All Forum Posts by: Sandy Salazar

Hi everyone, I would love some feedback on a property that literally fell in my lap. A 6 unit building next my complex went up for sale. At first it looks amazing, property next door to mine, PM is the same PM that manages my units, however after looking at their financials I am not sure the numbers look good. It is an older building with a duplex, triplex and SFR on a lot. both duplex and triplex are 1/1 with carports, and SFR is 2/2 with garage, built in the 60s. Neighborhood is B/C with this property being a C. Seller is older couple who wants out of the game, very motivated, own the property free and clear, they tried selling it back in 2007 via seller financing but foreclosed on the investor (investor was a newbie with no landlord experience, didnt do repairs, blamed everything on the tenants, and purchased at the height of the market so eventually stopped making payments and they took back the property. Now they've listed it for $260K, potential rents (if all units are rented is $3200 and $38,400 annual). two units are vacant and completely remodeled, and one tenant gave her notice. Based on these two numbers and what my expenses are (water, trash, insurance, taxes, PM at 8%, 12% vacancy (comparing to my units), 10% cap x and 10% repairs), even if I offer full price I would be positive cash flow.....where do I sign right?

here is the problem.  I requested 3 years of income/expense sheets for the property from my PM.  (remember the property is free and clear).  and the property has been negative cashflow for the past 3 years not including insurance and property taxes

2013 income $15K, expenses $15K

2014 income $19K expenses $21K

2015 income so far $13K expenses $26K - granted they did alot of repairs and paint to get the property ready for sale. but even at $13K for 1/2 the year, at full year the rent is roughly $26K, $12,400 short from my anticipated gross annual rental income.

I've heard of people on the podcasts and here on BP where they've turned around poorly managed properties, but since this PM is the same as my property's PM, and there really isnt that many PM in the area that are competent, and this property is negative cash flow for three years and its owned free and clear.  I am waiting to hear back from my PM why the expenses and vacancy so high.

This is my first deal as seller financing (and commercial property) I would like to approach as seller financing since I've found out this retired owner also has other SFR that he wants to get rid of, and if this goes well I would like to approach him on the other ones as well.

What do  you guys think is it a good deal, what should I offer?  Initially I was going to present the seller with 2-3 offers, one at full price with 0% and 0 downpayment for 30 years, and another two with less sale price, but with some downpayment and 0 or 4% interest depending on the purchase price and downpayment.  But now that I have the real expenses sheet, I dont know how low to go, because even if they just deed it to me, I will still be negative cash flow.  

Also I wouldnt need to do any work to it right now from what my PM tells me, they revamped it trying to get it ready to sell.

Any input and help would greatly be appreciated.  

Talk to an attorney and see what you can legally do to remove him. Find out what your liabilities are regarding informing the existing tenants of his registry. Unfortunately, not all renters check that information, some don't even know they can or know how to look up that info. Maybe offer him money to break his lease early, maybe it's your responsibility to notify the other tenants of his status. I believe in second chances but not when it comes to hurting children or anyone for that matter. Good luck and thank you for trying to do the right thing. I have a 3 year old daughter and reading the part where they were looking at a kitten made my stomach turn.

Awesome job Lisa Perez it's so rare to hear females succeeding in this business😀. Keep up the great work and keep us posted!

Of the numbers make sense but it, it's always easier to find another tenant than to find another profitable property. I thought sex offenders are not allowed to be near children? Is that something you can use to have him removed? Regardless of who was there first, isn't it the responsibility of the sex offender to inform everyone near him of his status and in not doing so constitute a violation? I'm sure that he's on probation for being released early, I would look at that more carefully.

Vincent Aiello I totally agree with you, in Southern California we are in an emergency drought and because of this the water bill fees are tiered based on usage. I pay the water bill (and trash). If you are purchasing a multifamily with one water meter you can request the copies of the water bills to see the usage when all the unit are occupied and in the summer vs winter. That will give you a better understanding of your water bill expense when your factoring your cash flow and if that's going to make or break your deal. To help lower the cost of the water try switching to low flow toilets, water conserving faucets and shower heads.

It all depends on what you want your property manager to do for you. You can have them do everything or the minimum. I require my PM to call/text/or email me to authorize any repairs and status updates, and all tenants are screened by her (income verification, employment verification, credit reports, rental and evictions history) but I make the final decision to allow the tenant to rent my unit. But I don't call the tenants and they don't call me. I just manage my PM so I am not an absentee owner.

Hi Robert,

Zestimate is so off, sometimes I feel like they literally pull these numbers out of their ______(feel free to fill in the blank, Sorry). If the property your looking at either an SFR or small unit multifamily (duplex, triplex, fourplex) learn to find out how to appraise it. Look at recent sales that are comparables in the past 3,6 and 9 months to this property (similar bedrooms/bathrooms, square footage, lot size, and then amenities such as central AC, connected sewer instead of septic, granite countertops, tile instead of lanolium flooring...etc). This is how the bank will appraise your property, and if they're asking pricing is way higher than what they're selling for then no bank will finance any buyers for this property, unless the buyer decides to pay the difference in cash, or be an all cash offer. If you lowball them with the offer, present to them an explanation why the offer is low, it could be that they are personally attached to this property and they feel emotionally that its worth more.

 If the property price is similar to recently sold properties in the area, then you can try to submit a lower offer of 10-15% less of asking and go from there.  But with any offer make sure the number works for you.  Good luck!

Stick to your numbers! There are a lot of people who over pay for properties, but those are the ones who end up in foreclosures when the market turns and the rent decrease while vacancies increase and they can no longer afford the mortgage payment. If you want to be in this game for the long profitable haul you need to make sure your properties align with your numbers, otherwise when the market hits a snag you may not be able to come out of the trenches in one piece. I remember when my husband and I went to bid at our first auction sale (we had attended several auctions before to get a feel of the atmosphere) I had an excel sheet for the property I was interested in and detailed profit/loss for every $5k increment of bid. When everyone stopped bidding and we were left in a bidding war between us and another investor, it would have been easy to get caught up in the excitement of the bidding and the heat of the moment, but before I bid I would look at my excel sheet and knew my numbers. In the end we didn't get the property but if I had made that one last bid I would have been in a negative monthly cash flow. And would not have found my next property (a duplex with consistent positive cash flow). When it comes to finding properties it's a numbers game, the more offers you submit, the higher the chance of your offer being accepted. Don't give up, you just have to get creative and try to find deals before they hit the MLS, when everyone else is jumping on them. Best of luck and don't give up!

I am not a property manager, but I have a property management company that manages my properties and they mail out to me a check every month. Though if given the option I would prefer direct deposit, I've had several of my mailed checks already open by the time I've received them from my property management company.

@Account Closed  Do you live near the rental property or in Oakland?  You can always ask the tenant to leave.  Worst thing they can say is no.  If they say no then find an attorney who knows evictions processes and can represent you in court (incase you do not live near your property).  Evictions are very complicated where notices need to be served properly or you would have to start the whole process again.  Most likely once the attorney serves your tenant the eviction notice, they will be required to contest it, if they don't contest it (which seems like what might happen here) you would win the eviction and would have to do the sheriffs lockout.  If at any time you don't post the eviction letters, or deliver them correctly, or file things properly, you would have to start the process all over again.  As a first time, I would use an attorney, then learn the process in case you have to do it again (hopefully not).  Good luck.