All Forum Posts by: Natalie Schanne

@Tyler Jahnke - Does your Property Management contract clearly state you'll be consulted for approval prior to repair/maintenance costs expected to be over $X such as over $300 or over $500?

Are advertising expenses limited to X?

If it was my house, I'd ask Morris Invest or the PM to take great (bright, well-framed) pictures of the property and send them to me, then I'd post on the local Craigslist (with an awesome ad) to see how much interest there was. If I got a message from an interesting person, I'd forward it to my PM to vet the person and show the property. 

I'm concerned that your contract may have loopholes where I could bill you $10,000 for advertising or $10,000 for home repair, and you've pre-agreed to it. Sure, you could fire them afterwards, but you've still agreed to pay the bill. 

Mohammad (Asad) Asaduddin - I'd love to be emailed the guide too. :) As for Buildium, I've never used them. A lot of smaller b2b companies might be losing money with all their staff. They also may have determined when they raise prices 20%, they lose less than 10% of customers. (Inelastic demand). So, they raise prices and revenue goes up.

Andreas W. - If the person hasn't saved enough rent from the 16th-31st paychecks, then they're not planning ahead for the bill on the first. No need to reward that activity. If I changed it to the fifth, they'd pay by the tenth. My rental's mortgage is due on the fifth. I could without interest penalties push the auto payment to the 14th-15th according to my mortgage contract. But I don't want to. You'll see plenty of smaller landlords who adjust in some way or another to accommodate when their tenants get paid.

@Mickey Powell - It seems like your father in law has a lot of experience working with luxury homeowners. 

1. Do you want your relationship to be intertwined, such that problems with your father in law might affect your relationship with your wife? How do your personalities get along?

2. Have you considered offering yourself as part of his crew to learn high quality craftsmanship?

After you've experienced the day-to-day operations, you could offer yourself on a commission/salary basis to help grow his business by being a salesman for his company. (High-End Remodels). You could lead crews and help his company be able to handle multiple properties simultaneously. When you learn to do this, you'll know how to supervise / GC your own crew. 

Save up your earnings, buy primary residences, improve them, and sell them every 2 years with the free up-to 500k IRS capital gains tax waiver. Buy, fix up and hold rental properties where you can generate positive cash flow and 6-10%+ ROI.

3. Have you considered getting your real estate license and using cross-using your connections to benefit each other? Bring his company high-end renovation work and use his client list to help bring you luxury listings?

Most Flippers I know are not doing slow, highest quality remodels. They are doing everything in <30 days. They are buying the most expensive-looking, inexpensive materials they can find. Craftsmen could be upset by the flip it fast mentality. Craftsmen are more likely to want to over improve a property. 

Good luck. Let us know how it goes.

@Chaits J. - Honestly I'm not sure how it would play out. Any outstanding LOC probably wasn't paid on either. They are 2 different liens. If you win the mortgage's senior claim to the deed, I assume you can petition for the junior line of credit to get wiped out.

The auctioneer will say subject to xyz liens if he has that info. I've never heard him say a heloc. He does say subject to any and all liens. 

Bid as if it exists. Let me know if you find out otherwise.

@Chaits J. - I've been to several recent Mercer County Sheriff's Sale auctions.

Tips:

- Auction prices don't really start at $100. The bank has a 'reserve' upset price. The auctioneer will bid that price on the bank's behalf until it is met, so the sale is either $100 back to the bank or with bids starting at upset price + $100, such as $100,100. Bring 20% in cash or cashier's checks (to yourself) to bid.

- About half the properties will have bank-set upset prices that are too high, and these will not be bid on by anyone at the auction.

- LIENS: Go to the Mercer County office on Tuesday or Wednesday before the 2pm sale and use their terminals to look up your target properties. This will show you recorded liens on the property that a paid title search would also access. A title company could charge $75-100 per quick search, and that property might not even be available at auction that day or the bank price might be crazy high. Some people don't look up liens, but that's risky with IRS liens, property taxes, utility bills, 1st and 2nd mortgages, etc.

- If you know the condo association number, call them to ask any unpaid dues. I did not have success reaching one on the phone recently. (I called several different numbers off Google for Scotch Run Association for Kyle Way in Ewing). Condo with comps of $150-$165k sold for $116k at auction after a mini bidding war. (After repairing, the margins for anyone flipping are pretty slim). 

- Many of the nicest properties will be occupied. Rule of thumb seems to be to plan for 60-90 days to help the occupants move, though I've heard of as little as 10-30. You file an eviction notice for non-payment of rent after the 10 day right of redemption. You will need a lawyer. Consider cash for keys too and being nice to the occupants.

Say HI if you see me! :)

@Chris L. - This website offers a pretty detailed explanation of the laws. NJ is a tricky, very tenant-friendly state.

Summary: 

- Contact the tenant (phone call?) and be very, very nice. If you can get the tenant to agree to give notice to move out, ideally in writing, you will not have to worry about the following difficulties as per NJ law. (Anything can happen that you two agree on... consider Cash for Keys if tenant is reluctant.)

- If tenant has broken the lease materially (damage, non-payment), you can file to evict at any time for good cause.

- You may be able to change the renewal lease terms to increase the rent, perhaps making her not wish to renew, and therefore give you HER 30 day notice to leave the property around when you are hoping.

