Buying a 145 units apartments in central Florida

Multi-Family and Apartment Investing
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Buying a 145 units apartments in central Florida

Orlando Lis
Member since 2022 · 5 posts · 2 votes

Hello, 

so we just got under contract to purchase a 145 apt from a nonprofit organization, the rent is currently literally 60% of the market rate, our biggest concerns are how to make sure there is NO rent increase law in place , how to know if there is one? if the seller is not willing to communicate about the subject. 

thank you 

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Tyler GibsonBusiness Member
Real Estate Agent · Orlando, FL · Member since 2017 · 1k+ posts · 2k+ votes
4y
Quote from @Orlando Lis:

Hello, 

so we just got under contract to purchase a 145 apt from a nonprofit organization, the rent is currently literally 60% of the market rate, our biggest concerns are how to make sure there is NO rent increase law in place , how to know if there is one? if the seller is not willing to communicate about the subject. 

thank you 


 Other members of mentioned that there are no rent control measures in the state of Florida from a governmental perspective. If it is a non-profit they may have accepted some sort of government funding in order to keep rents low in order to subsidize so you'll want to verify that all the leases that are in place don't have some sort of long-term government subsidy that would otherwise restrict you from raising the rents.

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  • Bjorn AhlbladPro Member
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    4y

    @Orlando Lis welcome to BP! If you have the resources to buy a 145 unit apartment building why would you rely on the seller to give you that kind of information. Verify that for yourself. Congrats and all the best!

    3Reply
  • David Vanlandingham
    Investor · Orlando FL · Member since 2022 · 42 posts · 42 votes
    4y

    At this time there isn’t rent control in Florida. It is being presented by one senator but has very little support or traction. You still need to do your due diligence on a local level. 

    1Reply
  • Tyler GibsonBusiness Member
    Real Estate Agent · Orlando, FL · Member since 2017 · 1k+ posts · 2k+ votes
    4y
    Quote from @Orlando Lis:

    Hello, 

    so we just got under contract to purchase a 145 apt from a nonprofit organization, the rent is currently literally 60% of the market rate, our biggest concerns are how to make sure there is NO rent increase law in place , how to know if there is one? if the seller is not willing to communicate about the subject. 

    thank you 


     Other members of mentioned that there are no rent control measures in the state of Florida from a governmental perspective. If it is a non-profit they may have accepted some sort of government funding in order to keep rents low in order to subsidize so you'll want to verify that all the leases that are in place don't have some sort of long-term government subsidy that would otherwise restrict you from raising the rents.

    [email protected]407-590-9858
    GPG Team 597 Reviews
    WebsiteView Page
    5Reply
  • Shawn McCormickPro Member
    Realtor · Central Florida-Orlando · Member since 2014 · 1k+ posts · 892 votes
    4y
    Quote from @Orlando Lis:

    Hello, 

    so we just got under contract to purchase a 145 apt from a nonprofit organization, the rent is currently literally 60% of the market rate, our biggest concerns are how to make sure there is NO rent increase law in place , how to know if there is one? if the seller is not willing to communicate about the subject. 

    thank you 

    If you are buying this via a broker, that should be spelled out in your contract about getting copies of all the leases so you can perform your due diligence. You will need to get estoppel letters out to each tenant to verify all of their information as well. Just make sure your due diligence period is long enough to accomplish this. Best of luck.
    1Reply
  • Orlando Lis
    OP
    Member since 2022 · 5 posts · 2 votes
    4y

    @Bjorn Ahlblad that's what I'm trying to learn, the seller is a big organization and selling it AS-IS and doesn't want to guarantee or disclose anything. basically, I have 30 day days due diligence period to find out if I can raise the rent or if there are any rent restrictions. 

    @David Vanlandingham thank you for your answer, can you please give an example of local level due diligence, like should we call the city department of housing ??? 

    @Tyler Gibson thank you for your answer, do you mean I'll find a clause in the leases that give tenants special rights? 

    0Reply
  • David Vanlandingham
    Investor · Orlando FL · Member since 2022 · 42 posts · 42 votes
    4y

    Look at both the city and county levels as far as ordinances go. If their are restrictions as mentioned those would be in your contract. That needs to be reviewed by a local attorney as well as all 145 leases that are in place. You need to know what you are beholden to. 

    1Reply
  • Orlando Lis
    OP
    Member since 2022 · 5 posts · 2 votes
    4y

    @Shawn McCormick thank you for your answer, do you think the leases are the only document that needs to be checked regarding this specific matter? , I am concerned about any kind of special deal between the seller and the government that may show up after closing?  can that happen?   the problem seller will not accept signing any document saying there is no rent restriction but that doesn't mean there is one, they just don't want to disclose anything. 

