All Forum Posts by: Matt Devincenzo

I believe if it went to auction and the high bid was 50K you would have the option of bidding and keeping the property yourself (you pay yourself to keep your property haha makes perfect sense) which is how banks end up with REOs some of the time is they weren't satisfied by what the max bid was and decide to keep the property instead.

I'm sure Bill Gulley can confirm or clarify that though for you.

I'm actually really interested in this because I have a couple owner financed properties from before SAFE act and would like to do more now as long as I stay compliant and out of trouble so this is a great discussion.

That won't be hard at all, when you close on the deal you would now own the property and have a note created that the current property owner would own for the remaining balance that needed to be paid off. The terms of the note would basically state that the loan amount is for 108K(120-12) amortized over 30 yrs with monthly payments of $580 (5% int PI payment only). It would then have something saying that the note balance had to be paid off at or prior to year 10 on whatever the remaining balance is (about 90K at that point).

You would need to worry about the negotiating the terms of the note and everything else should be handled at closing by the title company. Just make sure whatever title company you were using understands it's a owner financed deal and that you need it recorded.

That kind of depends, a few years ago when I did some side handyman work I have given bids that were dependent on me getting the whole job, because I was charging fair rates but wanted to make an overall amount as well, or I was willing to redo subflooring for a couple hundred bucks but didn't want then not get the painting work that was going to make the majority of the money on the job for me. And yes some people do feel like they can pick and choose parts of a bid, which sometimes is the case but not always.

I did give itemized bids still so they could see why I was charging what I was, if they didn't like it we can discuss or I could just have said take it or leave it or adjusted my number accordingly for the reduced amount of overall work I was going to receive.

I think the price is too high, and I think the fact that it has been on the market for 6+ months prob means that you could get a better price, I'd say more like 95-100K(just off the top of my head)

As far as the terms, honestly whatever you can negotiate is what you can get. The reason you probably see alot of 5 yr balloons mentioned is because that's kind of a common bank loan balloon to have on a commercial note.

You need to find out what the owner is looking for, if he just wants out completely see if maybe you can negotiate a lower price with a 2 year balloon to just the rental income on your schedule E so you can refinance as soon as you can and pay him off.

If he's ok with long term cashflow just doesn't want the LL part anymore see if maybe at closer to full asking he'll do owner finance with no balloon or with a 10 yr balloon.

On any of them I would do a 30 amortization schedule though, you can always pay it off within 10 years but then you're not stuck with the high payment when you do need the extra for a repair or whatever else comes up

I'll call Jon Holdman back in here so he can explain from his perspective, but I'll try also.

The idea behind the benefit of a long term lease is the elimination of turnover and vacancy which obviously improves your cashflow greatly. All your other expenses really occur no matter whether a tenant is there or not (taxes, ins, maintenance ect) so eliminating those 2 items has the greatest direct effect on your expense number.

The big disadvantage is the tenant has a legal right to stay in your property because they have a piece of paper that binds you to provide housing in exchange for their rent payment. So if they stop paying you can kick them out, BUT you have to get a judge to say that you can legally do it which means court and an eviction.

With a month to month in most if not all states you just have to give them say 30 days notice and they're out, which is generally less time than it would take for an eviction.

The biggest thing with all of this is a lease binds you to uphold your agreement and the tenant theirs, but a tenant will just move out if they really want to and not have a second thought about it, whereas you will be stuck by that lease no matter what and if you want to enforce your lease you would still need to take them to court for a judgement .

So a lease really can tie your hands when it comes to getting rid of a problem tenant, that doesn't mean it's a bad thing just different strokes for different folks, and can have a lot to do with the demographic and location you're renting to as well.

Why the desire for a 10 year mortgage? with rates so low right now I think it would be best to lock in a long term low rate if at all possible.

I don't know if you've had an opportunity to look around here much yet, but read up on the 50% rule, which basically says 50% of gross rents will be eaten by expenses. I know it sounds like a lot but when you start thinking about it it makes sense (PM, taxes, ins, vacancy, legal fees, turnover ect) so start doing some math with that in mind and you'll start to see what you need to look for in an investment property.

Hey LaTray welcome to BP. I think the question is what is your exit.

If you want to be a LL and have cashflow then obviously the multi is the way to go, which could be a short sale also.

