All Forum Posts by: Eric Hathway

That is an extremely good observation. Great insight. The income and expense numbers worked for the lender. Who cares if 2 or 3 units don't scrub their stovetops?

The seller is a broker, but he just had knee surgery so he could not be present. He had a maintenance guy let the appraiser in. I am working without an agent and didn't even know the appraisal was scheduled. I didn't think it would even be close that I would need to provide comps. Live and learn.

I can only assume he is a residential appraiser.

I'm going to get another appraisal done.

Thank you again all. I've learned a lot in the past few hours. At this point I am moving forward with a different lender who reports they "work with you" on these issues. They will give conditional approvals and say unit X: tenant must be removed for unsanitary conditions or the unit must be heavily cleaned. 

I spoke to the owner and he said he won't put them on the streets, but he will offer them another unit he owns in a different building.

As far as the deal, it is right on part with every multi fam sale in the area over the last year in terms of price per unit. It is a cap rate of 12, and my home inspector thought the building was maintained well and solid in his eyes. Debt service coverage ratio needed to be 1.25 for the lender and this was 1.67!!

I just got work the appraiser won't finish the appraisal report because the lender pulled out. He is refunding $800 of my $1000 appraisal fee. This baffles me. I paid for it.

Stressful day.

Thank you everybody. Now I'm just scared the appraiser is legit and this is a bad deal. 

The appraiser said they wouldn't value it higher than "a couple hundred thousand". Which is silly given what it brings in for cash flow and the condition of the structures. New roof, water heater, furnace, siding, and windows.

Debt service coverage ratio 1.67

I have an 11-unit apartment building under contract and my portfolio lender just informed me the appraisal was not good enough to lend upon. She stopped the appraiser before he wrote the report to save costs, but from their conversation, this was not going to appraise for the $640k purchase price. The building definitely cash flows but has 2 really dirty tenants/units that "horrified" the appraiser. My plan was to force them out by increasing the rent and then renovate those units and get a quality tenant in there.

Any advice or am I dead in the water?

Thanks Derreck,

  I be in touch next time I see a flip opportunity or have a tenant move out.

Thanks!

If I remember correctly the next meeting will be Feb 10th. You might just search for the NHREI website and get on the mailing list. I find it to be very helpful.

@Stefanie Willie-Bonglo it was Joseph Donahue from Donahue & Associates, P.C.

I went to a NHREI meeting last month and the attorney who did the speach recommended holding each investment property in a separate LLC and then all the LLCs being held in a trust for additional protection. My personal opinion from what I have gathered is that you first line of defense is liability insurance so make sure you have plenty of that. LLCs can be pierced if you are personally liable or negilgent. Good to have, but not bulletproof.

Keep in mind that if you purchase a property in an LLC it will have to be financed commercially instead of conventionally. It also requires a separate state statement tax return in NH. Federally, you will only have one return if it is a single member LLC, but you will have a separate state tax return. That's how I do mine. There are some specifics that might change those, but it's worth a 10 minute conversation with a CPA.

LLCs also have to file an annual report. I just did mine and it was $102. 

Best of luck!!!