All Forum Posts by: Bruce Scannell

Hey BP...once again, I've come across an issue I can't seem to find much on.

I'm currently negotiating the purchase agreement for a 26 unit property from an older couple who also have an older lawyer. They are gun shy about any chance of litigation caused by their reps and warranties. They are in their 80s and just want to be done after closing, which I can appreciate, but at the same time its a red flag and won't negoatiate. They claim to be the most honest people around, but we've all heard that before. 

So this question is for all other multifamily investors, how often do you execute a purchase agreement without post closing reps and warranties for the documents provided? Also, how often have you gone back to seller after closing to challenge the provided documents when an error was found?

Thanks,

Bruce

hey @Account Closed, I do both. 

I live in California and have owned a business here so I understand the fees associated with entities. I don't invest here however for that reason and others. 

My properties are held in LLCs and I have an umbrella policy personally. As much as I want to believe that things will go great, I want to be prepared for when they don't. My properties are probably worth a lot less than yours here, so I'm able to hold many in one LLC, up to 250k is my threshold. Here you couldn't do that and would need one for each. The formation and sustainment of my LLCs are considerably cheaper than those here, so I understand your problem. Then again, I would probably still do it if I was forced to invest here just for piece of mind

Hope this helps.

Bruce

Welcome Cristiano Botticelli ! You've come to the right place, no doubt. I invest out of state myself so I can kind of relate, but am no expert in your market or possibly the market you're investing in. Where are you investing again? As I post this I can't see your post to double check. Anyways, do you know why the previous seller is selling if they have a renter and can cover the bills? Next, just covering your mortgage and association dues isn't going to guarantee you the chance to put money in the bank. I'm assuming your payment includes the escrowed property tax and insurance but beyond that you're going to have other payments like possibly property management or any other usage expense. The good thing is the property is relatively new so maybe some cap ex things are ok, but things like appliances could be nearing their end if it's been a rental from the beginning. Then on top of that you will probably have to get it reinspected and could require some updates as well. I invest in purely cash flow and not just the chance of it plus maybe appreciation. So I would just double check your numbers and plan conservatively, because in my experience it rarely turns out better than expected. Bruce

thanks @Kevin Romines, I will give farmers a call and see what they can do

Thanks @Kevin Fox, I will reach out to Parker Cox

I am currently reviewing the purchase agreement for a 26 unit in Garden City and am trying to line up some of the necessities. I have been getting quotes from companies I found by just googling commercial insurance brokers in the area, but the quotes seem high to me. I have multiple single family homes and duplexes in the same area and I'm paying $35-40/door/month, but the quotes I'm getting are $42 or higher. I was thinking it would be cheaper. 

Is that the trend that others are seeing or am I just off base?

@Richard Ball, currently none of our properties are in Detroit, but I'm not opposed to managing in Detroit, on an individual property basis. 

I hadn't thought about that @Sam Bagwell, can you elaborate? We do have quite a few colleagues who would like us to help them out. 

I appreciate all the responses everyone, thanks again. I think at this point we will set up the company and manage our own properties and work towards getting our own brokers license. I just wish it I didn't take so long and require you to be a sales agent. We have been involved in leasing for awhile, just not sales.

@Richard Ball, all of our properties are in southeast MI, Wayne county mostly.

Thanks for the comments @Erick Harbert and @Dawn Brenengen. I had that feeling, but wasn't sure. There is a good level of trust but I will have to bring this up.

I know there's multiple other discussions about this topic, but I think this is a bit different and more specific.

A partner and I have a combined 30 properties in Michigan that we self manage and we're looking to start a property management company, but neither of us are a broker. In Michigan, you need to have a broker's license to be a property manager. We have another potential partner who is a broker, but doesn't necessarily want to be part of the management company. Does anyone on here know how we can use this person's license and make it a win win for everyone and still be legal by MI real estate laws? Do they need to be part of the property management LLC? If so, can we make them a passive member who doesn't need to be involved in the day to day operations? On a more basic level, does their license need to reflect our company name or can we just involve them personally and their license comes with them?

Thanks in advance and let me know if I'm asking these questions incorrectly.

Bruce

@Maria Sophia 

Congrats on the purchase!

When did you buy it? Michigan does have a 6 month redemption period on foreclosures. So if you bought the Sheriffs deed recently, the previous owner is probably right about ownership.

Bruce