If you do the SFH it sound like you'd be trying to do a kind of long term flip and sell in 1 yr. So the question becomes what would you be doing that would add value and what would exit value be. Meaning if you buy for 50K and put 10K in updating back out commission, closing costs and concessions you'd need to sell for about 75K to break even, can the SFH you're thinking of support that kind of value for sale?

It really depends on what you want long term, if your goal is to be a LL then maybe go the OO multi and every couple years get another OO multi until you have enough cash flow to move on to other purchasing techniques.

Or if you don't want to LL and think the flip numbers work then do that and have a chunk of cash to use for another flip next year.

I will say that while I don't have experience in CT, it seems that the area(New York, Mass) is fairly tenant friendly and would assume CT is as well while FL is more LL friendly.

Also I googled and it looks as though CT has a net loss in population between 2000-2010, while FL had a net gain of 17%.

I will admit I am probably biased being a FL boy born and raised, but those factors along with no income tax, lower cost of living(which can translate to cheaper repairs), and lower price point for properties would lead me to FL.

Now the disclaimer, I have been seeing prices run up the last year due to tons of foreign investors it seems and FL, Vegas, AZ are those areas hit hard by the bubble due to lots of speculation, so I would be cautious of that again because it is completely possible that there could be a mini run going now, however if you buy right and are getting good cash flow I think that that becomes less of a concern since you are focused on say 10 years from now not next year.

I completely disagree with Prashant P., while maintenance issues are a cost of doing business, tenant caused damages are not.

Now if your lease is not specific enough on who pays what then maybe you have to eat it for now until time for renewal and sign a new lease.

However if a tenant is pouring stale popcorn down the garbage disposal and doesn't think about the fact that unpopped kernels will cause it to bind and stop working, that is not your fault and not a maintenance expense but a damage.

BTW that happened to me that's how I know they will do it. I retrained my tenant by getting it fixed and letting her know that she was responsible for the expense, so next time she will consciously think "I wonder if this should go in the disposal...maybe not" because it is now her expense not yours otherwise why not keep doing it.

You said the washer/dryer hose came off, did you move the washer/dryer around and knock it loose...no the tenant did.

The breaker/fuse tripped so someone overloaded the circuit, did you plug the hairdryer, fan, laptop, tv and sound system into one plug....no the tenant did.

The sink got clogged, did you pour bacon grease/mud/potato peels down the drain...no the tenant did.

I say all of this because the tenant has no reason to try to make sure they don't cause damage because they will just get it fixed free. And no I'm not some mean intolerant LL, as a matter of fact I rent here in CA and LL back in FL where I'm from originally, and I have plugged up 2 sinks in 2 different places I rented, 1 the garbage disposal ended up not working very well and I put too much down it and food got stuck in the drain the other I tried to wash potato skins down at 3 in the morn after being up with a screaming baby for 3 hours and not thinking, you know who fixed both those issues...that's right the tenant did.

And if your PM doesn't respond find a new one, I'm going through the same thing now. They do a good job on the prop but I never hear back so, we're going to talk about communication, if they don't start doing it then I'll find someone who will.

http://www.housingnyc.com/html/resources/attygenguide.html#34

APARTMENT SHARING

It is unlawful for a landlord to restrict occupancy of an apartment to the named tenant in the lease or to that tenant and immediate family. When the lease names only one tenant, that tenant may share the apartment with immediate family, one additional occupant and the occupant’s dependent children, provided that the tenant or the tenant’s spouse occupies the premises as their primary residence.........

LEASE SUCCESSION RIGHTS

Family members living in an apartment not covered by rent control or rent stabilization generally have no right to succeed a tenant who dies or permanently vacates the premises. The rights of a family member living in a rent controlled or rent stabilized apartment to succeed a tenant of record who dies or permanently vacates are covered by DHCR Regulations.

Under these regulations, a “family member” is defined as a husband, wife, son, daughter, stepson, stepdaughter, father, mother, stepfather, stepmother, brother, sister, grandfather, grandmother, grandson, granddaughter, father-in-law, mother-in-law, son-in-law or daughter-in-law of the tenant; or any other person residing with the tenant in the apartment as a primary resident who can prove emotional and financial commitment and interdependence with the tenant. 9 NYCRR § 2520.6(o)(2)......

Those are just portions of items covering that but if you go to the page you may get a better idea of what the law says on the matter.