All Forum Posts by: Skyler Smith

I'd take a price reduction for *any* reason 😜 There's nothing wrong with asking the seller for a concession based on high utility prices. Not all sellers will go for it. I think the best course of action is going back to a spreadsheet and running the numbers and deciding if this purchase still fits your goals. I have a property that I pay the heat for - and the highest it went this winter was $750/month. Yikes! That number looks awful, but if you look at it in the big picture the property still makes sense for what I'm trying to do.

I have a property that has a gas bill higher than $350. Just because I write the check doesn't mean that I "pay" for the gas, I figure the cost before setting a price to rent the place out. 

I wonder if you could offer tenants an "either or" scenario - where you offer lower rent if they will pay the utilities, or average out last year's utilities and add that to their rent payment. As far as saving the environment goes, tenants paying their own utility bill is extremely effective. 

Which city? Any guidance on purchase price?

If you want to sue them for performance or for specific damages (appraisal and inspection costs, lost rent, etc.) be sure that you do not accept your earnest money deposit back. Read that line in 16.2 carefully, as accepting your earnest money deposit plus the extra $300 that they would owe you will forfeit your options to take any additional action. It sounds like they are also not savvy investors so they might not do this, but one way to avoid any future problems would just be to have the title company return your earnest money and give you a $300 check and hope you cash it. No trouble leaving that in escrow until you decide what you want to do.

In the future I'd suggest getting a real estate agent on your team for any more deals you end up doing. Not only will they help walk you through this and talk the sellers off the ledge, they also carry errors and omissions insurance that will step in if there is an issue with the contract not being filled out correctly. If this goes to court and the sellers bring an attorney, they could potentially come after you for any mistakes you made when writing the offer. Just missing one initial could make the contract not binding. My guess is you don't have insurance that will protect you in that situation, where a licensed professional would have the strong weight of their insurance and their brokerage behind them to apply leverage and pressure. They never should have been able to get this far, trying to cancel because they didn't see your appraisal. 

Pro tip: I would NEVER share the appraisal with the seller unless you absolutely have to.

Is this going to be in Springville? If house hacking a 3-4 plex that has 3 bedroom units is even on the table then I'm really surprised you don't qualify for 2 mortgages at the same time. I have also been able to claim rental income if I have a lease in place, as was suggested before. If your LO doesn't know how to do that without asking their underwriter or checking, you need to talk with someone else. Let me know if you can't find anyone, I've got someone up here in Logan who is the best.

My question is "why is there so much water???" Sometimes it feels like water is coming from everywhere into everything. You will be a good resource on BP.

Do you have anyone that comes up to Logan by chance?

From everything you've shown us so far I would probably sell once the current lease is up. $140/month is nice cash flow, but if your investing horizon is just 2 years out vs now, I would probably capture the equity while the market is good. That cash flow is nice, but sounds like it's probably tight if something goes wrong. So much could happen, and you're one disaster or problem tenant from not having a viable exit 2 years out. If you were deciding between selling now or selling in 10-15 years, I'd probably say hold. Where it's such a short time frame, I'd say take the money off the table and get going on that 203k rehab, which will probably accelerate your equity much faster than $140/month.

$140/month * 12 months / $30,000 equity = 5.6% return on equity per year before depreciation, loan pay down, and an interest deduction. All said and done you're probably at 8-9% annual return. If you're already looking at the 203k rehab, put it into a spreadsheet and see which will give you the best return. Hopefully you'll grow your equity much faster than that on your new home, and you've already seen that equity on your primary residence is tons easier to tap in to than a rental property. Let's not forget to figure what your return on that equity will be on the next flip you plan to do. You'll probably double that $30k in a year on a decent flip. Also, before making your final decision, double check the $140 cash flow figure. How much in repairs + vacancy is factored into that $140? You might have a bit more risk than initially estimated if the rent is just $140 more than the mortgage payment.

If you'd like to message me the address I could send you some sold comps in your area to verify the sale price you're using in your projections.

