All Forum Posts by: Charles Situ

@Sean Connolly Thanks for the insight. I had assumed from neighbors whom have 59 and 82 feet of frontage that those would be the minimum requirement for new lots. But I just took a quick look at the town's code/bylaws. Its not in plain English, but it seems the requirement is a minimum of 120 feet for new build-able lots. I may want to consult a local lawyer anyway to confirm it and explore other options such as building an addition (perhaps a carriage house).

@Sean Connolly I am very curious to see if you had any luck in subdividing the land and if the property is located in MA, which town it is in. I just purchased a house in Wayland that is zoned multi-family where there is a larger single-family home with an in-law suite attached. It is on 1-acre lot and I am fortunate the house is located closer to the border line, which I figured would create more clearance on the other side to create a lot. I would have to move the septic, which is now to the right of the home, towards the back to clear it out of the new lot. I asked my general contractor about the idea. He thinks I could build 6 townhouses on the new lot and notices a couple of positives. The neighbor to the right was converted to a 2-unit condo a few years ago and I am located in an area that has more commercial, rather than residential, properties compared to the rest of town. These factors would mean I would get fewer objections from the town. I hear approvals differs from town to town, and even sometimes from whoever works at the town office. 

@Nagendra Jain You are right about no tax benefit with LLC. What you get from an LLC is legal protection on your personal assets. But what you give up is more difficulty in getting loans. Some lenders will require 2 years history for the LLC. But lenders might waive that if you have a good W-2 income and provide a personal guarantee. Also the loan you will get from for LLC is typically shorter terms (no more than 20 year amortization) and floating after being fixed for 3 to 5 years. I have both situation. On the personal side I get an umbrella insurance to protect my assets.

@Brandon Baker I have to add on the $150 that one person mentioned, He said it is "site visits to take an Evaluation Video, but not inspection." 

@Brandon Baker To be honest, we have not formally finalize the numbers. I had suggested to my PM $200 flat fee and 1.5% commission, but I told him I am open to negotiation and more importantly that the long-term goal is a good property that he wants to manage. Yet my PM still gives me feedback on wholesale deals I send him and still has not charged me for the last one he visited and we decided to pass. I have heard others in a forum I posted mentioned $150 for the flat fee. 

@Brandon Baker I invest out of state also and I kind of have the same concerns about needing someone to be my eyes and ears to see all the issues with wholesale properties. I had been trying to find people that do what @Account Closed describes in my market. But I am also working out some arrangement with my PM, who is also an investors and agent, so he has that perspective. I offered him a flat fee for wholesale deals analyzed and visited if it doesn't result in a purchase and a commission if it does result in a purchase. But you have to trust that the person is capable and their interest is aligned with your's. My PM knows that it will be a property that he will manage. So that kind of addresses the alignment concerns. It seems to works since most of the time, he can weed out things and say something is not even worth a visit and don't have to charge me. He also told me this compensation arrangement is fine, but he doesn't want to simply do any transactions just to get paid more. I do worry a little that my PM maybe too busy and have too much on his plate, just like any other good PM would be. 

Investment Info:

Townhouse buy & hold investment.

Purchase price: $109,000
Cash invested: $110,563

3 Bedroom 2.5 bath townhouse. 1,380 square feet. Built 2000.

What made you interested in investing in this type of deal?

Already owned 2 other townhouses in the association and desirable area. Satisfies the 1% rule. Seller lived in it since it was built and maintained the place well.

How did you find this deal and how did you negotiate it?

Was on MLS and just came back on market. I emailed my PM, who is also a realtor about this property. But he was too busy to get back to me. I decided to contact the listing agent myself and told him I am a cash buyer and didn't mind him being a dual agent. Even though there is already 2 other offers, we were able to figure a win-win-win for buyer, seller, and agent.

How did you finance this deal?

Cash. But I may consider doing a cash-out later on.

How did you add value to the deal?

