First Deal - Three Family in Plymouth, MA
I have an offer accepted on a three family in downtown Plymouth, MA. There are two three bed units and one two bed. We are currently negotiating P&S and have some fairly big issues to work through:
Three existing long term TAW that are all paying well below market. We initially thought we would "work with them" to keep them in there, but now we think the best policy would be to deliver vacant. At their current rent it is nearly flat ($250/mo) for COC return (after reserves). If we brought the property to market (for current condition) it would be 5 - 7% COC returns ($600 - $800/mo). If we upgraded the units we could get it closer to 10% COC but we would rather wait a few years to do that. Is there any reason to keep these tenants in place? It will be a big sticking point with seller because it will push out closing date but based on everything at BP it seems like a no brainer.
It's also a very old house with a few "classic" problems (asbestos, lead paint, etc.).
Lastly, our lawyer is pushing us to use a bank loan so that we can purchase in an LLC, rather than buying it in our own name to get a 30 year fixed and transferring to LLC later. Has anyone ever had a bank call a loan on them for being in an LLC?