All Forum Posts by: Brad Thomas

I bought a 5-unit apt building 2 years ago. It's sitting on about 2 acres and I was looking forward to building more housing on the property (another apt building or townhouses). I finally stopped in to the town building office last week and they said that I can't build any more units. The land is zoned R1 and is considered "non-conforming" because it was there/built before the zoning rules were put in place. So what can I do with all this land? I don't want to have to maintain huge fields and I'd like to make some money on the land if possible. 

You ask about legal requirements here, but I think you should approach the issue from a practical perspective. The tenant was upset, so there is an issue. Usually these issues can be solved with good communication and good boundary setting (if not, you need to think about getting rid of the tenant). If you didn't set boundaries clearly enough in the lease, do it now through a conversation. Happy tenants pay the rent and treat your property well. That's worth a little work/communication/effort on your part.

Hi Isaac. I like your plan. Yeah it doesn't hit every magic number, but it's solid and it  gets you started. You have some cash flow and I assume you have decent W2 income as well to keep you moving if you hit some bumps in the road (don't assume it will all go smoothly).  If this is your first move into the real estate investing, the most important part is the experience you are going to gain. After all goes well with the build, and your move to the duplex and getting everything rented, then you can sit back and start thinking about how to optimize. Should you sell the main house and buy another duplex or multi-unit in order to maximize return on equity? Maybe. But that will depend on your goals. Good luck!

I bought my 9th property (a five-unit apt building) about a year and a half ago. All of my previous properties were basically self-sustaining after I put in the initial contribution for purchase. So all bills were paid out of the account attached to the property. But this last property needed a lot of work and only had one tenant, so, even though the property is owned by an LLC, that LLC didn't have much money. So I kept paying for stuff with my personal funds. I have everything documented, but I'm trying to find the best way to establish a clear (tax) basis for the LLC. Should I have the LLC write me a check for all the expenses I've paid over the last year and a half and then write a check back to the LLC as an official contribution (the LLC still needs funds)? Or can I just say I've spent $X over the last year and a half and add that total to the basis?

Let's say I am getting a divorce. I am the one moving out. Instead of renting a place, I want to buy a place.  Any issues here since both folks in the marriage (until the divorce is final) have primary residences?

Hi @Alex McKnight. Sorry for the slow response. Here are some thoughts on how I moved from 2 units to 5 (I now own 7 buildings, 12 units).

1. I used the first building as a case study. I read every word of every closing document. This helped me increase my knowledge of all parameters of a real estate deal and to appear knowledgeable to the real estate agents, bankers, lawyers, etc. I would deal with in the future. I forced appreciation by rehabbing as much as I could. I wrote a detailed listing and created a good application process to attract the best tenants I could (they are still there 5 years later). In short, I used the first building to explore, understand and then build systems that could easily be applied to future investment properties.

2. When I went to buy the second property, I called the banker I worked with on the first property. He didn't call back. This ended up being a good thing, because I decided that if I had to connect with a new bank, I might as well call every bank in the area. So I did. I found another bank to work with, but I also gained an understanding that all banks and bankers are different and that bankers are people. If you build good relationships with them, it will pay off. Example: When I went to buy my 7th property last Spring, I called my banker and he had a prequal letter to the real estate agent for me in about an hour. This was important because there was a lot of interest in the property. That quick letter allowed me to be first in line and helped me secure the deal.

3. As teachers, we have pretty secure jobs. Banks love the W2 income. In my case, I had 3 more advantages related to my job: (1) my wife is also a teacher, (2) we have both been teaching for about 20 years and so we are finally making some decent income and (3) we have a good bit of equity in our house. Using the equity in out house + our solid incomes + my solid record in running our properties well + my relationships with bankers + my ability to talk to all the relevant people (agents, bankers) knowledgeably helped gets the deals done.

4. Always be looking and analyzing. I'm constantly on Zillow checking out properties in my area. I drive for dollars almost every day by taking different routes to work and when I run errands. Last Spring I came across a deal I wanted to act on, but I literally had almost no money in the bank (I had just purchased a duplex a few months before). What did I do? I called my parents who (1) owned their home free and clear and (2) were not in the best shape in terms of retirement income and proposed a deal -- use their home equity for the down payment and then use my income to pay the bills util the apt building was rehabbed and rented. We would share the equity 50-50, but my parents get all the cash flow for the rest of their lives (I don't need cash now, they do). So I contributed my knowledge and deal making ability and my parents contributed their home equity and we both made out great.

5. Last idea -- I haven't succeeded at this yet, but teachers like us are surrounded by a lot of other teachers who also have steady income and summers off. The potential for partnerships seems good to me.

Good luck! 

Wow, most people do not appear to be reading @Patricia Luna's actual post. She has money to invest and is tired of searching (search costs are *actual costs* in time, energy and $ sitting around not earning returns). She has a property that is (1) nearby (so she can easily manage it herself), (2) can be rented immediately and (3) is looking to pay it off fast (15 yr mortgage). If you include mortgage pay down, the returns will still be decent. If you take this a bit further, if Patricia has a good relationship with her bank and can free up the equity in this building in a few years for a down payment on another property (when a better deal does pop up), the returns will be compounded. So, @Patricia Luna, I would answer yes to your question. In this case, buying a property with negative cash flow can make sense. The BP podcast emphasizes almost every week that every real estate deal is different -- so why give textbook answers as if they were all the same?

Thanks all. The issue is much clearer to me now (great article @Christa Centolella). I should have thought to call the water/sewer company before the tenant moved out. But I can't believe the company let her go without paying for more than a year! Had they contacted me earlier this could have been resolved in a much simpler way. Lesson learned.

Hi all. General legal question. I have a rental unit in an area that is served by a private water & sewage company. The lease called for the tenant to pay these charges. The account was set up in her name, but she is now gone (she gave proper notice and we parted ways peacefully) and I just received a letter from the company saying she never paid her bill (for over a year!) and that I have to pay it (I am on record as the owner/landlord). Does the company have a right to demand payment from me? Didn't they establish a contractual relationship with the tenant? Do they have a right to put a lien on my property if I don't pay? I will, of course, contact the former tenant and try to get her to pay (she might), but I'm just curious. I am in New York state. 

I just bought a townhouse -- 2 bed, 2.5 bath. When I went in to get the insurance, the agent at first said the replacement cost was $193,000. I asked him how this was determined. He explained that it was all about rebuild costs and had nothing to do with market value. I told him about the townhouse I posted about above (which is almost identical to the newly purchased one) where replacement value had gone from $160,000 to $200,000 in just 2 years and the premium had gone up by $160 (16%) in those same two years. He clicked the mouse and said, OK it's $170,000 now. And yet, no change to the other townhouse. If 2 houses are the same, isn't the rebuilding cost the same and the premiums the same? (assuming they are in the same general area with the same general conditions and costs) The only difference I can see, is that the one policy is 2 years older and had automatic increases for two years.