All Forum Posts by: Konrad L.

@Bill Gulley that is exactly right.  I would like to be protected in any case, as I'm sure, they would also. The 15% money going in is $18k. 

I will look into a note and deed of trust.

Hello BP...  I am looking for expertise advice and any suggestions you may have for me regarding a flip, which is about to happen, and I would like to make sure that am protected and also not missing anything.  

I am in a business deal with two others, for a total of three, to buy, rehab and sell a house, which we will be closing on by next week. The two other members have a licensed business partnership together - meaning they have a real estate business with both of their names on it.  This would be my first flip, and theirs. While we are all new to flipping, they have more expertise in real estate in general, as agents and contractors.

They have the means to private money which will fund 85%, while I have the remaining 15% - this is where I come in - kind of a third wheel.

The agreement is that I contribute my private money and some time for basic rehab, in return for the experience, learning and 15% of net profits, and of course my 15% of initial capital, while they split the rest among themselves.

They said  that they will write up all of our contracts, including mine for the 15% initial project capital, as well as, my 15% return on net profit.  I have done business with one of them before and I am comfortable going this, but I'm sure you all understand that I would like to be protected.  

Again, I am new to this, but I am excited to learn the process and everything that this involves, and I am content with the 15% return.  With that said, please understand if I may sound naive. 

So, will a basic contract showing my initial 15% and 15% return be enough?  Should I expect/demand the contract to state that I will be guaranteed return of my initial 15% investment, as well as, the 15% return?  Meaning I put 15% and I want to get the 15% back, plus 15% on profits.  In terms of putting in additional work and time, this is really vague.  Not sure if it will be stated in the contract but it's really subjective.

Any and all advice is welcome - thanks in advance.

Konrad

Nice progress Mike.  The property great! 

@Nicole A.

@Steve Babiak  Is there a standard form you guys use for renewals with such options and 'check boxes' for the tenants to sign, or is this something you have drafted yourselves?  Is this considered an important legal doc, or just a gateway to signing a contract, which they would supersede the renewal option doc?

I really like the strategies Steve, Brad and Frank point out and the thought process behind them.  This will definitely be something I will put in tact for the next lease signing and keep in mind.  Thank you all for great feedback.

@Michael Noto I'm a bit worried about the month-to-month lease.  I think I'd be more comfortable knowing when they at least have an option to vacate.  Maybe I'm overthinking it.  I am from Meriden and my property is also in Meriden.  Glad to see a neighbor on here.  Where do you have your property/ies?

 Good idea also.  I'll be sure to do that while singing my next lease.  

I'm assuming if you have that in place, if you don't hear anything from the tenant before the 60 days of the lease's end, then they automatically renew, correct?

Thank you both, Lou and Nicole.  Great points and information.

@Lou Castillo I just purchased this property in April and have inherited tenants for both units out of three (one being vacant).  However, they have told me already that they like the fact that I take care of the yard and try to make it look nice.  I'm thinking of buying a used playground off Craigslist for their kids to play.  I'm hoping this would also attract families in the future.  With that said, I think the landlord/tenant relationship is good.

I really like the idea of making an improvement to their unit if they decide to stay as an incentive, improving the property at the same time.

@Nicole A. I will have to check my lease in regards to the month-to-month option.  I was under the impression that it ends at the lease end date and then it's either renew or leave.  Obviously, I'd prefer them to renew rather than the month-to-month.  

I will definitely use your option categories for submitting such a letter in the future.  Since it looks like I'm a bit late this time around, I will most likely see them this weekend.  Afterwhich, I'll casually ask them and then let them know that I'll drop off an official letter, where they can check off a box of choice of their intention.  Keeping my fingers crossed for option 2!

Hello everyone,

I have purchased my first 3-family investment just a little over a month ago and the current lease on my 4-bedroom unit will be ending on June 30, so the tenant has one more month of official occupancy.  

This being my first, I'm a little unsure on how to approach the tenant and ask whether they will be renewing, or if they will be moving out.  When I first talked to them, they said they would like to stay (they think).  I would like to address this, this weekend, as if they will be moving out, it would give me time to prepare for a new tenant.  

So my question is, should I just casually approach them and talk to them about whether they want to renew and stay, or is there an official form I should drop in their mailbox.  

If they do renew, should I seek 6 month, 12 month?  What is the standard?

As I said, it's a large 4 bedroom unit, with a family and two brothers living there.  They are nice people that actually help me around the yard, bring flowers for the front of the house etc.  I would like them to stay, but obviously I can't make them.

That leads to, if they do stay, should I risk raising their rent a few dollars, or just keeping it the same for the next contract?  Currently, they are paying $1,325 and I pay for water.  Should I be firm with a $20-40 increase, or let them slide, till I become more comfortable over the next year?

Thanks in advance!

Konrad

I recently purchased a 3-family home and also deliberated this same question for a while and finally decided to go with the replacement cost of the house policy.  The difference between cash value and replacement value was a few hundred dollars more per year, but as you already know, allows for much better coverage.  The savings, if I was to go the cost value way, wasn't worth the loss of sleep for me.  I'm glad I made that decision and I feel more comfortable going that route.  Good luck on either decision you make. 

@Marcia Maynard Thanks for your feedback Marcia. 

In regards to your first bullet, I will be occupying the property.  I will be living there for a few years most likely before moving on.  

2, the broker who sold me the policy actually left two weeks ago to another company, which makes me think if this is related, or just a coincidence.

3, I'll have to look further into this.  There may be more.  The property isn't run down by any means, but it's also not new. 

4, yes, the property has two units rented out already, and a vacant unit for me.

Either way, I'll try to find out more as to the reason and will look into Safeco and others.  I guess it's just a bit stressful due to timing, but I'm sure could be resolved.  Thank you for chiming in.