- If the property is 3 or fewer residential units and if you have contracted to sell to a buyer who needs the unit vacant and will personally occupy, you must give a minimum 60 days advance notice. The lease will terminate and the tenant can be evicted by the courts for good cause. ** This one means you'll have an agent trying to show the house to buyers while it's occupied, including buyer's agents being stuck having to plan far ahead to get permission from the tenant to view the property. This may severely limit your showings. Additionally, any buyer must wait a min 60 days to occupy (if the tenant is stretching this to its limit). 

Sources: http://www.state.nj.us/dca/divisions/codes/publica...

http://legalcounselnj.com/2015/01/16/leases-expire...

" Quite simply, under New Jersey law, most residential tenants have an ongoing right to continue renting a property until there is “good cause” to terminate the lease. These “good cause” grounds for eviction are specified in N.J.S.A. 2A:18-16.1, and, of course, include nonpayment of rent among other commons sense causes, such as continuing to disregard material lease terms or causing excessive damage to the residence after proper notice. However, without such statutory good cause, the lease must renew as per its terms. And, if the lease does not have terms for renewal, then the lease converts to a month-to-month lease, with all other terms remaining in full force and effect. N.J.S.A. 46:8-10. The lease and the tenant’s right to remain in possession continue, indefinitely, until the landlord has “good cause” to terminate. New Jersey law has detailed procedures for making reasonable changes to renewal lease terms, but these procedures do not allow termination of the lease without good cause. N.J.S.A. 61.1(i). "

" Owners of rental property who are listing the home for sale often want the home vacant. Buyers of rented property often want the tenant to leave by closing. This scenario is governed by N.J.S.A. 2A:18-61.1(l)(3), which allows the owner of a residence with 3 or fewer residential units to terminate a tenant’s lease where the owner seeks to personally occupy the unit, or where the owner has contracted to sell the unit to a buyer who seeks to personally occupy the unit, and the contract for sale calls for the unit to be vacant at the time of closing. However, terminating a lease for this “good cause” requires that the term of the lease has expired (such that it is ending or is in month-to-month status), and requires that the tenant be given at least two full months of advance written notice that the lease will terminate and the tenant must vacate. N.J.S.A. 2A:18-61.2. In this circumstance, the owner or new buyer must personally occupy the premises for at least six months, or the owner is liable to the former tenant for three times the tenants damages plus the tenant’s attorneys fees and costs of suit. N.J.S.A. 2A:18-61.6(b). Such tenant-occupied real estate sales have added complexity and risk and must be properly navigated. "

@Julie Silvestro - Think of other businesses vying for an apartment owner's attention and copy what seems to work for them.

LED / Energy Efficient Lighting - they will advertise it as 50% annual ROI or "2 year payback" with a 10-30 year useful life. i.e. Years 3-30 are 100% profit from the common area electricity savings.

For increased adoption, many apartment owners will want you to agree to manage / service the system, hardware, and/or billing. Maybe provide an 1-2 year term maintenance / money back guarantee with its cost baked into your initial price. As an owner, I am probably happy with 33% ROI (3 year payback) on a product and no calls or headaches.

Can I contract with your company to provide the internet service and you just send me checks? (Do you know what, if any, kickbacks or perks I may be getting from Verizon/Comcast/etc.?)

@Account Closed The seller thinks his house is worth every penny you offered to pay him, regardless of the appraisal amount. "What the house is worth" is subjective, even to the appraiser.

What you can do:

- Ask your buyer's agent to ask the listing agent if the owners/sellers wish to negotiate a suitable deal with you by X time or that you are cancelling your contract due to clause #. Ask your buyer's agent to explain your contract and your choices to you. 

-- At $10k over appraised and 80% conventional financing, you probably have at least $2k more cash available. So you can offer up to appraisal + $2k cash as purchase price if you really like the house.

In your advantage: 

- Vacant properties cost $$. People are usually willing to negotiate for a few thousand dollars to close sooner. 

- If the person stands to make so much money, he might be willing to take a little less to have cash in hand.

To your disadvantage:

- If the seller has strong external interest in the house, the price might go even higher if your contract falls apart. It's getting to the March/April/May Spring selling season. He may have already received some backup offers. There's nothing preventing him from making $60k or $70k off the next buyer instead of $50k off you.

Supply and Demand.

Keep us updated.

Alex Siravo - Put yourself in the seller's shoes. 1. Did you make an offer for X price? Yes. 2. Did anyone force you to do that? No. 3. Did the seller have other opportunities / offers / pending house showings to other buyers before you signed and agreed to a contract for X price with them? Yes 4. Does the seller think their house is worth at least X price? Yes 5. Can real estate appraisers be methodical and slightly off market values? Yes - a different appraiser would likely have a similar but different market value report for this house. If prices are rising from multiple offers/high demand, appraisals will be often be lower than market / sale price. 6. Does this house have features you like over other houses such that it is worth X to you? Yes/No? If your contract is contingent on financing/appraisal, you can get out because your lender can write a letter saying you weren't approved for the loan (given the appraised value of the collateral). If your offer is not contingent on financing/appraisal, you have a binding contract (subject to any other contingencies) and will be expected to come to settlement with all the $$ and get the keys. If you want this house, you said before to the seller that it's worth X to you. You can A) come up with the 10k cash differential at closing to pay X price given your loan on the appraised price. B) try to see if the seller will lower his/her price to the appraisal. The seller views this as shady. Seller may cancel because you've cancelled. Seller may put house back on market and might sell end up selling for less than appraised value, but not likely to you. Or they might sell for X or more to a buyer with enough cash at closing. C) meet the seller 'halfway' where you pay above appraisal and the seller accepts less than X. Good luck. Let us know how it goes.