All Forum Posts by: Wesley W.

@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.

Hello folks,

I once again am imploring the collective wisdom of those on this forum with more experience than I.

Some background: my wife and I currently own 3 financed properties: our primary residence (HELOC, my name only), and two 4-family rentals (both our names on one loan, just hers on the other). They are held in our personal names. We both have great credit, no debt (aside from RE), and well paying, secure W-2 jobs.

We will soon purchase our next property (another 4-family rental), which I plan to put in my wife’s name exclusively. My wife will be leaving her job in the fall to go back to school, at which time we will buy another property (in her name) near the school for her to live (and rent out the other units). This will give her 4 financed properties. I will then leverage my W-2 job to pick up additional properties while she is attending school. Once she is done, we will flee South where we will both become self-employed (myself via RE holdings).

This latest property (currently under contract) will have a purchase price of around $105K, with between $20K-$40K of rehab needed, depending on how updated we want to make it.

QUESTION: How should I finance this next purchase, given our long-term plan?

Option #1: Buy this next property with cash and pull most of the equity out with a refi/HELOC. How soon can a refi be done after closing? (We want to redeploy the capital.) After a refinance, does this expose us to any more liability? An asset search would still yield the property as leveraged, correct? Right now we have a commercial umbrella policy in lieu of using LLCs to hold title. (Since we were taking out conforming loans, we couldn't hold in an LLC without risk of DOS clause.)

Option #2: Once again buy using a conventional loan. My concern here is spending an inordinate amount in closing costs compared to the actual loan amount. We want to use loans whenever possible at this point so we can leverage our W-2 jobs while we have them – but I am wondering if it’s the right thing to do given the size of the loan (~$75K) and the expected closing costs.

Option #3: Something that I haven’t considered, but one of you insightful people will suggest.

Thanks again for your suggestions and advice!

I've had estimates has high as $10K for this kind of thing, and like @JD Martinsaid, it is absolutely a benefit to you if this is a long term hold.  I looked at a duplex recently that had one meter and the utilites were paid by the landlord, and there were 5 window air conditioners running with the doors and windows wide open.

Hi Alicia,

First of all, welcome to BP!  If you can't find the answer here, you won't find it anywhere.  The collective experience of the members here have seen it all.  I've had lots of help since joining.

Definitely check with a local attorney to get the lay of the land as far as how the courts view eviction cases that are NOT due to non-payment.  Where I am, it's a tough row to hoe.  My best advice is remain professional, and document all communication with this tenant, preferably in writing.  All official notices should be delivered as required by your local municipality.  (e.g. concurrent certified & first class mailings)  This is especially important if you are going to evict this tenant for violation of lease.  In my market, the "burden of proof" is greater for that kind of thing, so build your case with a lengthy paper trail.

Just know that there will be a fair amount of testing from the inherited tenants whenever there is a new owner.  In my limited experience, most buildings that are for sale are poorly managed and the "inmates are running the asylum."  The ones that are well-managed and have great tenants are not for sale;  they are making money!

I guess what I am trying to say it is not totally unusual to have a problem tenant in your building when you first purchase it.

I know if feels difficult right now, but I can assure you - it well get better.  Once you get your "sea legs" for the landlording thing, you'll know how to handle situations like these.  Good luck!

Here's a copy of the letter I used on my most recent acquistion:

Hi Mr. & Mrs. Smith,

Please find enclosed a new lease for you to sign and return. After doing a market analysis on your rental unit, we have determined that the average 3-bedroom unit in [city] is currently renting for $933/month. As a courtesy to you as an existing tenant, your monthly rent will increase to $890/month. We hope you’ll see this increase as a more than fair amount given market conditions.

Given you have pets, our company also requires a non-refundable pet fee of $200. This is a one-time fee, good for your entire residency. There WILL NOT be a monthly pet surcharge as some landlords charge. I realize an increase in rent and a one-time $200 fee might tax your household’s budget, so I am willing to work with you on a payment plan if you need additional time to come up with the pet fee.

Please fill out all the highlighted parts of both documents. (Please initial in the lefthand margin next to each of the 28 paragraphs of the lease). I will be stopping by next week to pick both up. I realize this is a lot to digest; please call me and I would be happy to answer any questions you have about the lease, pet policy, or anything else.

As a reminder - beginning with rent for September, please pay your rent by depositing the entire amount into the following bank account at [bank]: account # 12345; routing # 12345. We do not accept rent checks at our P.O. Box; rent can only be paid by deposit.

If you have any questions, concerns or maintenance issues, you may call or text my cell phone at (x), or you may email me at the gmail address listed at the top of this notice.

Thank you in advance for your cooperation. I look forward to working with you during your continued tenancy.