All Forum Posts by: Randy Frederick

Hello BP community!

Need some advice from the more experienced members. We have owned SFR, but this is both our first foray into multi-family, as well as one with tenants in place.

Background: We have under contract a pair of duplexes that is set to close in less than three weeks. The properties were being sold as one package, but we discovered that each building is on its own lot. Thus, we had to break it up into two separate contracts, per the lender. No sweat. The properties were constructed in 1986 and are in an area zoned R6, which is for single family dwellings, but allows two family attached houses if they were there prior to the ordinance (which appears to be created in 1993). I spoke briefly with a RE attorney about this and he said I should get a zoning compliance letter from the city and to make sure there are two certificates of occupancy. I asked my closing/title company to help with this and they basically told me to go kick rocks (ie- they don't do this). I spoke to the city RE assessor office and there is an application to get a zoning compliance letter but they are on a backlog of 45-60 days. Three of the four units are occupied and have leases through July, August, and November. 

My question is: Do you just not worry about this, since it has been operating as a pair of duplexes for years, and just move forward with the deal and assume everything is honky-dory? Do you extend the closing date in order to obtain all this information? How important are these items to get (COOs and zoning compliance letter)? What is worst case scenario and how detrimental will that be to the deal?

Thanks in advance!!

This should be a fun discussion. Thanks, Steve!

My original tenant had someone move in with them last year and they both signed the renewed lease jointly and severally for period of 6/20-6/21. Apparently they have had a falling out and the new roommate wants to move out. Lease stipulates a 30 day written notice if they choose not to renew for the next year. There is no clause about moving out prior to end of lease term.

This is the first time I have had to deal with this, so I am curious how others have handled this in the past and what obligations that tenant has in terms of the remaining time on the lease?

Thanks in advance for any helpful critiques!

Another one you might try is C&F bank. They have offices all over Virginia, including Charlottesville. They do portfolio lending, work with LLCs, will do cash out refi 80% LTV, and will usually do 25yr fixed! Here is their url: https://www.cffc.com

Thanks everyone for all the feedback and food for thought!

@Ola Dantis- I appreciate your skepticism. The wholesaler I'm working with was referred to me by my real estate agent, and seems above board. There are certainly costs that I didn't count on from the hard money lender (back end points), and carrying costs that I hadn't consider (bank wants six months of rental income before doing cash-out refi). 

@Patrick

@Patrick Collins- new roof, hvac unit (vents and ductwork already there), refinish floors, carpet, paint, tile bathroom.

@Jon Holdman- to be clear, the house is not ON the busy street. Rather it is offset on the generous lot. So, it is a bit busy to get in/out, but once you drive through the entrance you don't really feel like you're on a busy street. 

Update: So, perhaps I did have a case of 'gottadoadealitis', but I pulled the trigger. I still think it is solid and going to cashflow and work out in the long run. I think it will cost me a bit more money up front than I anticipated, but I'm all about the long game. Plus, an added chunk of cash will flow each month that I calculated for property management (until that day I let someone else manage). We shall see!

@Josh Sohar- really? An unscrupulous person inflating values? For their own benefit?? Whaaaa??  Seriously, though...I hear ya. Thank goodness I have a solid agent that knows his stuff and was able to verify. Worth his weight in gold!

@John

@John Thedford- It is a busy road, but the house has such a big lot, that it is offset from the main thoroughfare. When you're inside the house you can't even hear the road. I am told it would create a hurdle to selling it, but shouldn't affect getting a renter.

@John

@John Leavelle- cash flow is based on P&I of refinanced mortgage, and is even more as long as I am managing it myself. Great job on your project! Getting creative and finding that hidden value!

@Kelly Hall- Thanks for the advice! I spoke to my real estate agent after I posted this, and he doesn't think the county will allow me to subdivide. However, he did think it might be re-zoned for commercial in the future. We shall see...

@John

@John Leavelle- Comps in the area are actually closer to $190k or more. This particular property is off of a busy street, so the value is less. Per my agent $160k is a good number. Plus, there is a scarcity of inventory in that county. Rent is verified at ~$1 per sq foot, so $1350-$1400 also is a good number. 

Terms of the hard money lender are 12months, no pre-payment penalty, 12.5% with monthly interest-only payments of $1,230. I already have financing pre-approved for more than this amount with a local brick and mortar bank. So, after the rehab, plan is to get the bank appraiser in asap to refinance.

Hey BPers!! Could use some help analyzing what I hope may be my first deal. I live in Richmond, Virginia and the property is as follows: SFR 4BR 1BA 1,355 sq ft On 0.9 acre B neighborhood with good schools in suburbs of Richmond; property abuts a park Wholesaler asking $118,000 Needs $20,000 of rehab ARV $165,000 Expected rent $1,400 Assuming hard money loan $100,000 (wholesaler wants to close asap) and put in $41,000 for money down, closing costs, rehab: Should cash flow $211 a month (assuming Brandon's standard cost calculator assumptions for vacancy, property management, capex, insurance, repairs, etc) Cash on cash: 6% Now...the intangible is, I think the lot can be split and a second property can be put on the land. Or, alternatively, it is enough to accommodate a smaller multifamily property in the future. I know it's not a homerun, but maybe a single or a double? Certainly has the potential for hidden equity and would rather do a decent deal than continue waiting and waiting for a knockout deal. Let me know what you think? How would you proceed?

Welcome Olawale!

I am also in the Richmond, VA market and just getting started. Hit me up if you want to connect and talk shop!

Randy

@Anthony Chung

It really is a local market thing. I have lived in several states, while moving around in the military. In VA and FL every place I rented had appliances. When I lived in CA, it seemed standard that refrigerators and W/D were not provided. Study up on other rental properties and decide if you go with flow or make your own properties stand out!