By asking the right questions, I was able to address seller's concerns. Her previous sale fell apart with a buyer that offered full price of $115k but asked for $4k reduction after inspection. Since then seller replaced the roof but was still worried about a similar situation. Also she wanted some time/flexibility to shop around for a bigger new place. Seller also provided the previous inspection which shows several small handyman items, and an old furnace and roof were the major items.

What was the outcome?

There was already 2 offers: $113k cash and $115K w/ 25% down. I gave 2 offers--$112k w/ a cap of $2k credit (budget for furnace) after inspection & $109K as-is. Both of my offer included a 45 days closing and option to rent for a month at market rate ($1100) after closing. She decided to take my $109K. Listing agent decided to take 5% commission vs 6%. At closing seller was under agreement for her replacement, but still needed the extra month. 1 month rent & security deposit was held back.

Lessons learned? Challenges?

I took a risk by contacting listing agent directly and not having representation myself. But the listing agent was willing to work with me. I also could had ruined my relationship with my PM who was adding as my agent. When I talked to my PM about the place to manage, he was a bit disappointed that I did it without him. But he said he will let it go and agreed that I have a good deal. After this situation, it also seems like my PM is more willing to look at deals for me and ignored me less.

@Joey Freda Currently there is a bigger spread between primary residence (3% 30-year) and investor-owned properties (rates has not come down as much and tighter standards). Because of high unemployment rate among blue collar workers due to Covid, many lenders are cautious about potential tenant issues and not doing cash out to 75% LTV. I called 4 lenders before I found one that would do cash out. But there is also a bigger spread between straight refi (4%) and cash out (closer to 5%). My refi is in MA and it's up to 75$ LTV. I think this lender can do RI. Direct message me and I can share my contact with you if you like.

@Forest Hunt I invest out of state in the Clayton and Henry Counties (Rex, Stockbridge, and McDonough). To answer part of your question, I can say that "consistent tenants" are realistic in these areas. But the lower price points may be tougher to BRRRR. I done some small rehabs and were able to add value, but not enough to pull all of my capital out when refinancing.

Investment Info:

Townhouse buy & hold investment.

Purchase price: $109,000
Cash invested: $110,563

3 Bedroom 2.5 bath townhouse. 1,380 square feet. Built 2000.

What made you interested in investing in this type of deal?

Already owned 2 other townhouses in the association and desirable area. Satisfies the 1% rule. Seller lived in it since it was built and maintained the place well.

How did you find this deal and how did you negotiate it?

Was on MLS and just came back on market. I emailed my PM, who is also a realtor about this property. But he was too busy to get back to me. I decided to contact the listing agent myself and told him I am a cash buyer and didn't mind him being a dual agent. Even though there is already 2 other offers, we were able to figure a win-win-win for buyer, seller, and agent.

How did you finance this deal?

Cash. But I may consider doing a cash-out later on.

How did you add value to the deal?

By asking the right questions, I was able to address seller's concerns. Her previous sale fell apart (full offer of $115k), but $4k reduction after inspection. Since then seller replaced the roof but was still worried about a similar situation. Also she wanted some time/flexibility to shop around for a bigger new place. Seller also provided the previous inspection which shows several small handyman items, an old furnace and roof were the major items.

What was the outcome?

There was already 2 offers: $113k cash and $115K w/ 25% down. I gave 2 offers--$112k w/ a cap of $2k credit (budget for furnace) after inspection & $109K as-is. Both of my offer included a 45 days closing and option to rent for a month at market rate ($1100) after closing. She decided to take my $109K. Listing agent decided to take 5% commission vs 6%. At closing seller was under agreement for her replacement, but still needed the extra month. 1 month rent & security deposit was held back.

Lessons learned? Challenges?

I took a risk by contacting listing agent directly and not having representation myself. But the listing agent was willing to work with me. I also could had ruined my relationship with my PM who was adding as my agent. When I talked to my PM about the place to manage, he was a bit disappointed that I did it without him. But he said he will let it go and agreed that I have a good deal. After this situation, it also seems like my PM is more willing to look at deals for me and ignored me less.