All Forum Posts by: Jeff Bridges

Take a closer look at your building condo policy or call the company to confirm the type of coverage and if you are underinsured. You need to confirm if it covers items studs-in coverage or if it will replace the entire construction of the apartment in case of a catastrophic incident like a fire. My condo building policy only covers items studs in, so they will rebuild the structure around my condo, but I will be responsible for electrical wiring, kitchen, bathroom, drywall - everything from a blank slate. As a result, I have an additional homeowners condo policy for landlord, which is building only coverage to cover these additional construction items that the condo policy is not responsible for (these don't count as contents). Ask to get a copy of the policy if possible. For liability insurance, they usually require you to not only have condo homeowners insurance (even for landlords), but will require a minimum coverage and liability will cover anything above and beyond those limits from the standard policy. first talk to your building manager then call an insurance agent to figure things out. I'm thinking you'll need a condo policy on top of your planned liability policy.

Quick update: the seller appears to be willing to do 89k: that is, 69K cash down and 20k seller financed at 5%. He didn't like the 5 year term since he is 63 and his father passed when he was 65, so he is concerned with not being around for the remainder of the loan. He is ok with considering a 3 year term.

That said, should I not mess with seller financing due to his age and risks associated with him passing and trying to release the lien from the deed in the future? Are there ways at closing to hold the deed in escrow so that I can pay off the loan and have someone besides the seller release the lien? I can use a mortgage servicer like sellerloan.com but I'd rather avoid it due to the high fees, unless this is the only way I can have a third party hold the deed in escrow and automatically release when the payments are complete in order to avoid a mess if he passes before he could release the deed of trust note.

I can offer him 85k as well and just call it a day, but this would really help me with my 20k in planned repairs and allow me to not have to come to the table with all cash. Further, I dont anticipate I will get conventional financing for this in the near term anyway as I already live in my building and I checked and they wont finance a 2nd unit in the building due to higher risks of default etc. So I'd like to reduce my personal investment in the unit if at all possible... I do however understand that free and clear would be the least headache:)

I can email him the proposal anytime. Any thoughts or recommendations on how to structure given the receptiveness to above terms or experience with older sellers and seller financing pitfalls?

Another thing to keep in mind: short sales can't be timed. Sometimes they are quick, sometimes they take 6 months. Also important to note, once short sale approval is granted by the bank whenever that happens, you sometimes have a deadline in which you have to close in order for the short sale offer to still be valid (30-45 days). If you are reaching that deadline and the tenants have still not vacated, you have to choose between backing out on the offer or closing with tenants. They are notoriously difficult with closing extensions for short sales depending on the bank so your ultimatum to the seller might not mean much... bank will just shrug and say too bad... shoot to get them to have the tenant out as soon as possible to avoid this...

Thanks @Rolanda Eldridge @Lolita Ellis @Jonathan Marcus @Andres Piedra

for your feedback and advice. I didn't paint a full profile of the seller, but lets say he's quirky and doesn't have normal interpersonal skills that make negotiations a little more difficult. He's delusional because his unit is a disaster zone with crumbling plaster and fails to see how he can't command the same price as what I paid for my move-in ready unit in the same building.

Seller financing seems like a great suggestion to bridge the gap between our differences, but I've been cultivating this relationship for some time now, and have pitched several offers to include various types of seller financing options with no traction. Now that I'm offering more cash, I'll still check about this but don't anticipate any joy.... Also I'd like to not have to deal with him after closing, and definitely not for 3-5 years:)

Next steps, I'm going to have my contractor do a walkthrough tomorrow to tell me what some aspects will cost and maybe give me a written estimate to help my offer negotiations.

I'll try my best to outline what would happen if he were to sell the unit on his own vs. my offer of 80k cash and at least explain the basis for my offer.

105- (20k + Closing costs 8.4k (8%))= 76.6k plus time spent meeting realtors/ contractors. closing will take an additional time if offer financed.

My offer of 80k nets him 80k plus saved time of renovations/ fees and visiting property and be done with it...

I'll likely settle meeting him halfway to get the deal done at 85k as I don't want to risk losing the deal, but I'd be remiss if I didn't at least try to help him see the alternate scenarios. I know I'll risk alienating myself if I play up how scary the unit looks since the sentimental emotions might kick in and shut him down...

I could also explain that its hard for me to come up to 89 if repairs cost 20k (him likely more with retail priced contractors) putting me in at 110k for a property with market value of 105k. but he also thinks the cast iron sink and retro metal kitchen cabinets can be left as-is so the renovation arguments will not have a powerful effect on him:)

I'll post again the results of the negotiations later in the week hopefully...

