All Forum Posts by: Vernon Chiu

@Caleb Brown it is a 7 unit multi-family building. 2 units currently vacant (one undergoing renovation and one that just went vacant a month ago). They are still providing showings for possible tenants.

At the current rents with 5 units, the property is cash flow positive but not stellar. Once the one vacant unit fills, it will cash flow well. Not to mention the one that's undergoing rehab.

My greatest concern is that rents will suddenly dry up with the COVID19 situation and I'll be on the hook for the majority of the loan. I do have reserves but the market and current climate has really shaken myself and my partners. There's all this talk now of unemployment potentially reaching 30% and all these landlord letter floating around about how/what they expect their tenants to pay. It's enough to have you pause and take stock of everything. Pun intended.

Under contract for a property and was extremely happy. Now with the COVID19 situation and the world turning upside down, I am questioning if I should pursue and put $150k for the down payment. DD is up end of this week. Money has already been spent on inspection, elevation certificate, bank fees, an appraisal, etc.

Now with the possibility of rents not coming in, it is making me question the purchase. Should I just cut my losses and say it was simply the cost of doing business (the expenses listed above) or pursue? I was much more certain about this property a month ago. With the stocks, panic and potential loss of rental payments, I'm not as certain.

Anyone else in this current situation? What are your thoughts on the matter?

Thank you all for your insight. I feel the same. After the added in commission, the deal still works. Will see how things go. Have a wonderful weekend everyone.

Would like some clarification and hope I'm doing the right thing.

A multi-family broker I deal with regularly brings me am off market deal. It looks like this will work out. He advised me that the seller is going to pay him 2.5% and ask if I could put in another 2.5% to "make it whole".

I see no issue with this as he brought the property to my attention without the need to elbow my way through many other prospective buyers. One of my partners feels that this was odd as the seller typically pays all the commission.

This is my first off market deal but I feel it is only right to pay half the commission as he is working to put this deal together between two of his clients. I feel no reason to begrudge him the 2.5% if it means building good will and more potential deals down the road.

Am I being swindled or am I doing the right thing? Your thoughts would be appreciated.

Good day all. I have a 7 unit building under contract. This is a recently renovated building that was converted from an old theater to a multi-family building. The current owner installed 3 new HVACS: one HVAC for 3 units on the 3rd floor, one HVAC For 3 units on the 2nd floor and one HVAC for a larger unit on the ground floor.

So there is one thermostat for each of the above floors and they are simply set to 70 degrees year round. I would prefer each tenant have their own HVAC systems or minisplits. Only reason I can think to why the owner didn't split the units is potentially due to costs (i.e 6 minisplits + 1 HVAC vs 3 HVACs). The owner also is paying for all the utilities.

The math works for rents and cash flow but would like to submeter this out. Any idea what the cost might be for something like this? I would submeter water and electricity. Would likely also need to purchase 2 zone minisplits for the 6 units. I can only imagine this may have been cost prohibitive which is why the owner did the above.

Any advice or suggestions appreciated.

@Zachary Paschke thanks Zach. Allstate is just a starting point as I am familiar with them and want to learn more about all the options available for our particular LLC. Once we make an acquisition, I plan to go through a broker so I can have a good selection to choose from. At that time, I should have a clear type of insurance in mind to streamline the purchasing/selection process. A bit more foot work up front, less hassle later.

@Thomas Rutkowski

That was very informative. Thanks Thomas. I have some time still so will be learning the ins/outs of different policies. The entity purchase agreement sounds like it would work based on what I've read so far.

@Ashish Acharya

Thank you for the information. I'll be looking up entity arrangements and see what I can find out. I may speak with my local insurance agent (Allstate) to see if they can help with this. May be able to get discounted rates as I'm already an existing customer.

Hi everyone,

Wasn't sure what category this falls in but financial planning seemed appropriate.

I'm starting a 4 members LLC for CRE purchasing. We are of the mindset of buy, hold, refinance indefinitely. I heard one of the BP podcasts where someone had purchased life insurance on their partner and vice versa. It was a 2 member LLC. This was to make sure that if something unforseen happened to one or the other, the surviving partner will have the means to buyout the shares from the heirs.

I thought this was fairly sound advice. My membership is agreeable to something like this so I have some more questions before following this down the rabbit hole.

1) is there a specific type of insurance one would recommend in this situation? So far, the only one I have come up with is a 20-30 year term life, perhaps for $50-100k death benefit, to purchase for each member. It is likely the most cost effective and gets the job done.

2) what are the tax implications other than payments are not tax deductible as this will be paid by LLC for members, not employees?

3) what are the tax implications IF the policy does take effect? The plan for these benefit payouts would be as buyout funds in case the heir to the disassociated member's shares doesn't want a part of the business or is deemed I'll suited for the position. I suspect the remaining will go to the LLC and distributed to all remaining members as is typical of life insurance policies

We all agree this is not an easy conversation to have. However, I feel it behooves us to make sure our membership and families aren't saddled with a giant "what do we do now" should anything happen down the road.

I like to imagine worst case scenarios where someone may have $50-150k in equity scattered throughout multiple properties and the remaining members would have to buy them out at a time when they may be retired and on fixed incomes.

Thank you for your time.

Thanks to everyone's input. Looks like first order of business will be a Phase 1 ESA and inspection of the well and septic system. If it turns out this is the original system from 1973, I will definitely be negotiating a much lower price.