All Forum Posts by: Richelle Bryan

This is a good opportunity to discuss some basic real estate business principles. 

I make most of my money, buying rentals from unsophisticated sellers.  Cannot have it both ways. IF they are sophisticated enough to understand their numbers and are actually able to provide them to you, they are not nearly as likely to sell to me for the discounted price I require. 

In small properties, you should KNOW what the numbers can or should be and be able to figure out how much the property is worth to you (Your offer price) within a narrow value range. Figure out what your market CAP rate is and use that along with comparables, all of your actual knowledge and experience of market rents, property condition and repair and renovation costs, to perform your own "appraisal" of the property. Most of that is not dependant on what the seller's actual numbers are - yours may be very different = the opportunity for you.

If the property's existing rent levels and vacancy rate are sub-par in your experience, then the seller should be pricing it below what you could value it at if run better (you must maintain the control of what you pay for it, not the seller). If the property condition is run down with lots of deferred maintenance, then the seller should not be paid as if it were in better shape.  The difference between the actual situation, and what you could achieve, is your opportunity. If the seller is unreasonable, then there is no opportunity for you and he can keep the property. Don't take his problems off his back, without being adequately compensated for doing so - via a discounted price. The more unknowns you face in the deal, the more risk, and the less you should pay- to compensate you for the additional risk.

If you rely on any numbers provided by a seller, without verifying them against your own belief of what they should be, then you are possibly in for a bad experience when the truth is revealed (After you have purchased and operated the property for a while). 

SO, use your own numbers and forget the seller's provided ones which you should not trust/rely on anyway. If you cannot plug in your own numbers, then you do not know your market and should not be buying anyway, until you do. 

There is no substitute for your own competence. Relying on others to take care of your business, including relying or counting on a seller's provided data about a property, is abdicating your own responsibility to perform due diligence. Competence is what we are paid for.

Hi Sean. I live in nyc and invest in Rochester. PM me and I’ll be happy to answer questions.

Hello all - I am a Realtor and Home Inspector servicing the greater Milwaukee area.  I am also an Investor and excited to be here!  Fell free to contact me directly with any questions pertaining to Real Estate of Home Inspection!  Thanks!

Yeah not usually for residential.

On the commercial side I tell a seller if we cannot validate items because you cannot present factual data to back up your claims then we have to assume the worst with the property and drop the offer price accordingly. If the seller wants you to pay a premium for unknowns than most buyers walk away.

Duplex can be smaller potatoes. When you get into much larger properties then not getting these items losses can be heavily amplified. 

@Richelle Bryan Conventional rates are in around 5% but depend on your loan scenario.  You can always ask your lender if you pay points can get lower interest rate.  Ask for both option so you can do your calculations. If you pay points lets say its $100000 loan amount and you have to pay your lender .25% on this loan so this will be $250 to get lower interest rate.

@Richelle Bryan in Colorado we have a "property condition report" - basically a checklist regarding the structure where they can list condition (example: roof - new in 2015, sewer - public system, etc.) If it turns out that they lie or avoid revealing something then they and their Realtor are in trouble. You could even make up your own list of specific questions. Due diligence is on you. 

Rent rolls (vacancy rate) might be important in an area where there is excess housing - not so much in areas where housing is short. What are important things that YOU have to pay? How much is the water bill? Common area electric? HOA or landscaper fees? You can put your own numbers together if you have a few pieces of key info. @Chris Mason and @James Wise are correct - don't get hung up on some formal paper. Ask the questions you need answers to and walk if they can't provide the answers.

I once bought a grocery store with crappy bookkeeping - so I asked them for several quarters of their sales tax reports (the income reported to the state). I figured they were skimming cash off the business and these reports would be "lean" at best and honest at worst. 

@Richelle Bryan 401K can be used as reserve you don't need liquid assets. Yes you do need reserve for all the properties. 

@Richelle Bryan 401K can be used as reserve you don't need liquid assets. Yes you do need reserve for all the properties.