All Forum Posts by: Sharon Tzib

Welcome, Johnson! Are you looking for a SFH or MF agent?

Good luck, Dar, and welcome to BP!

@Michael Power thank you! She has a couple websites so I was going to the wrong one. Got it now :)

Wow, the place looks like it's in very good shape from the pictures.

I agree with everything @Christopher Dumelle noted. 16% for maint/repairs on a home you're already putting $4500 into seems high. You should definitely have plenty of reserves - never a bad thing.

And get in the habit of always including PM fees even if you're doing it yourself because you just never know - if something happens to you and you can't attend to it any longer, you'll want to hire it out and still cash flow.

Hope the closing doesn't delay much longer.

Yeah, knowing what kind of building this is would be helpful. If this is in Sac, then at $45K annual income, I'd assume a 4 plex perhaps?

However, NOI does not include debt service, so if he gave you the expense number with that included, you need to back that out to get a true representation of cash flow.

Before you go any further, you really need to look at his operating statements and figure out what's going on. Maybe he pays all the utilities or something? That can be a killer sometimes. Let us know what you find out.

Not sure how you arrived at the idea you would need to put up $2 mil, but even so, without details like how many units this building has, unit mix, average rents, etc. to get a clearer picture of things, would be hard for anyone to theorize.

That aside, Jon's advice is spot on, and all that stuff may be a moot issue anyway.

I will say, just so you know in the future, if you see a property in disrepair that is owned by an out-of-state owner, many, many times they will have no idea of the condition of their house/building, so calling them and informing them and then finding out if they are open to selling is a great way to find off-market deals. The trick, sometimes, is finding their phone number :)

Sorry about the "?" marks before my list. Have no idea why BP inserted those :)

- What should I expect the buyer to provide? I expect leases, rent rolls , tax returns? The agent looks at me funny for some of these things. I would expect at least leases.

Did you mean what should you expect the seller to provide? A lot!! And if his or your agent is looking at you funny, too bad. Here's what I would want to see at a minimum:

?Rent Roll

?Leases

?Estoppels (near close of escrow)

?T-12 Operating Statement 2 years

?Balance Sheet 2 years

?Bank Statements

?Credit Card Statements

?2 years Tax Returns

?2 years Utility Bills

?Property Management Report

?Work Orders

?Service and advertising contracts (trash, HVAC, etc)

?Insurance Policy

?Get a list of FF&E (Furniture, Fixtures & Equipment)

?Invoices for recent capital expenditures

?Licenses, Permits & Certifications

You and your agent should go meet the tenants and have them sign an Estoppel Agreement, before close of escrow. There's a sample on in the BP Files section.

This may help alleviate some of your concerns, or you may find issues ahead of time you will want to deal with prior to close.

As JJ said, as long as they are paying tenants, you should be fine with them being there. What's your concern?

The insurance part shouldn't bother you - standard stuff.

Section 5.3 is an Indemnification Clause, and theirs is quite one sided. I owned a PM company in Belize, and the first part of my PM contract said,

"Owner agrees with the exception of fraud, theft or any other act that is a crime in the country of Belize, Owner agrees to indemnify, defend, and hold harmless Manager and all persons in Manager’s firm, regardless of responsibility, from all costs, expenses, suits, liabilities, damages, attorney’s fees, and claims of every type, including but not limited to, those arising out of injury or death of any person, employee, tenant or guest upon the premises or damage to any real or personal property of any person, employee, tenant, or guest upon the premises, including Owner, in any way relating to the management, rental, security deposits, or operations of the Premises by Manager, or any person in Manager’s firm, or the performance or exercise of any of the duties, powers, or authorities granted to the Manager. If either party commences a lawsuit against the other to enforce any provision of this Agreement, the successful party shall be awarded court costs from the other and reasonable attorney fees."

I would definitely ask them to revise their language so they are held accountable in certain circumstances. You may want to have an attorney review this contract and suggest appropriate and fair language for your state.