I would make sure that $250-300k figure isn't starry-eyed. If the ARV is really that high for the rents you're getting, and If it is really that affordable to fix the foundation issue (I was expecting you to say about $100k) then I would go through with it. If you don't want to deal with the headache, or don't have the cash for the rehab, for sure don't run from this deal. Just wholesale it to me. Do you realize how many Utah investors would love to have a 4plex under contract for $51k? Sign me up!!

@David Healey Only Brandon could tell us if he will eventually get his license, but I think he will. It makes so much sense to have, it's not too expensive to keep up and you get access to a lot of data. Some investors talk to so many home owners, but just throw away any retail leads they might have. Licensed investors can refer those out to a trusted agent and get a referral fee. Wholesalers especially who do a lot of direct prospecting could make quite a bit of money with this strategy. It's not uncommon for agents to pay 25-35% of a closed commission for somewhat qualified leads. 

I'd be interested to hear why your mentor doesn't want you to have your license. I agree with focusing on just one thing at a time, but being licensed has been only a boon to my investing. Aside from MLS access and making my own offers, it gives instant credibility when I'm talking to owners, buyers, and other agents. The biggest complaint I see investors use is that they have to disclose that they're licensed. I don't really see enough drawbacks, aside from the several hundred dollars in fees that you end up paying to keep it up every year. After I got my license I also ended up transitioning in to quitting my job and working as a full time agent. It's great!

Hey David, great to have you here! Very smart to get reading, and I think @Brandon Turner might change some of his strategies with agents after he ends up getting his license, but his advice is solid.

Sorry you've struck out with agents so far. Good news though, I think it might be in the way you're pitching your agents (and possibly not finding the right ones.) Here are my thoughts in no particular order.

Make sure you understand the implications of your numbers. When you say they need to cash flow $200 per unit, give your agent something more to work with. If you're putting 30% down then it's much easier to get that cash flow. If you are putting 3.5% down on an FHA it's a whole different story.

I ran in to the same issue as you when I started out, and I ended up getting my license for that very reason. There's more to it than just having the agent fire off the offer, but I'm sure you'll find someone to do it once you know how to approach them. In the same way you want to present your best face to the bank and use terms a bank will want to hear, I'd practice how you approach a Realtor.

You'll want to suggest that they set you up with automatic "hotsheet" emails with your criteria, so you will always know when a new multi family building pops up or changes price. It's free for them and keeps them from missing anything.

It sounds like you're planning on making offers every other week, so keep in mind how much your agent will be making per hour if you only buy one property a year. I've had clients asking me to do exactly what you're talking about who understand that it would be too much work to call the listing agent, ask the normal questions about the property, tell them a little bit about my client, explain that we've got an offer, but also why it's coming in low - and why they should take it anyway - so they ask me to just submit the offer and be done with it. Imagine the listing agent getting an email from an agent they haven't talked to on a property they haven't seen or shown for an FHA at 40% below asking price. How do you expect that offer will be presented to the client? Perhaps consider calling the listing agent yourself and do some of that leg work. You might never have to work with that listing agent again, but your Realtor almost certainly will.

Be the type of client an agent could only dream of. Get a mini pitch deck together, maybe build a spread sheet that you can fire off that practically writes the offer itself. I would die if a client asked me to write an offer and emailed me this info:

MLS:

Tax ID:

Purchaser: (e.g. my cool LLC)

List price:

Offer price:

Highest I'll go:

Highest I'll REALLY go: (gotta find an agent you trust to use this one)

Concessions:

Special inclusions/exclusions:

Home warranty: (yes/no)

Due diligence deadline:

Financing/appraisal deadline:

Settlement deadline:

I could write that offer in 5 minutes and be on my way, especially if you already had a chat with the listing agent. ("Yeah I just wanted to personally introduce myself and let you know that I do have an agent, it's Skyler and he'll be sending my offer over shortly. The property looks great, but it needs X and I'll have to get in there and Y, so the offer is coming in at $Z for that reason.")

Finally, you'll have to be buying some place like Ogden or Box Elder county to really score some of those awesome multifamily deals. Otherwise they'll never let it go for 20-30% below market if it's on the MLS the way things are going now. Shoot me a private message and count me in on your next round of agent interviews. I think we could work something out.