a surveyor. Cost ~$1000 +/-  a few hundred.  

3. If you are making changes to the elevation or the footprint of the house you will need a rendering or elevation to scale of the proposed project. You can usually have a draftsperson do this though you may need stamped architectural plans if they're being picky which can run several thousand upwards to ten thousand. For the permit process you will definitely need stamped architectural plans which, depending on the complexity of the project, can be quite pricey.

4. You need to get a certified list of abutters and abutters to the abutters within a certain radius. You can get this at the zoning office for usually around $20. you'll then need to make two sets of stamped envelopes with the assessor's address labels and for the abutters. This is for the zoning office to send out notification letters to the abutters to come to the zoning hearing. There is also an appeal period (20 days in Worcester) in which abutters can challenge any decision in your favor. It's usually worth reaching out the abutters in advance to let them know your plans and clear up any possible grievances through a conversation prior to having the notices sent out.

5. Depending on your budget, it's usually worth retaining a zoning attorney to help you through the process. This can range all the way up to someone doing all the work for you (several thousand dollars) to having someone on the side for consulting while you go through the process on your own ($200-600/hr). Alternatively, you could find someone (i.e. a mentor) who has experience and is willing to help you through the process.

6. Many of these type of projects can be political in that if you know someone in a position of power or someone who has experience doing these types of things, they can help make the process easier for you by applying pressure in the right areas.

7. Also, feel free to reach out and call the zoning office and ask them what you will need to do to make what you want happen.

I don't know anything about setting up HOAs or any of the other things you talked about, but hopefully this gives a little bit of an idea about some of the zoning process. Best resource is the zoning office. They will tell you what permits and variances you would need to get, and those all have the checklists on them.

Thank you

I'm under contract to purchase an assessed 3 unit property. The city has declared the third, basement unit illegal and has given the seller notice. One of the other tenants also put an illegal pool in the back yard without required permits or fencing. I knew these going into the sale. The seller lives quite distant and is unable to manage these issues. As such, we agreed on a low price of 210k in exchange for me waiving all contingencies and forgoing smoke certificates. The only requirement was that the tenant in the basement unit would be gone at closing due to the unit being uninhabitable. I'll have to put a lot of work and money (50-60k) to bring the unit up to code, but it should be worth in the low 300s once done.

Well, the tenant in the basement unit refused to leave. As such, the sellers asked for extensions for closing. First it was 30 days, then it was 45 days. Before approving the 45 day extension, I asked for documented proof that the tenant would really be leaving. They said the tenant purchased a mobile home and were going to provide a copy of the deed as proof. The tenant refused to give them a copy. Then they offered a 5k closing stipulation that if the tenant were still occupying the illegal unit by closing that they would allow me to keep 5k from the price to go towards eviction costs (when the moratorium is up). I said that I wasn't going to deal with evicting a tenant and instead suggested they offer the 5k to the tenant. 

Then after a couple weeks I suggested that while I wouldn't do a 5k holdback, I could see doing a 15k (thinking we might negotiate to 10k) holdback. The sellers then said that the tenant said they were going to need two more months but would be willing to leave immediately for 5k.

"Great!" I thought, "Now the seller can just give the tenant the 5k they offered me, and then we're all set." Nope. The sellers are now saying that they want me to cover 2k, they cover 2k, and the realtors to cover 1k. They also said if I don't agree to that then they are walking. 

I don't want to cut into the realtors' commissions. Also, the sellers had ONE JOB - make sure the tenant was out. I don't really feel comfortable paying for the one job they had to do after waiving everything else already. Why not just give the tenant the 5k if they were prepared to give it to me anyway? At this point, I'm considering walking as well. It's just such a good deal, I would hate to lose it because of my ego over 2.5k (assuming I can get them to split it 50/50 with me rather than cutting commission). 

What do you all think? 

If you are the sole member of your LLC a lender may still consider you to be a second-time home buyer. I would contact a lender and see what they have to say about that. The Fannie Mae and Freddie Mac loans are not "stackable" with the FHA loan as you're required to live in the home purchased using the first time home buyer programs unless you refinance. The Fannie Mae and Freddie Mac have more restrictions (Homeone program only works for single unit properties) and also might require you to take a home ownership course depending on certain circumstances.

Hi Mark,

You can't really lose the eligibility of the first time home buyers programs. The FHA loans are structured so that you can only have one at a time (though there are ways around this), but that doesn't mean you cannot use an FHA loan more than once. You're just required to live at the property that you use with an FHA loan for at least a year. This is the principle behind house hacking.

So to answer, it doesn't matter if you put the HML home into your LLC or not as far as FHA loans are concerned. There may be other reasons why you may or may not want to put that first home in an LLC (liability purposes, refinancing, etc.)

Hope this helps!

Thank you, I had not known that. Also, technically the cash is coming from a line of credit at 2.5% so I had the mortgage on there as "0%", but in actuality would be 2.5%. Just meant that I wasn't charging any extra interest on it. I could have been more specific.

I'm entering into a partnership with a wholesaler for flipping houses. Our target is turn-key properties needing very minimal, if any, work. For example, he has located a property that negotiating with the owner he can get for 310. He already has a buyer agent and buyer lined up that want to buy for 365. The wholesaler does not have access to any financing. We want to create a partnership in which he adds 100% sweat equity, and I add 100% financing. What would be the best way to structure this?

My thoughts are to create an LLC with us as 50/50 equity stake.

Initial LLC creation cost (~$1000 here in Massachusetts) is split evenly

I would then do a 0% interest mortgage for financing the LLC. He then would do all the paperwork to make it go through as well as take care of any work that needed to be done to the property. Profits split 50/50.

Have a clause that if any work needs to be done to the property then additional loan money would be given at interest (not sure what a good amount would be).

Disputes would be handled through mediation, followed by arbitration.

If someone wants to leave they have to buy out the other person's equity/debt. 

He finds the deals and sets the terms of the deal with the other people involved with the deal. I either approve or deny moving forward with the deal.

In the case of one partner dying, assets are sold off, debts are settled, remaining profits are split 50/50 between surviving partner and dead partner's estate/closest kin. Losses are cut. 

Dissolution optional after any flip. 

What do you think? What should be added/removed. What seems too skewed one way or the other? Of course I'm going to have a lawyer look over and draft a formal agreement, but just want to get as much of an idea as we can before sending to a lawyer to minimize legal fees.