All Forum Posts by: Wesley W.

I've mentioned this in a few threads recently, but it seems to keep popping up.   @Brie Schmidt has a great method for incentivizing the PM so their goals are aligned with the owner's. She outlines the written contract with her PMs on one of the BP podcasts.

It's something like this...take 25% of gross monthly rent and use that as an annual "vacancy bonus." So for 10 units renting at $1000 a month, owner pays the PM $2500 vacancy bonus over the year. So each quarter PM would get $62.50 if that unit had no loss of income.

 I've mentioned this in previous threads, but @Brie Schmidt has a great method for incentivizing the PM so their goals are aligned with the owner's.  She outlines the written contract with her PMs on one of the BP podcasts.

It's something like this...take 25% of gross monthly rent and use that as an annual "vacancy bonus."  So for 10 units renting at $1000 a month, owner pays the PM $2500 vacancy bonus over the year. So each quarter PM would get $62.50 if that unit had no loss of income.

@Roy N.

They are 2-4 residential. I can understand the sellers are less sophisticated, but since the units are occupied and I am paying retail, I don't have a big margin like the folks who buy vacant distressed properties do. So, I am trying to CYA (or CMA, as the case would be). ;)

@Kelly N.  thanks for your input

 (anyone know why my @ mention doesn't always work?)

I neglected to mention that if I can get those items elsewhere I do.  usually the sticking points are regarding the tenants. I get pushback sometimes with providing the leases, and almost always with tenant info and estoppels.  The rent rolls in our market are the seller's claim to what is being collected from each unit for monthly rent.  The estoppels are the tenant's claim to what is being collected, as well as any other arrangements they may claim to have as part of their tenancy.  Both of these things I feel are VERY important in determining if this a deal worth pursuing.  I feel like I need to know who is living in the building, whether or not they have a security deposit, and what they are paying in rent.

CO's can be FOILed, but if they are not current, that can get me in hot water with the city, and could require MAJOR expenses to make it good. I recently backed out of a deal when I found the third floor was not a legal floor despite the seller housing tenants there. Code Enforcement informed me that on their next inspection it would fail and would require external staircases for about $50K. The building had been used as an O/O, which have different rules. The seller moved out and put in tenants, and this wouldn't be caught until the re-inspections came around or the building was sold.

What part of my list would be unreasonable in your market?

Thanks again!

@Aaron K. thanks for the feedback.

Yes, all of these items on my list are requested under attorney approval after a price is negotiated and we have a signed contract.  I wait to do the inspection after the documents because it costs me about $500 and since the sellers don't have any "skin in the game" at that point, they can just refuse to negotiate post-inspection and I'm out half a G.

Hello all,

I'm looking to get some feedback from people who have made a practice of buying occupied rent-ready small multi-family properties.

This is my niche of choice, and despite what I consider to be my best efforts, I have had no less than 8 deals fall apart in the last 18 months after being under contract.

They say the definition of insanity is expecting different results by doing the same thing, so I'm looking for some feedback on whether or not this is due to external factors or what I am doing as the buyer. 

I would be happy to indulge the BP community by discussing the process on the forum, or if anyone is willing to correspond privately or via phone, I would accomodate anyone willing to be a sounding board.

Extremely briefly, all the sellers have been unwilling to "meet my demands" under attorney approval or continue to negotiate post structural inspection (with major items flagged by inspector).  They say due diligence is a critical part of the process, but I am getting nearly universal pushback from sellers on providing documentation I think is reasonable under due diligence.  Here is what we ask for under attorney approval:

Is this congruent with what you ask for when buying an occupied property?  Please share your experiences.

Thanks.

Or look on Craigslist (or VRBO/Airbnb?) or Rentometer for nearby properties also on the water.  That way, your comps will be market-specific.

@Brie Schmidt has structured what I think is a brilliant agreement for her PMs that incentivizes them for keeping good tenants, instead of the "churning" we are seeing.

When my portfolio gets too big  to self-manage, I am definitely using her idea!  She articulated it as a guest on the BP podcast some months ago.

If these work, you could do it by installing 4 and doing some subtraction:

Meter A = Units A, B, C & D

Meter B = Units B, C & D

Meter C = Units C & D

Meter D = Unit D

Water use as follows:

Unit A = Meter A - Meter B

Unit B = Meter B - Meter C

Unit C = Meter C - Meter D

Unit D = Meter D

I, too, do what @Beth L.does.  I phrase the conversation as others have said, above, so despite the fact we have an appointment, they need to "opt in" with a call/text confirmation at least 2 hours beforehand or it's as if we never crossed paths.

Another thing that helps is double-booking (or more) the appointments (this also helps with perceived scarcity of resources and prompts more ambivalent applicants to make a move to "beat" their competitor.")  I would not use this strategy on an occupied unit, however, due to theft concerns.