All Forum Posts by: Randall Alan

@Jamaal Smith

There are a number of things we don’t know about your situation… such as, how long have you owned your property?

If you bought it in the last 2 years, you may just be seeing the result of the property tax assessor factoring in the new value of the sale. 

The documentation they provide with your tax notice will clearly show how they have changed their valuation.   It could be they raised millage rates which would mean everyone’s taxes went up.  I’ve had it where they went and did a special project just to look at multi-family properties to bring them more into agreement with todays valuations, etc.  

$600 is really not a huge increase in my book.  We have seen double and triple that on the insurance side of things in a year.  But I do tell my tenants when raising their rents why they are going up… sometimes even showing them the paperwork!

Unless there is an obvious error, you will likely be fighting an uphill battle.  The appraisers are professionals and usually undervalue your property by about 15-20% just to avoid people complaining too much.  You will have to show that the value they say your property is worth in the market is off by more than that 20% to even start to have traction.  It’s a tall order usually.

All the best.  

Randy 

@James McGovern

I really don't see any up front angle on this situation. It's lose-lose for those that own the condos. What is likely to happen is that people who have financed properties could walk on their investments, or do a deed in lieu of foreclosure if they have very little equity. I'm sure those who cannot afford the assessments will just stop paying and that will send those properties into foreclosure with the first position lenders foreclosing. I'm not sure where that leaves the HOA in regards to needing each unit's contribution to fix the property? Will they be able to maintain that charge against the unit when a new buyer comes in?

Many of those that do stay and pay will be upside down on their investments if they have to pay some large fee for structural repair. Others will attempt to sell and probably include the condo surcharge in the price of their sale.  But it becomes a much less attractive investment to an outsider when you know you could be facing future special assessments like that.  

Think about this from an investor perspective.  Maybe you were clearing $500-1000 a month as a rental, and now your profit just evaporated for the next 10 years (or what have you!) where you take out a new mortgage to pay the assessment!

With all that risk and unknown, I wouldn't be going there until all of this settles out!

All the best!

Randy

@Gabriel Sastre

This is less of a structure issue, and more of a tenant issue.  As a landlord, I'm not going to try and go change my building to accommodate noisy tenants.  Why would you spend thousands of dollars and lose months and months of profit to do that?

The best answer is to let one or both move out, and place quieter tenants in the unit. Quieter tenants translates to: Older individuals without children or noisy pets. 

I would try speaking to both tenants and ask them to try and maintain a quiet environment.  You can offer your tenant possible solutions... I would be like, "Listen, I'm sorry this isn't working out with all this noise, and if this noise is a deal breaker we are ok with you moving out early to find a quieter place."

 Our lease calls for no nuisances such as excessive noise.  Children are obviously somewhat uncontrollable.  But ultimately you can give a tenant notice if there is excessive screaming and yelling that if they are not able to maintain a quite environment you are going to have to ask them to leave due to violating their lease terms (presuming you have something in your lease like that).  

So one approach is an opportunity, and the other is a veiled threat - both within your right as a landlord. 

It's a crappy situation, but by offering them a solution - even if it is on them - it somewhat alleviates the need to fell like you have to act and you have made an attempt to solve.  For me, domestic issues aren't my problem as a landlord.  If the tenants are truly that loud, the other tenant could call the police for disturbing the peace if they wanted to.  We just provide the building.

All the best!

Randy

@Chris Lee

We don't exactly know where you are located.  In Florida, the landlord is not allowed to do malicious things like remove doors, turn off utilities, etc.  In other words, you can file your eviction to get rid of the tenant, but you can't "abuse them" on their way out (very paraphrased).  

So, with that said, if you followed that concept, it would depend on whether you were responsible for the electricity currently.  If yes, I would think you would be expected to leave it on.  If the tenant paid for utilities, then it would be up to them to continue to pay them. 

We can usually have a tenant out within about a month where I'm at.  You just want to get that process started as soon as possible.  It usually starts with a notice being posted, so get that done asap to 'start the clock'.

Keep in mind you should receive their security deposit as a transfer from the previous landlord as a part of closing, so that will at least compensate you somewhat for the lost income if they haven't trashed the place and such.

One other set of questions would be - do you want them to leave?  Were you planning on renting it out (where that tenant COULD remain?) or were you looking to move into it.  My thought there is, if you reached out to the tenant maybe there might be another path?  

One would think that the tenant would have been notified if they needed to move out.  This seems like a break down between the seller and the tenant.  You might be able to go back to the seller and say, "This isn't what was expected or you told me would happen, and it seems like I should be compensated for this as it had nothing to do with me."

He may tell you to 'pound sand'... but he may agree and offer you some compensation.  Not sure what you have done to try to resolve the situation.  

One thing I would do is to make sure your soon to be exiting tenant understands the impact of having an eviction on his record.  As soon as that is filed, he will have a VERY hard time finding a new place to rent to him.  Recent evictions translate to "We don't want you in our place" when you go apply somewhere else.  I would probably approach your tenant with this information and say, "If that is the way you want to play it, so be it... but be aware you are really screwing yourself if you go that way" and explain that situation to him.  Maybe give him 24 hours to decide before you file.  He may have a change of heart.  I can tell you the last person I evicted was shocked, and was having to live with friends because no one would rent to them... not even a mobile home... and they had a family of 4 with a dog.  I more or less begged him to work with me to avoid having to file - but all he did was stall and bounce payments... "so be it!".  In retrospect I know he wishes he would have handled the situation differently. 

