All Forum Posts by: Sarah Humbargar

Lia, do you think this could be done as an addendum to an existing lease?  

@Taylor Roeling Yes, no one wants bed bugs and I think most landlords and tenants are reasonable when it comes to these types of situations. The concerning thing is that the bill language states it is the landlord's financial oblligation to remediate, but does not specify anything different if the tenant brought the bedbugs to the premis. I assume this means that regardless of who brought in the bedbugs, it is the landlords financial responsibility.  To me, its seems like you almost need to prove there were no bedbugs present when the tenant moved in, and even if you do that I'm not sure this information will prevent the landlord from being responsible for the cost of future mitigation. Maybe I'm just reading into the bill more than I should, but this seems like a major overstep that could cost landlords thousands of dollars when the issue is most often caused by a tenant bringing in an infected item.   

Hey there Colorado landlords! How is everyone planning to address the impacts of the incoming law HB19-1328? My understanding is it hasn't become law yet but is just awaiting the governors signature. 

Here is a link: https://leg.colorado.gov/bills/hb19-1328

What concerns me is the response period requirement and the requirement that the landlord is responsible for all costs!

" Not more than 96 hours after receiving notice of the presence or possible presence of bed bugs, a landlord:

• Shall inspect or obtain an inspection by a qualified inspector of the dwelling unit; and
• May enter the dwelling unit or any contiguous unit for the purpose of conducting the inspection.

If the inspection of a dwelling unit confirms the presence of bed bugs, the landlord shall also cause to be performed an inspection of all contiguous dwelling units as promptly as is reasonably practical.

Except as otherwise provided, a landlord is responsible for all costs associated with inspection for, and treatment of, the presence of bed bugs. "

What are the best approaches to handling this? Can we and should we be charging a new "bedbug fee" to cover the future costs? Are there other states with similar laws? 

I am considering getting my license here in Colorado. I have a real estate degree, so all I need to do is take the exam and provide a copy of my transcripts to get my license, but I haven't done it yet out of fear that having my license will interfere with my career objectives, which is to focus on investing in the commercial sector and  providing advisory services to my development clients. However, it's starting to look like there may be some cost savings if I had my license, and it would allow me to facilitate my own transactions more easily when buying or selling a personal investment property. So, any recommendations on where I could hang my license that won't expect me to be a full-time broker or charge me up the whazoo for a couple of transactions a year? Any reason why having my license would prevent me from continuing to do consulting on the commercial side if I am well insured?

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Colorado Springs.

Purchase price: $359,000
Cash invested: $75,000

This property was purchased as a long term buy and hold using the BRRR strategy. The house was built in 1901 and was originally used as a boarding house. It now consists of 3 units, all legally separated and metered. Two units contain 2 beds 1 bath, the third unit is a 2 story 3 bedroom 2 bathroom. Two units were vacant upon closing, so we are taking the first month to rehab the units, adding a laundry room to one of the units. The third unit will be updated when the existing tenant moves out.

What made you interested in investing in this type of deal?

We were looking to have a more scaleable impact with our dollars, moving from single family investments to small scale multifamily. Being able to phase the leases so that we never have 2 units empty at the same time was of interest to us, and this particular property as in really good shape with only minor improvements needed to get top dollar. The location is amazing and has great long term potential, being in an up and coming neighborhood walking distance to Downtown and many other amenities.

How did you find this deal and how did you negotiate it?

We found this deal on the MLS and beat out 5 offers with an over-ask offer in 24 hours. The property had a history of flooding, mitigated meth use, a zoning issue, and a widowed seller who didn't have the capacity to manage the asset. After inspection and understanding the goals for the seller, we were able to negotiate the price back down below list and still achieve some concessions, while also resolving the zoning issue with the city and confirming clean and safe conditions.

How did you finance this deal?

We used a commercial loan, having to switch lenders mid-way through the contract. We found that the zoning did not permit a tri-plex on the site and we were unable to get the city to issue a rebuilt letter for a tri-plex as was required by our earlier lender through a residential mortgage. The commercial loan terms ended up being even better than the residential terms, and they had no issues with the fact that if the house burned to the ground, we could still rebuild a duplex in its place.

How did you add value to the deal?

We bought at the right price, were able to get legal non-conformance for use as a tri-plex when only a duplex was permitted and will improve the property even more by painting, re-exposing original architecture, adding laundry facilities, and increasing the rents to market value.

What was the outcome?

We closed and started our updates. More outcomes to come!

Lessons learned? Challenges?

The "good deals" aren't typically easy deals. We have looked for the right property for more than a year, walked away from a lot of properties, and always stuck to buying at the right price and buying where you can add value for limited costs. This purchase required careful cultivation of a relationship with the seller so that we could have the flexibility needed to close a challenging property.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Integrity Bank and Trust saved the day, closing on a commercial loan in 2 weeks for us. Luckily e were already pre-qualified with them which helped to accelerate the process, but they were fantastic to work with.

Does anyone have recommendations or has worked with a virtual CPA? How was the experience? I recently went out on my own and thought I had lined up a good local CPA to work with, he told me back in November he would take me on as a client and he seemed like a great fit, then when I reached out to him a few weeks ago with some tax questions, he told me he didn't have time to take me on as a client anymore.

I still have a lot of questions to ensure my short and long term strategies are in place as my company is just getting off the ground, and I haven't gotten the clarifications I wanted for filing my 2018 return regarding QBI for rentals, etc. I'd really like to work with someone that I can regularly ask questions of as they come up, rather than just dumping my books on them come tax season and finding out all too late that I wasn't reporting something properly. I just recently found that there are CPA's who work virtually, which may be a good fit for me since I live in a smaller town, although I could easily work with someone in Colorado Springs or Denver as well. 

What're everyone's experiences? How do you find the right CPA that will stick by you long into the future? Is virtual a good fit, or is it better to go with strong local knowledge? 

Thanks for the input. I like the idea of doing a series LLC, we intend to own more in the future so it seems to me like setting up a system now makes sense.

We are soon to have 4 units between 2 properties and at this time I self manage everything and will continue doing so into the foreseeable future. We've received 2 different legal recommendations and are trying to decide what our best option is. First was to just put each property into its own LLC and have your leases under the ownership company. Second is to put each property into its own LLC but have a contract with a separate management company, which we also own, to further reduce liability. I am assuming that the second option only becomes necessary when we have a lot of units and we are still self-managing. Are there other better options I am missing? What's the best approach with a small number of units, with the intent to grow our portfolio?

 I haven't seen anything at or below $500 in most markets in several years, and in another 5 years just think of how far below market that unit will be! I would walk away, seller financing requires trust on both sides and, while the interest rate may be good, who know's what you may be getting in to with someone who pulls a move like that. 

Thanks all for your input. We received the paperwork from the state that the initial contamination had been officially cleared. @Bill S. thank you for the advise to get the other units testing, we just got the results yesterday and all three units are clear, and now we have evidence of such if anything were to happen in the future.