All Forum Posts by: Mathew Pezon

This is a great meetup for new and seasoned investors alike! Keep up the good work, Matt and team!

 Hi Frankie, there's little recourse at this point. For the next deal you do in Allentown, here are the two possible paths I take: 

1) Make the AOS subject to the seller providing a clear CO (i.e. it's seller's issue to deal with and resolve BEFORE your client buys the property)

2) If buyer (me) is responsible for clearing the CO, then I get a copy of the presale inspection (which clearly states which permits are needed in Allentown) and I submit a right to know a specifically ask for any zoning, permitting, or other non-compliance issues with the city, all during the due diligence/inspections period. Get the RTK submitted quickly because it can take up to 30 days to get a response. If you're concerned about not receiving a response within the inspections window, then elect 30 days for permitting/zoning contingencies in the AOS so you can receive the city's response in time. 

I hope this helps!

Hi Abbie,

I don't know exactly what you need help with but I'll try and provide some general guidance. I'd say the first thing you should do is talk with some lenders and get a pre-approval letter. This will let you know what your current budget is and will also indicate to sellers that you are serious. Lenders can usually get this preliminary pre-approval process done pretty quickly by looking at a high-level summary of your finances. 

The next most important thing is to FIND A GREAT DEAl. If you find a deal for under market value that cash flows nicely, what lender wouldn't want to fund you? 

Hope this helps!

Hey Grayson,

If you're cash flow after debt service is positive, your cash on cash return will be positive as well. 

If you send me a message with the file, I'll be happy to try and spot the error. 

 Hello Tom,

Most lenders will lend up to 75% against the market value of a home on a refinance. An example may provide some clarity to your question:

Say you've owned a property for two years and its current market value is 200k but you only owe 100k on it. When it comes to refinancing this property, there are two main routes you can go with. If rates are HIGHER now than they were at the time of the first mortgage, which likely is the case in the current economic climate, you can elect to take out a second mortgage worth 50k. (150k is 75% of 200k and you already owe 100k). If rates are LOWER now, it would make more sense to refinance the entire thing either with the same lender or a new one, assuming there are no pre-payment fees. (Even if there are pre-payment fees, sometimes it is worth it but that's on a case-by-case basis). If you refinance the whole thing, you'll be getting 150k, 100k of which will be going to paying off the remaining balance of the first loan. Whichever route you choose to do, you now you have an additional 50k of capital to use for another down payment, assuming you are still servicing the debt on the first loan. (Either through its rental income or other sources of income). 

I hope this helps but let me know if you have further clarifying questions.

Hello,

It sounds like you're taking steps in the right direction to address the mold issue. The insights provided by the mold inspector make sense. Mold thrives in damp, poorly ventilated areas. If the mold continues to return, it would be a good idea to test for moisture levels inside the wall using specialized equipment. If the wall is severely compromised and cannot be treated, replacement would likely be the best choice to ensure the health of your tenants.

As for future prevention, the dehumidifier plus increased ventilation is a good idea. I also recommend checking for any leaks or improper insulation as water can get into a house in sneaky ways. 

Hello John,

If the approximate market value of the property is 8.5M (which means the cap rate is approximately 6% in your market. NOI/Valuation) and there is a combined 3.3M in debt against the property, then the owner would have roughly 5.2M in equity. (8.5 - 3.3 = 5.2) If you were to takeover his mortgages, you would still need to put up 5.2M. Since interest rates are much higher now, this may be an advantageous route. It's also possible to take another loan out to fund the 5.2M.

Hello Joe,

Renting a property as a rooming house can be a good strategy in some instances. It's difficult to give you an answer without knowing what market you are investing in. I suggest you look at the rooming house regulations located in the Zoning Ordinance for your city. A google search of "City X zoning ordinance rooming house" is a good start. Minimum bathrooms per X tenants will likely be listed.

Additionally, you want to ensure that a rooming house is a valid use of the building according to the zone that the property is in. If you need further assistance, I'd recommend calling your city directly and consulting with the zoning officer on duty. 

If the numbers work, there's no regulations, and the demand is there, you should go for it.

Hello Tyler,

Here is how I look at it: If the rent for the type of property your client is looking to stay at in that market is $1,500, the total monthly income for the duplex could be $3,000. If the expenses and the debt service amount to $2,500 a month, this property is producing $500 in excess cash flow. 

If your client wasn't "house hacking" and rented for himself somewhere else for $1,500, he would still be at -$1,000 in terms of the income this duplex is producing and his living expenses. However, it does not make sense to incorporate your living expenses when determining the strength of this asset and this number is therefore irrelevant.

I suggest evaluating the strength of this asset as if both sides were being rented out. It cash flows at $500 after debt service. Depending on what the down payment is, this is likely a solid asset. Some good metrics to look at may be cash on cash return and the cap rate compared to what the local market's cap rate is.

Hope this helps!

I am not very familiar with the specific LA County Landlord-tenant laws but I will do my best to provide some general guidance:

1. Notice for a New Lease:

Since the tenant in the first unit is on a month-to-month tenancy, you typically need to provide a 30-day written notice to make changes to the lease or terminate the tenancy. This should give the tenant sufficient time to consider the new lease terms or make other arrangements if they choose not to sign a new lease.

2. Collecting Additional Security Deposit:

If you want to collect an additional security deposit from the first unit tenant, you should again provide a 30-day written notice. The notice should include the details of the increased security deposit amount and the effective date when it will be applicable.

3. Rent Increase:

To raise the rent for the first unit tenant, you need to again provide a 30-day written notice for month-to-month tenancies. However, if the increase is more than 10% of the current rent, the notice period must be 60 days in LA County.

4. Maximum Rent Increase:

Rent control laws may apply in certain parts of LA County, and they can restrict how much and how often you can increase the rent. If the property falls under rent control regulations, you must comply with those rules. Some areas may have rent stabilization ordinances, while others do not have any specific rent control laws.

Given that this is a sensitive situation with a recent vacancy and upset tenant, it's important to approach the matter with transparency and clear communication. I'd also recommend checking with local city and county officials or even hiring a legal professional to go over the lease changes.