    0Reply
  • Tyler GibsonBusiness Member
    Real Estate Agent · Orlando, FL · Member since 2017 · 1k+ posts · 2k+ votes
    4y
    Quote from @Orlando Lis:

    @Shawn McCormick thank you for your answer, do you think the leases are the only document that needs to be checked regarding this specific matter? , I am concerned about any kind of special deal between the seller and the government that may show up after closing?  can that happen?   the problem seller will not accept signing any document saying there is no rent restriction but that doesn't mean there is one, they just don't want to disclose anything. 


     Shawn is right. Use a broker, get documentation, and read it. You need copies of all the leases and then you need to verify the leases with a tenant estoppel letter. This is a document signed by the tenant verifying the information in the lease provided to you by the seller. You should get financial information too like rent rolls and expenses. 

    [email protected]407-590-9858
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    2Reply
  • Orlando Lis
    OP
    Member since 2022 · 5 posts · 2 votes
    4y

    @Tyler Gibson thank you, trust me I'll not be concerned if there's at least one single tenant at market rate, the problem her all tenants are paying the same fixed rent amount ( $500). I did get all that you mentioned and I'm very familiar with the estoppel letters as I used them many times in past deals, as of the leases nothing says that there is any restriction or any special clause, and I'll have them all sign estoppel before closing, now the hard question stays, the rents are $500 per apartment in a location where rent should be 900-1000. yes, the organization is non-profit and they are not in the business of making money but how I can know if they have an agreement with the city or county, or government ??. Like you said @Tyler Gibson they could have accepted some kind of government funding in order to keep rent low!?  @David Vanlandingham brought up a good point that the seller will need to disclose such info in the contract, but I think that's in residential contracts ( like disclosing HOA fees, etc...., will this apply in a commercial deal?

    0Reply
  • Kim Meredith HamptonBusiness Member
    Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
    4y

    @Orlando Lis Be very careful about any government programs the tenants/property are under, as some buyers need to be approved prior to taking ownership and managing/collecting rent. Have you seen a copy of any of the leases? Have you investigated this non profit? Sounds like an interesting purchase, but as of this moment, we do not have rent control in place here in Orlando or St Pete/Tampa, but they are working on trying to get a special referendum for the voters, and the only way they can do this is to say that we are in an emergency situation with housing. 

    Best to you, hope it all works out

    PS

    Please make sure you have a good broker and legal counsel on your side 

    [email protected]407-448-6679Podcast Guest on Show The Key to Scoring Discounted Deals in One of America’s Hottest Markets
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    2Reply
  • Valentina Naumenko
    Property Manager · Orlando Kissimmee, Daytona Beach & Cocoa Beach · Member since 2016 · 331 posts · 166 votes
    4y

    Hi, I think it's good idea to call Section 8 people to inquire  about the property. To my knowledge they are the ones who can set the maximums on the participants of their programs. 

    2Reply
  • Orlando Lis
    OP
    Member since 2022 · 5 posts · 2 votes
    4y

    @Valentina Naumenko thank you for your advice. 

    @Kim Meredith Hampton thank you for your though, yes there is a broker in the deal and I personally have been in the real estate business for 25 years, but honestly, this is a big purchase and very interesting as you said, it could be a huge disaster if there any mistake, the rent in place will not even cover the cost to own the property, so until we raise the rent we will be negative cash flow and paying monthly out of pocket.   that's why on top of having an attorney I wanted to hear from other experienced people. 

    1Reply
  • Kim Meredith HamptonBusiness Member
    Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
    4y

    Here’s to a successful closing and prayers that you can get that rent roll increased right away!! none of us want to pay out of pocket 

    [email protected]407-448-6679Podcast Guest on Show The Key to Scoring Discounted Deals in One of America’s Hottest Markets
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    0Reply
  • Jaya Duraisamy
    West Chester, PA · Member since 2015 · 4 posts · 1 vote
    4y

    Do you have assumable FHA loan on the property? Sometimes they restrict who we can evict tenants and other stuff...

    0Reply
  • Sam YinPro Member
    Los Angeles, CA · Member since 2021 · 584 posts · 738 votes
    4y

    @Orlando Lis

    I'm assuming you are paying cash? Or have an extremely tight relationship with the lender? I am also assuming this is not a syndication or partnership? Finally, I'm assuming this is an out of state deal.

    There is just something fishy about all this...

    In anycase, you could just go talk to the tenant, the neighbors, the PM, or local PM. If you are trying to save time and money, do it during the inspection. Ask directly, dont be shy about it. Ask 20% of the tenants. You should inspect 75% of the units anyway.

    I still feel something is not right about this. Good luck.

    2Reply
  • Percy N.
    Developer · Philadelphia, PA · Member since 2015 · 2k+ posts · 904 votes
    4y

    @Orlando Lis do a title search to see if there is any LIHTC or LURA restrictions on the property.

    Also look at the current leases in place. 

    Talk to some of the tenants.

    1Reply
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