I'm a condo investor here. Agree that the deal looks thin and condo fees can go up over time further eroding cashflow or creating a loss.

As for people's sentiments on condo investing, I think successful condo investors only really stand a chance in metro areas as typical higher rent becomes high enough to support HOA fees, mortgage, and leave enough cashflow to be worthwhile to hold as a rental. If rent is under 1000, it appears to be much harder for a condo to cashflow accounting for the condo fee.

I'd appreciate any ideas on how to handle pricing negotiation with the seller based on the below details:

I'm in discussion with another condo owner in my building to buy his 1bd/1br unit. Location is Washington, DC in city near metro station. Unit has been vacant for 13 years since owner moved out, but hasn't been willing to rent or sell the unit for unclear reasons. He's in 60s and retired. Unit condition is very poor and still contains his old furniture and household items in addition to needing a new kitchen, bathroom updates and drywall repair to 3 different rooms from prior leaks from upstairs. the bathroom ceiling is collapsed. Overall scary cosmetic picture, but all reasonably taken care of with a good contractor.

The negotiations are that I offered 80k cash however he is hoping for 89k, which means we're fairly close. He is using the purchase price of my unit from June 2013 of 89k as the basis for his asking. I responded that his unit condition is in significant worse condition than the condition mine was in during purchase. We left off with him providing me keys/access to the unit for the week while I bring in my contractor to identify the true costs, but he still thinks the 89k price is reasonable regardless of the different in unit conditions and additional repairs/ junk removal required. The follow up phone call will be my opportunity to use contractor estimates to support my claims for the level of repairs, but not sure those will have any effect. Mine took 17k in repairs. His will likely be 20k or more.

This is going to be a buy and hold rental, and I'm comfortable with the cashflow potential, however just looking at techniques on how to help him understand that a) his unit repairs will cost significantly more than mine which is why I was able to pay 89k for mine and cannot do the same for his and b) the alternative option for him to fix and sell will not be worthwhile. He expressed that he would fix and sell if he didn't sell it to me but might not know the true cost of such repairs and the value add for him paying retail to get the below ARV.

ARV is $105K. Analysis of the Deal quality is not as important as I know it doesn't meet the 70% ARV-repairs initial guidance, but nothing in DC does, hence my current offer.

Appreciate any feedback in advance!

As a MD condo landlord, I just build HOA fee into my expenses and has no impact on what I can charge for rent. I don't see how someone could tack that fee on to raise the rent above market rate and convince renters to live there. You can advertise the fees however you want, but the place will only rent what the market will bear, and if its over that amount, then people will go elsewhere. Let's say there was a rental building next door with identical comps: What would stop them from going there instead to avoid paying those fees? Has that other listing been up a while? Could be a delusional landlord who will never be able to rent that unit out... Maybe they should add the property tax bill onto the monthly rent while they are at it:)

Also, you need to account for future HOA increases in calculating expenses. If the assessments go up in 2 years, you might not be able to raise rent by an equivalent amount if market rents haven't risen accordingly, leaving you stuck with reduced cash flow.

I would replace the gas furnace. Your likely also messing with resale value if you add a bunch of electric baseboard units and call it a day. Maybe getting a quote for a 90% efficiency unit if you are paying for utilities or get an 80% unit anyway and put a thermostat lockbox over the thermostat and leave it at minimum of whatever the local code requires for heat during the winter for a rental unit. Better yet, they sell tamper proof digital thermostats which have a max setpoint of 72 degrees for landlord. You'll need to specify this temperature and stipulation in the lease contract so that tenants are not surprised that they are unable to set the thermostat to 90 degrees in the winter for their personal comfort at your cost. That or say that the heating bill will be divided between the 2 units in the contract and added to the rent.. there are other options to consider...

One example of a thermostat with hard-coded set limits:

http://amzn.to/1nubqa8

It appears that there is no rubber washer on the inside of rusted hose #1. The rust was the least of that hoses problems if there was no rubber washer to seal in the water....

@Marcia Maynard Great call with the water alarm. Those are $10 at home depot. Excellent idea to drop one down on the floor in the laundry closet/ area to notify both the tenant and yourself that there is something that needs to be addressed.

Two problems with this strategy. FHA is for owner occupied property only. Most banks will require 20% down for conventional investment/rental property loans, which is the loan you will need to apply for. Second, the condo needs to be FHA approved in the first place or you will have a hard time getting a loan. Finally, bank also has to approve condo finances and cannot be over 15% deliquency or else they wont loan to you...

Your cashflow is breakeven at best but most likely negative with an $850 rent/ 8% vacancy/ 65k loan@ 5%. Not a deal...