All Forum Posts by: Andrew Johnson

Todd Magin If you make an all-cash offer you'd better be able to back it up with a screen grab of your bank account balance! Well maybe not all of the time but when I have made an all-cash offer in the past I could have sent a wire transfer the next day. In reality that doesn't happen because of inspection periods, lease reviews, etc. but I wouldn't purport to have the cash if I didn't.

Rinzin Dolma You might have a tough time getting interest with your scenario. Unless you have a huge downpayment that cash-flow for a first rental isn't going to be massive. 10% of that is going to be pretty small for the amount of risk (their name is on the loan if things go sideways). If cash-flow is $500/month their 10% is only $50/month. If they have a great job in NYC they're in a decently high tax bracket so after taxes they're probably getting a pizza a month for being on the hook for a mortgage. But that's just one hypothetical, how do you see it penciling out and making sense for an investor?

@Dwayne Hunter If you get a solid cap-rate and cash-flow then I'd say "go for it".  The reality is, however, that if you're competing with buyers looking for a primary residence their motivations are different that yours.  They can/will develop an emotional attachment and outbid you.  Just be unemotional about your numbers.  Either they work, or they don't.  Don't chase a bad deal because you "have to get into the market".  I'd start looking at properties 30 miles out from where you are and see if the numbers/cap rates/etc. change.  Even if you don't want to buy there it would be an interesting compare/contrast for you and help you evaluate your Charlotte options better.

@Ronn Johnstone I know it's popular to use cap-ex based on a percentage but I always look at it on a property-by-property level.  When you walk the property hopefully you can get a sense of how well things have been maintained.  You'll know if the kitchens are falling apart, the age of the roof, if HVAC systems look like they are on their last legs, etc.  If you're looking at cash-flow I'd try to weigh that in over the first five years as you'll need reserves for cap-ex expenditures (5% of the gross monthly rents won't cover a roof).  Make sure you either have reserves or allow cap-ex funds to build before you think you'll need something.  It's a little bit of an educated guess but that's why I look at it on a property-by-property basis.

@Brad Fausett I have my property management company take care of it for all of my multifamily properties.  They find someone and just charge me what it costs.  I have them do it every two weeks so it's predictable.  I don't really have flower beds so that might be another story.  My properties do have hearty plants and hardscape so they're 'nice' but a little bit easier to manage.  Not quite as colorful but you don't end up with a dead rosebush.  

@Tiffany Miller Maybe someone is trying to wholesale the property?  I can't imagine that the sellers agent wouldn't know that the property was under contract.  What did the seller's agent say when you asked about the second listing?  If there's ambiguity I sure wouldn't put down an earnest money deposit or anything like that.  If you can't get clarity about who owns the property, if there's a contract in place, etc. just walk away.  

@Derek Chiasson Have you been to the property? Is the supposed "scam" with the property or the HML? It's never a good sign when fees show up in the final hours. If it was part of the proposal from the start that's a different story. You might pay an upfront underwriting fee, upfront appraisal fee, and some points at closing but those wouldn't typically happen before the deal.

@Account Closed I never did the house hacking strategy (fellow SoCal resident here) so I'm the last person that should comment on it.  I've just focused on out-of-state where I could get better cash-flow and valued appreciation as a "nice to have" rather than a "must have".  For better or worse I've always kept my primary residence out of the investing conversation.  It means I can't go in for house hacking but I can be more objective on where I invest because I don't have to worry about living there.  I"m sure others will have better input that me.

@Jonathan Johnson Got it, you'll likely have the have the current owner do a cash-for-keys scenario then. I can't imagine he wouldn't be obligated to the terms whatever leases are signed. I don't know the legalities of it but he will probably want a significant EMD before he embarks on a cash-for-keys conversation. Even if there is language in the lease there's still the practical matter of enforcement.

Jonathan Johnson I don't think you would have one "evicted". It would likely be a cash-for-keys scenario if they are current on payments and still under the terms of the lease. It's a bit of a coin flip regarding current tenants. No owner will tell you "have fun with my nightmare tenants!" Conversely, how confident are you that you can screen for better tenants? If you're not confident I'd stick with the tenants that are in there. It's easier to deal with the cash-flow loss one unit at a time than it is to start from scratch.