All Forum Posts by: Account Closed

Hey Andrew, 

Hope you are enjoying Germany. Thanks for all that you do, it is greatly appreciated. 

I have bought and sold a few homes and have some buy and holds and was in the military. Being in the military and stationed overseas I would not buy a rental property to manage yourself. You will be setting yourself up for failure. I would wait until you get stationed back in the states and are able to set everything up in person. And then get a property manager since you can get shipped out on a moments notice. Since you can get called to anywhere at a moments notice you want everything to be completely automated before you start. 

How do you know you're getting a good deal. First you shouldn't be buying in an area you don't know. Second the inspections will let you know whats wrong with the property if your buying from out of the area. And lastly your knowledge of the area and comps will help you determine if its good to go.

With that said I do know people who have bought properties they have never seen and have been successful. But there is an inherently large risk burdened by you when doing that and you better have all your ducks lined up to be successful. I hope you find your property but don't jump on something just to buy. Stack chips and wait until you get back in the states and make a fully informed decision. Hopefully that's clear as mud.

A house for us to live in turned headache, turned into a $105k flip.

So my wife and I bought a house, 3BD 2BA with an attached studio, in Aptos, CA in June 2015. 

Purchase price $678,000 ($28k over asking), we got a $5,300 rebate from our agent and a $4,000 rebate from the buyers for needed repairs to fund the loan. I ended up gambling that we would close and did the majority of the repairs myself.

Current rents on the home were $3,000 for the main house and $1,200 for the studio. The studio lease was up the month we gained ownership and the main house would be up in February '16. We listed the studio for $1,400 and had someone move in a few weeks later.

Cap rate at purchase was 6.7%. Mind you we weren't buying it for an investment, we were planning on moving into it in February when the main house lease was up so we didn't really care about this. That changed in November '15 when the tenants, studio and house, were nightmares and we decided that we were going to start thinking about selling. That said the purchase cap rate was good for the area. With the immediate increase in rent we were able to get the cap rate to 7.1%. With that we were cash flowing about $900 a month not taking into consideration principal reduction. 

In February we were able to completely maximize rents, main house was now rented at $3,300 and studio $1,400. Cap rate was now 7.8%, cash flowing about $1,400. This was unheard of for an investment in this area, and yes a house is different than multi units but still compared to other investment homes in the area/most areas this was excellent. Come this time we were set that we were going to sell come summer time as the market was still hot and we really didn't want an investment property on the side of a hill on septic that needed about $25k-$50k in work to be top notch.

Around March I started marketing by word of mouth, Craigslist and some other places on the internet, we were not going to use an agent as I knew homes were flying off the market if appropriately priced. Even told people who brought agents that they can pay their agent out of their pocket. Main reason for that is that we were making great money and we didn't ultimately have to sell unless we got our top dollar sale. We may have been a little high but a couple months later we got our full asking price of $750k from a buyer with no agent. Not having to deal with agents made the sale go a little slower, an extra month was spent in escrow, than ideal but there was no trying to figure out what the heck was going on as I had the direct line of conversation with the buyer. And ultimately if agents were involved they would have tried to talk me down in price and probably out of selling to the buyer so they could get their commission quicker as anything and everything flies off the market if priced correctly here. In the end I sold the house for top dollar, the highest sale in the comparable area, and didn't pay $40k is commissions. 

All said and done we grossed $105k and made some sweet lemonade.

@Account Closed

Considering the tenant has essentially moved out, eviction wont be a problem as mentioned in the post right above yours. If that is a problem for the buyer I would go to the next buyer, to answer you question. Not sure if you are familiar with the real estate market in my area, but buyers are lining up to houses they think will be sold to buy, this property didnt even hit the mls. I've come to the conclusion that with the numbers this property produces if speaking to the tenant that is not part of the deal is a deciding factor then there are other reasons the buyer wants out. 

@Thomas S.

Thanks for your reply. The tenant has essentially moved out all of their belongings so staying isn't the question. Its more of the conversation between new buyer and old tenant that is not being transferred with the sale. And how that conversation would affect the buyer, which it seems like it would not with you. Now I guess if I dont get the keys before escrow closes then I have a different issue. But knock on wood I dont believe that will be the case as an eviction hurts the tenant much more than them not giving the keys back. 

A tenant paying late is not a management issue. A tenant not being evicted due to paying late is potentially a management issue. A property manager cannot force a tenant to pay rent, but with that said the property manager has options if rent is not paid and what actions the manager does or doesn't take is the managers problem or success. Knowing the tenant and them wanting to keep their reputation, credit, etc., is why we did not take the time to evict. This was a calculated risk and it paid off. How much rent am I out, nothing, actually made more money on the late fees. I guess that's one part of management, being able to read people to understand when taking the extra time and money to evict is appropriate. 

@Fred Heller

Thanks for answer greatly appreciated.

@Account Closed

Don't take this the wrong way but did you read my post. There isn't anything that is getting covered up. This isn't a question of covering something up, this is a question of letting someone who will have nothing to do with a previous tenant get possible information that can hurt the sale because that tenant didn't get what they wanted during their tenancy. Again as I stated in the post I would want to talk to the tenant also, but from a sellers standpoint to what degree do I protect myself from the nonsense of the previous tenant. 

Haha, yeah its a decent property in Aptos. No its contingent on the tenants attitude that's moving out, just kidding, yeah its as-is. Its a FSBO, so its not really even on the market which is kind of the nice part about this, so for ease purposes I would like this to close. Thanks for the confirmation.

Hi everyone, 

I have a question that I am struggling with. I have a property that I am selling, in escrow now should close next month. The main house has stellar tenants, their lease is up in 2017 so they are included in the sale. The studio lease is up before escrow closes, wont be included with the sale, and this tenant has been somewhat tough. Always paid rent but never on time and always lying about when its paid, ie. saying its paid before the late fee date to try and avoid a late fee yet the deposit slip says rent was paid after the late fee date. The tenant also wanted out of the 1 yr lease early and we declined saying you have a signed lease that we need to abide by.  The buyer has asked to speak with both tenants during his due diligence period. I have no problem with the him speaking to the main house tenants but am very reluctant to give him the phone number of the studio tenant. Not that the studio tenant will reveal anything but that they may lie and say something to put something in his head that will have the buyer question the purchase. Ultimately the inspections he gets/has gotten will reveal everything but the fact that the studio tenant has lied so often about not so important things I am afraid that they may say something outrageous to just mess with the sale. The buyer knows the tenant has lied and has been tough. I know this may pop a red flag for the buyer but how much would that affect you if you were in his shoes? What would you do if you were in my shoes? I know I would want to do exactly what the buyer wants to do if I were in their shoes so I am somewhat conflicted. Any and all advice is greatly appreciated.

I have a good one for here in CA if you would like it?

Helme keep looking. 2 months is not that long to be looking. I'm in the bay area which is much more competitive. I have a few rental properties and I haven't been able to find another deal for over a year. Don't get something just to get something. I have a house with a studio in the Aptos area of California that has a cap rate of 7% and would cash flow with your 3.5% down. Only major issue is your in Portland. If interested PM me.