Does this sounds sketchy to you?

Multi-Family and Apartment Investing
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Does this sounds sketchy to you?

Terry Dunlap
Rental Property Investor · Olney, MD · Member since 2019 · 32 posts · 10 votes

I recently bought a SFR from this company that also is managing the property for me. They know I'm an out-of-state investor. However, I grew up in the area and we know many of the same people.

I asked for his help in looking into some SFR on my radar. A text over the weekend said he's working on a 6-unit deal "exclusively" for me. He would contact me with details. Here are those details from his email

---
Terry,

This is the one I was talking about that has been all redone. Just a money maker

 415 Huron Avenue #1 Rent $525 monthly Security deposit $525; unoccupied

415 Huron Avenue #2 Rent $450 monthly Security deposit $450; occupied

415 Huron Avenue #3 Rent $400 monthly Security deposit $400; occupied

415 Huron Avenue #4 Rent $500 monthly Security deposit $500; occupied

417 Huron Avenue #5 Rent $595 monthly Security deposit $595; occupied

417 Huron Avenue #6 Rent $500 monthly Security deposit $500; occupied

Unit #5 completely redone on the inside, units 4& 6 completely torn off and redone inside and out, new roof, new walls, new floors new cabinets. New and updated furnace and water heater. New roof entire building. New water line to the building. New gas line and meter to the building. New driveway next to building. Storage shed. Tenant in unit #3 cuts grass in summer, shovels snow in winter and rakes leaves in the fall. Also puts the trash to the curb every week and back after trash is picked up. For a reduced rent of $50. Potential income of $2970 per month less expenses. I am working on getting you the expense report. This is to good to pass by for only $149,900.00 with annual income over $35,000 it pays for itself in less than 5 years. This is the one!

Scott

Full disclosure: My Dad owns it. I told him sell it and pay off his house so Mom does not have to move if something happens to him. He agreed. It is not listed.

---

A few things I need to mention:

  • I can only find one of the properties on the county website (I asked about this... awaiting reply)
  • The one I could find was bought by him and his brothers at a Sheriff's Sale then a quitclaim deed to his dad
  • I have no pictures other than Google Maps
  • I have no financials... yet so I cannot use the tools here to analyze this investment

I may need to find another local realtor to help me run comps as I wouldn't fully trust anything he sends me since he's so deeply intwined.

Am I being paranoid?

Thanks,
Terry

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Account Closed
Financial Advisor · CA · Member since 2012 · 128 posts · 76 votes
7y

This one needs a plane flight out there.

He sounds believable, but a simple round trip

might end up saving you a ton of heartache. 

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  • Tanner Marsey
    Rental Property Investor · San Diego, CA · Member since 2017 · 439 posts · 578 votes
    7y

    You’ve worked with this guy before? Has he done you wrong in any way? If you guys have a good working relationship pursue this deal further but tread lightly and do your own DD. If you think this guys a scammer.... on to the next one.

    0Reply
  • Brian Garlington
    Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes
    7y

    Outside looking in you're at "roughly" a 10 cap, which might look great on paper,....but there is a real reason why he wants to sell that he's not telling you and my guess is because of the tenants.

    Don't do anything until they get you financials and pictures, let him know that after you get financials and pictures then you still intend to fly out there and look at the property yourself before doing an LOI. If he says you will risk losing the property by doing this, then so be it, you "lose" the property.

    If they are difficult tenants it may still be manageable, but look at the contracts....did a half of these tenants literally just move in over the last few months? If so, red flag. If most of the tenants have been there for awhile that can be a plus. When you fly out there to look at the property and meet the tenants, you may be able to see who the troublemakers are and who aren't and you can also base your judgement then on if you want to buy the building. By the way what area of the country is this in?  Buying any property, especially if it's in a tenant friendly area definitely has it's challenges so keep that in mind.

