All Forum Posts by: Valeria T.

Thanks @Evan Polaski - I plan on proceeding exactly that way.  You're right, after more digging I learned that I cannot (nor my agent) legally market the unit that I don't yet own.  So regardless, the seller/seller's agent would have to be the one to market and lease, upon my final approval of the tenant.   

Thanks all for being the sounding board and helping me sort this out.  Having said that, I decided to "wait and see" for a bit, as I'm seeing the local RE prices drop, and as a buyer during these times, I can only gain from that.  The risk is losing this property and it's a risk I'm willing to take.

@Bjorn Ahlblad Thanks for your reply.  I have spoken to 2 local management companies, as well as my realtor, whom I trust, and they are all confident it'll be rented quickly.   I've run rental comps as well to determine how much to expect, especially in the middle of this crisis.   I am attempting to eliminate as much "known" risk as possible.

Best of luck to you!

Thank you all for your insights.  I know this is an unusual clause.

@Marc Winter the property manager who advised me suggested to put the effort of finding the tenant on the seller/seller's agent.  I, however, feel better if that's on me - so I can be properly screening for a solid tenant - especially during the crisis and so much employment instability.  As far as administering it, my initial thought was the same way a contract conditional sale is pending the inspection report or the ability to get financing.   If we cannot place a tenant within 30 days of entering contract, for example, then the contract is void.   It's really a solid protection during this time and a way to say to seller, put your money where your mouth is....

@Erik W. great suggestion, thanks ! I really like the "If I take away...." approach as a negotiation tactic.  I feel it's worth a try.  I think you're right on target on how the conversation will go down : ) 

@Brian Garrett Thanks for your insights also.  The owner had a contract that fell through (March) due to buyer not being able to get financing in the middle of this crisis.  It is legally zoned for a duplex -  I checked, not with the county, but with the city.  Should I also check with the county?  I was not aware of that.

I ran the comps and price is on target, but that still makes me uneasy since I feel properties are likely to depreciate during this recession.  It was a daycare for years, and now a completely rehabbed duplex.  It's in a neighborhood that is still transitioning, which is why it may be overlooked, and priced well.  Also, it backs up to a cargo rail that runs twice a day.   That fact (the rail) doesn't concern me much since my goal is cash flow (rental property mostly targeting young execs) and this will cash flow at the lowest rental projections.   Any other thoughts?  I'm open to suggestions.   This is my very first RE deal and it's an understatement to say I am being cautious, conservative and.... slightly terrified : )

Hi BP community :

I am making an offer on a duplex in Palm Beach county that was recently rehabbed and turned into a duplex.  It was used for commercial purposes previously.  As such, this property has never been rented to tenants.  In speaking to a local RE manager, he strongly advised that if I were to buy such a property, is it imperative, given today's crisis coupled with the fact it has never been rented, that we include a condition that the sale is conditional based upon the ability to enter into a rental lease within 30 days, for at least one of the units.

The seller's agent (not surprisingly) asserts it will rent in a week.  I don't expect that, but I do like the idea of the conditional sale based upon the lease contract.   Under normal circumstances I don't think most sellers would agree to this, but given this property has been listed for over 150 days and price has been lowered many times, it seems more feasible.

Any thoughts on this approach?  Anyone experienced with this type of conditional offer?

Thank you.

Thank you for the great points.  @Guifre Mora I def need to reanalyze considering the zero cash flow, the "holding costs" during rehab period.   Also, when you say "leveraging the HML to 30%", do you mean I should calculate the HML cost at 30% instead of 10-12% to cover these unexpected expenses? On another note, I have decided to wait for the global pandemic dust to settle before moving on any deal. My reasoning is that I likely won't be able to (1) fly out of state to see the property, and (2) get contractors in to start rehab during this crisis and so that would increase my holding costs and rehab timeline. In your opinion, is the uncertainty affecting the R.E. market is a valid, sound reason to pass on a potentially good deal? Being this would be my first investment property, I am very hesitant to pull the trigger in light of the current state of affairs.  However...now more than ever, I'm reminded of the quote, “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”.  In researching how this pandemic will affect the rental demand/prices in my target area, it's early to tell, but it looks like it has and will continue to decrease demand for a few months, and projected to bounce back by fall - but no one knows as this situation is completely unprecedented. That being said, it could be the perfect opportunity to buy in the short term, rehab and be ready to rent by fall.  Any thoughts?

@Jaysen Medhurst Thanks again for your insight. I'll make the HML rate/points adjustments. We decided to hold and observe for now, reassessing week by week, how prices in that area are affected by the pandemic and pending recession. Am anticipating that we will have more room to push down the purchase price due to current/projected state of affairs. Stay safe and healthy : )

Thanks again, Val

Link here to report with updated CapEx and repairs...

https://www.biggerpockets.com/calculators/shared/1683395/1339dcf6-281d-4a04-8a36-cc8cf6395bb3

Hi @Jaysen Medhurst and thanks again !

I have updated the report to show the corrections you noted. Thanks for catching my mistake in including the wrong rates and terms for the HML.

Assumption used for calc:  in light of current state of affairs, though I have spoken to several HM lenders, I cannot get a quote as operations are on hold.  Therefore, I used the rate of 10% and 1 point, a 12 month term, and interest only.   In your opinion, are those reasonable figures for a lender to offer new investor?

I adjusted and estimated the renter insurance at $80 (very conservative) but am waiting on actual quote from local agent.

I will put putting in $43.5k cash (HELOC) and covering the rest of acquisition cost and rehab with the HML.

Acquisition: $87k

Rehab: $35k

Down payment: $43.5k

HML: $78.5k

ARV: $145k

I estimated the refi amount at 70%(LTV) with the ARV@$145k = $101.5

I realize the LTV is low, but I'm being extra conservative considering it's my first BRRRR property.

Would really welcome your thoughts on it.

Thank you - Val

Updated report here:

https://www.biggerpockets.com/calculators/shared/1683395/f397fe9f-4bda-4408-bf0e-f1c99a4d9ea9

Thanks for the insight @Jaysen Medhurst 

My reasoning for putting 50% cash down at initial purchase, was to decrease the amount of hard money loan (not traditional mortgage) I would need upfront.   Do you recommend putting less down and if so, the traditional 20% or a different amount?

If I go with the hard money lender for the purchase, my understanding is there is typically a shorter seasoning period. Will adjust repairs and CapEx - motivation there was also considering it'll be a total rehab so I'd anticipate lower costs. Thanks and I really appreciate all the feedback. I am getting super gun-shy about pulling the trigger on that first deal. The typical rookie analysis paralysis, I guess! If you have any other thoughts or insights, please let me know.

https://www.biggerpockets.com/calculators/shared/1683395/d49120be-904d-48d9-a428-36499f9b0a7b