All Forum Posts by: Max Gradowitz

Property management company, definitely. I work way too much to manage rentals myself. The management company uses their own lease agreements usually, which are probably fillable boilerplate forms they had an attorney custom draft at one time. 

If you do everything yourself, be smart and have an attorney with real estate landlord/tenant experience custom draft one for you and explain each and every clause in it, and put any specifics in there you want due to your investment situation.

I've had good success with Section 8, although a lot of others will tell you the opposite. The checks go straight to you or your property management. There are negative stereotypes out there. I think I've had fairly good experiences by strongly vetting potential tenants. Background check, credit check, confirming any sources of income, etc are all well and good, but what many people (and even property management!) sometimes fail to do is actually contact their prior landlords or property management companies to ask questions like did they pay on time, did they take care of their unit, etc.

Understand the legal differences too: longer notice to vacate periods are required, in CA at least. I'm not sure about other states. Read up or consult an attorney about the legal differences. But most importantly, strongly vet those new applicants!

There are a lot of options out there. What it boils down to is whether you want to house hack and finance with a low down payment loan in the super expensive LA area, or whether you want to finance an investment property in an affordable part of California (central valley for example) or another state, which will require more like 20% down. With the numbers you posted, I think you might be priced out of the LA area, but to be sure you should consult a lender to see what financing options you qualify for and see how it compares to LA and and less expensive areas outside LA. I live in an area where having $50k to put down allows you to buy a good cash-flowing 2-4 unit, so a lot of my RE clients are from the LA area and buy here for that reason.

Either way, welcome and best of luck to you in your investing endeavors!

You really should consult an attorney who has experience with entity and partnership formation. 

I work with and advise wholesalers all around California. Is it possible the attorneys you contacted don't know about wholesaling? Certainly. Wholesaling is relatively rare in certain areas because properties are so expensive, so attorneys in those areas might be clueless as to what it is. However, is it possible they know a lot about it and are advising you properly? Absolutely. Attorneys advise you of risks, so there is a good chance that is why you are getting push back. Even if you go about it the least riskiest way possible from a legal standpoint (which is really what you should ask a wholesale friendly attorney how to do if you decide to wholesale), there is always some risk involved. Look up Business & Professions Code 10139. Then look up the desist and refrain order list on the DRE website so see how often people get hit with violating  Code 10130, "practicing real estate without a license".

That being said, people wholesale all the time in California without problems. I see it successfully and lucratively performed all the time. It's usually only when someone does it without performing risk-mitigating steps beforehand and something goes really wrong and someone gets angry and reports you to the DRE when you get in trouble. It's always a good idea to have a wholesale friendly attorney to advise you accordingly, local or not, so you understand these risks and enact risk-mitigating steps properly beforehand.

Confirm your zoning does not already allow for 4 units already, because it might. But if it doesn't, changing the zoning on a property (ex. going from R2 to R3) is more of a challenge than people realize, at least in CA. Your property may not qualify due to the lot size, layout, etc. You should check your local R3 zoning requirements if there are any. Also, you'll have to petition the county for a variance. You'll have to do some research on your county, but the counties I've experienced only grant variances when the current zoning renders the property to be impractical, given the area. So, if your property is a duplex on a block full of all fourplexes, you might have a shot. If your property is a duplex in a mixed single/multi residential area, I wouldn't expect to get that granted. 

If you do get it granted, the entire process thereafter is really expensive. You can ask around to see what your county requires to get the proper permits for a construction project like that, but oftentimes they require an architect's draft of the additions and multi-stage reviews by the county of the additions in the various stages of being built, among many other things. These permit fees and costs of experts and contractors having to abide by all the permitting procedures become a really expensive addition to the construction costs.

Southern San Joaquin Valley, just North of LA County, you will find some affordable places to invest in. Much cheaper and much higher cap rates than LA and the rest of SoCal. Short drive from LA too.

In my part of California, a 2 unit (or 2 home) property with only one meter is a red flag that one of the units/houses is not permitted. For example, if I own a huge lot with only one house, I can build another house on there if I want. But getting permits for it, especially if you make the mistake of building it first before worrying about getting permits, can cost a LOT of money, so some people just don't do it.  And my understanding (I could be wrong about this though) is that utility companies will not put multiple meters if the property is not recorded as a multi-unit or multi-home property, which is why only having one meter is a red flag for this. Unpermitted additions are not the end of the world, but you should understand the implications.

I'm not saying this is the case here, but you should definitely take a close look at the permits, zoning, and recorded property description if you are genuinely interested in this property.

You need to take this up with a lawyer. The title to your post says joint tenancy, and in your post you wrote that you own it with another person as tenants in common. In any case, this person has the same occupation and ownership rights as you do in this property.

If this person is nice enough, they might voluntarily choose to quitclaim their share to you, perhaps for an agreed upon amount of money, if your goal is to own the property in your own name alone. You can't just remove this person from title yourself, unless you have a legitimate legal reason and you seek a partition from a court, which is a lot of work. Again, consult a lawyer. Good luck!

They want $225k for a property with around $150k?.... That should answer a lot of your questions right there. Don't get your hopes up on this situation.

Tell them if they want you to sell it for them, MLS or off market, they have to be reasonable and sell it for FMV. The "good condition" of the property makes very little difference in that value, all other things being equal (sq ft, area, type and number of units, etc) . Even if you find an investor off market and double end this sale as the sole agent, that investor will expect you to comp it for them to justify the price. You'll never sell it for more than it's worth, that's not how investors do things. If they insist on their delusional price, don't waste your time with them any longer.

If you're thinking of buying it yourself, make sure the cash flow numbers are good and then comp it as accurately as you can and offer to buy it from them for FMV minus 6% they'll save on the commission you won't charge them. Win win for everyone, assuming the numbers make sense for you and your investing goals.

Wholesale? Pshhhh... No way on this one. They are already delusional about the price. Do you think they'll be willing to take 20 or 30 thousand less than FMV? I don't think so. This situation is the polar opposite of what makes a good wholesale.