 @Kent Kettell

The advantage of leverage is that it lets you extend your purchasing power. If you had $100,000 to spend on properties, you could buy 1 property for $100,000, or you could borrow and put 25% down on 4 - $100,000 properties. The 4 properties will always make more money than the 1 (all things being equal). This presumes you make smart purchases that cash flow after paying all their expenses (Principle, interest, Taxes, Insurance, and a maintenance / Capex reserves).

The risk of leverage is if your properties AREN'T making money - maybe you misjudged your income, or you run into repairs that cost more than you expected or budgeted for.  Now you can be in a situation where the property's income isn't covering the expenses - which puts you in a bind to be able to pay your bills and keep your properties running.  The way to avoid this is to have sufficient reserves.  Perhaps instead of buying 4 properties you should only buy 3 with the theoretical $100,000 and keep the extra money in reserve for emergencies, etc. 

We just ran into a bad 'spat' of having to replace 7 ACs and a septic field in the course of the past 60 days (on our portfolio of 37 units).  This is really extreme for such a tight time frame... and cost us about $45,000 in capital expenditures.  It certainly exceeded our monthly budget for those types of repairs... but we had reserves to be able to cover them.  So that is a real world example of what can go wrong.

Hope it helps!

Randy

 @Grant Cox

Usually underwriters present all their 'objections' in one go.  It starts getting a little suspicious when they keep moving the goal post time after time.  I was selling a property where this happened for my buyer.  It turned out the whole thing was a bit of a scam - the "lender" took a huge up front fee ($4,000) to do the deal - so it turned out they weren't really the lender... they were acting more like a broker...while it wasn't said this way, it appeared to be "after you pay us $4,000, we'll try to go and find you a loan."  The problem was that the borrower wasn't that qualified, so the broker really didn't have any good options to offer, so they just kept throwing up roadblocks in front of the seller until they finally through one up they couldn't meet (Like wanting 25% down, when that was never a condition up front.)  So my 'spidey senses' start to tingle when you tell us these things and it makes me want to question the validity of the lender.  

We've closed over 25 loans on buying our properties and 'conditions to close' were always laid out up front... in essence, "These are the things we need to be cleared to close."  It was never... Here's one thing we need to close... then here's another now that you cleared that hurdle.

Are you dealing with a major lender, or is this a private lender, or what?  

The other thing about legitimate lenders is that they are usually trying to 'check a box' on a due diligence form.  Typically, if one condition can't be met "The usual way"... there is another way to meet it.  Like if they are complaining about the recency of a credit card, you can sometimes present other documents showing maybe utility bills being paid on time, or something like that.  (The fat joke was funny... at least hoping it was a joke!)

It might be worth asking, "What Fannie Mae condition are you trying to meet with the request you are making of me?"... and you can follow that up with , "Is there another way to meet that condition?" 

 You can go and look up all the Fannie Mae guidelines online on their website:

https://selling-guide.fanniemae.com/sel/b/origination-throug...

The link above is the "origination through closing guidelines"

Hope it helps!  Hope they are legit!

Randy
  

 @Kylie Gerstein

Assisted living is a huge cash cow from what I understand - meaning I would think that market segment would be very interested in your property - especially as a rental. 

I would reach out to local people in that industry and inquire on what they are currently paying for property space to inform your decision.  I doubt you will have any issue renting it above what a regular multi-family would rent for.  Hopefully the ADA issue isn’t to much of an issue - but you could ask them about that as well.

All the best!

Randy 

The LLC gives you better asset protection - but you can't use a residential loan to borrow in the name of the LLC. So you would have to get a commercial loan if going straight to the LLC - which usually has worse terms (shorter rate lock period, shorter amortization schedule).

USUALLY, you can borrow personally and then deed it to the LLC after the fact and as long as the LLC is owned by the borrower you won't trigger a due on sales clause.

You will probably pay transfer taxes to do this though. 

All the best!

Randy

@Matthew Samson

The easiest way to avoid the taxes is not to sell it.  Borrow against it as needed for retirement and keep it as a high end rental if they want to vacate it.  You can usually borrow up to 75% of the value of the property.  If they keep it until they die it would probably pass to family tax free - at least federally.

My 2 cents.

Randy 

 Your Savings and your W2 Income would be the first two places to look - in that order.  You have to have skin in the game.   Few if any lenders are going to provide you 100% financing, so it starts with you.  So if those aren't in order, you start by getting them in order.  You could also possibly partner with a relative who knows / trusts you to make up for any shortcomings you may have.

After that, presuming you have good credit, you can go to a mortgage broker and they will evaluate your credit and financial "worthiness" against their requirements for their lenders to lend to you.  In 10 minutes of looking at your application they can tell either "This will work", or "You need to fix these things before it will work."

Beyond that there are hard money lenders who charge higher rates to take on more risk... but they again start by looking at you, your skill set, and your previous experience in both managing your credit, as well as your real estate investment history.  If you have little money, experience, positive credit, they probably won't be much help. 

Hope it gives you a start towards achieving your goal.

Randy