    1Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    7y

    id say based on the fact it’s likely c or d class there is not enough rent coming in to get excited about imho

    I could very easily get that and more with 150k in the hood around here without rehab work . If you were experienced local motivated landlord the. stuff like this will work ..but being out of state, relying on a pm ,and it needing work sounds like a not so great deal .

    3Reply
  • James Wise
    Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
    7y
    Originally posted by @Terry Dunlap:

    I recently bought a SFR from this company that also is managing the property for me. They know I'm an out-of-state investor. However, I grew up in the area and we know many of the same people.

    I asked for his help in looking into some SFR on my radar. A text over the weekend said he's working on a 6-unit deal "exclusively" for me. He would contact me with details. Here are those details from his email

    ---
    Terry,

    This is the one I was talking about that has been all redone. Just a money maker

     415 Huron Avenue #1 Rent $525 monthly Security deposit $525; unoccupied

    415 Huron Avenue #2 Rent $450 monthly Security deposit $450; occupied

    415 Huron Avenue #3 Rent $400 monthly Security deposit $400; occupied

    415 Huron Avenue #4 Rent $500 monthly Security deposit $500; occupied

    417 Huron Avenue #5 Rent $595 monthly Security deposit $595; occupied

    417 Huron Avenue #6 Rent $500 monthly Security deposit $500; occupied

    Unit #5 completely redone on the inside, units 4& 6 completely torn off and redone inside and out, new roof, new walls, new floors new cabinets. New and updated furnace and water heater. New roof entire building. New water line to the building. New gas line and meter to the building. New driveway next to building. Storage shed. Tenant in unit #3 cuts grass in summer, shovels snow in winter and rakes leaves in the fall. Also puts the trash to the curb every week and back after trash is picked up. For a reduced rent of $50. Potential income of $2970 per month less expenses. I am working on getting you the expense report. This is to good to pass by for only $149,900.00 with annual income over $35,000 it pays for itself in less than 5 years. This is the one!

    Scott

    Full disclosure: My Dad owns it. I told him sell it and pay off his house so Mom does not have to move if something happens to him. He agreed. It is not listed.

    ---

    A few things I need to mention:

    • I can only find one of the properties on the county website (I asked about this... awaiting reply)
    • The one I could find was bought by him and his brothers at a Sheriff's Sale then a quitclaim deed to his dad
    • I have no pictures other than Google Maps
    • I have no financials... yet so I cannot use the tools here to analyze this investment

    I may need to find another local realtor to help me run comps as I wouldn't fully trust anything he sends me since he's so deeply intwined.

    Am I being paranoid?

    Thanks,
    Terry

     You've got yourself a low income property here. There are pros & cons to buying properties like this. That topic has been widely discussed all over this site by myself & others. All about your risk tolerance, skill set & experience. As for your specific question here if the guy pitching you the property sounds sketchy to me.....No he doesn't. He sent you a fairly straight forward email with information on the property. Not sure what else he could have sent you that would seem less sketchy to you.

    0Reply
  • Terry Dunlap
    OP
    Rental Property Investor · Olney, MD · Member since 2019 · 32 posts · 10 votes
    7y

    UPDATE: Received financials.

    Expenses for 415/417 Huron Avenue:

    Columbia Gas $1933.06

    Ohio Edison $1631.28

    Water & Sewer $1558.05

    Trash Removal $ 350.00

    Rental Registration $ 275.00

    Property Taxes $1659.50

    Property Insurance $1478.00

    Total Expenses: $8884.89

    Gross Rents: $35,640.00

    Less 10% Vacancy Rate ($3,564.00)

    Net: $32,076.00

    Less Expenses: (8885.00)

    Cash flow before Depreciation $23,191.00/12=$1932.58 per month

    Purchase Price $149,900. Everything is done on this one!


    I asked for a breakout of what tenant and landlord pay. Here was his reply:

    Landlord pays: Water/Sewer, Gas, Electric and trash. Tenants pay for phone, internet and cable TV.

    Okay... I'm new to this land lording gig, but I don't recall seeing or reading about landlords paying for practically everything! That seems odd to me.

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