All Forum Posts by: Benjamin Aaker

The seller will be contractually obligated to pay a commission to the agent he signed with. The seller signed with an agent in the hopes that the agent will be able to sell faster or for a higher price than he could by a sale by owner. That tells me that the seller will be less interested in an investor offer right now because retail offers (from agents) will be higher. Sounds like the place is in disrepair, so he might find that you are the only one interested, but that realization will take some time. This guy is your neighbor; go ahead and tell him your offer and if he likes it then the agent can put it together. You won't pay the commission, but the seller will. In my area, it's usually 6%, so if your offer is 100k, the seller is getting 94k and he will be smart to keep this in mind now that he's signed with an agent.

Consider whether you even want to get involved in this situation. You already have some qualms about it in stating there is a moral issue here. Who among us would want to kick out anyone, let alone an elderly lady with health problems? Sounds like the investor had plans to do that and ran into the same issue and wants to unload this problem on someone else.

You might even think that this lady has health problems and will die soon, but there might be survivors who will come out of the woodwork with claims on the property as inheritance.

If you decide to move forward, make sure you get title work done on the place. Get an estoppel agreement (the tenant probably won't want to do
this, which is another red flag). Do your diligence in finding out any agreements whether written or verbal and make sure that the current
owner puts in writing what those agreements are (or that there are none). Don't let necessary repairs go uncompleted just because there is a non-paying tenant.

Finally, there are a lot of other great deals out there. My vote is to give this one a pass. I'd love to hear how it goes.

If you are just starting out with little money, driving for dollars is a good way to begin. Drive around your locality and look for places that are being neglected. Write down the addresses and send them a series of letters. There's a million ways to do this, but you can start small and it's scalable.

There certainly are people who take advantage of the ESA rules. There are other people with a legitimate need. I can speak from experience dealing with the rules that come from the federal government(HUD) but California is likely more restrictive. It's very easy to get diagnosed with a psychiatric condition that would benefit from an emotional support animal. As a landlord, it is discriminatory to require further details about the issues behind the need, so be careful in doing your diligence on this.
Tenants have broad ability to bring in these animals and the type of animal isn't specified. The landlord's recourse is only after the fact - if the animal poses a danger or nuisance, the landlord can require its removal and compensation for repairs. Check with your insurer about the type of animal - it might not be allowed. Inspections are your friend here, but you cannot discriminate, so you have to do the same type/frequency of inspections for all your units, regardless of whether they have an animal in them.

Hi Stephen,
Great question. For starters, you need to be comfortable tying your primary residence up in an investment. That entails some risk, but that's in all investing. I'm a huge fan of lines of credit because you can get one set up for little cost. Once it is set up, the money just sits there, interest-free, until you find that great investment deal to purchase. The downside is that you will have another loan to pay back and your new investment's financials need to be strong enough to cover this. Another option is that you can use the equity in your primary residence as collateral for a conventional loan on another property. You may even be able to avoid a down payment if the deal works for the bank. It's worth asking about. Good luck!

Depnds on the size of your roof and your area. You might want to conform to other properties in the area, so you should take a look at what they are using. I'm a fan of asphalt architectural 30 year shingles. If you have a huge roof, the 30 year will be more costly than 20 year, but isn't a huge difference in a smaller roof.

I'm always loathe to get rid of an income-producing property, more so if it is building equity. I love lines of credit and have always chosen this one over refinancing or selling. The exception being when I got out of single family residences into multifamily and sold the SFRs.

Hi Brandon,

I disagree with the statement of SFH appraising for more than MFH. Many
MFH are larger than SFH and will have a higher value. Perhaps you meant
value per square foot, then you have an argument.


It's always good to be thinking outside the box in real estate. Assuming you are 4 units or less, the appraiser is going to look up comparable properties, those that are similar to yours, and find their sale prices. There aren't many single family homes with two kitchens and two family rooms. This would be seen as an unusual property and likely would be a detriment to your appraisal value. The appraiser tries to look at the property through the eyes of the potential buyers. Most buyers of SFHs won't be interested in your property, which will drop the value.

Having the mortgages is not necessarily a bad thing. Unless you desperately need the cash flow from the ones you intend to pay off, keeping all the properties seems like a better plan. Rarely do you meet anyone who says they were glad to have sold an income-producing property.

You have a 5 year balloon. This is common in a common commercial loan. 4 more years until due is a long time and a lot can happen. You will have to refinance at the end like others who have similar loans. You might even have to refinance for a higher rate. By that time, you'll have more equity in the property and can structure your payments if you need to. The bank will want to work with you to keep that income coming in. A sale is always a possibility at that time as well. Keep going and put away some funds if you feel it necessary.