All Forum Posts by: Jeff Bridges

Patrick L. thanks for the response! Its good to know that other have had a hard time with FNMA accepting less than list. Also frustrating to hear that the selling agent is cut out of this offer negotiation ( however, its good that FNMA receives all offers, even if lowball, but bad if you actually want them to help you justify your offer). I know scenarios where the agent withholds the offer from the bank if its way too low... I'll have to think about next steps and possibly raising offer if it makes sense...

I submitted an investor offer in on a homepath property in MD via the online submitted offer through my broker. My offer was $75k with 7.5K seller concession and 7.5K EMD and it was rejected. Asking price is $104k and the DOM is around 30 days with no accepted offers. FNMA sold 2 other units in the same building very recently for 70k and 89k (however those were the asking prices). Unit is a 1 bedroom condo unit in an older apartment building that shows poorly and needs electrical, new kitchen, water heater. This would be a buy and hold rental property.

Anyone have suggestions for my follow up offer? 80% is 83.2k. I was thinking of offering 80% asking to include the 6% seller concession (their net will be 80% asking). So I would have to offer 88k with ~5k seller concessions. Would they ever accept less than 80% net after 30 days on market? I was hoping to bid around 78-80 2nd time around but dont want to waste my time. Also should I try including comps or any justification for lower offer? my max offer is 85k.

thanks in advance

I havent had this happen but there are a variety of things you can do to avoid it. If you have an apartment rental, avoid putting in the apartment # on your listing until you schedule an actual showing with the tenant. On craigslist you can put up only cross streets for a SFR to avoid giving the exact address. Finally you can avoid confrontation by handing everyone a rental application to fill out or emailing it to them, saying you must accept a $35 rental app fee and will be checking for evictions, criminal history and income. State your eligibility requirements up front with the application but say that you will accept their application. They will likely not follow through due to the app fee or knowledge that they wont qualify. this avoids the confrontation of giving a hard NO over the phone or in person.

follow this guide and you should minimize your threats:
http://www.biggerpockets.com/renewsblog/2013/01/04/how-to-rent-your-house/

If you get qualified for a 203k Streamlined FHA loan, you should be able to wrap that repair into your loan, get that repaired before move-in (without needing a general contractor and lengthy repair documentation like normal 203k loans) and there shouldnt be much hassle in getting that repair included if you have it professionally inspected and confirmed. Just chat with your lender and mention that you'd like to pursue that route so you can provide it with your offer.

FHA inspection process will require something like minimum 2 years life left in the roof if you were just going the regular FHA route and preferred to pay for repairs out of pocket. They wouldnt lend without the 203k if there were obvious leaks or durability issues. See below for additional things they look for with the roof. Your lender will also be able to answer more specific questions if you tell them the exact roof condition. Its best to be forthcoming with them now rather than post appraisal and then get denied after paying for appraisal fees etc.

http://www.fha.com/fha_article.cfm?id=257

With the $9800 in potential closing costs you shared, it would take 3.5 years offset by $230/month profit (230x42 months=~$9800) for you to break even with your current mortgage payments. The refi closing costs are pretty astronomical from the quoted bank, but more importantly, it wont buy you any real profit for the next 3.5 years. The problem is compounded by the fact that your property was never profitable to begin with. Will correctly pointed out that you might seem to be currently breaking even on paper, but things like vacancies and any repairs and maintenance will put you at a loss each and every year, and maybe a little less so in 4 years if you refinance now. I would try to sell it if you can recoup your original cost if possible. otherwise you will be losing money and spending time on dealing with tenants on a rental with dubious results when you could be free of that burden (are you expecting major appreciation in the area? if so thats a risky sole reason for holding on to the rental)

You need to remind them of michigan state laws and their duty to provide heat in every living space in your dwelling. State that they must make available heating in your bedroom and it cannot be in the form of electric or temporary/ portable heater due to code violations. If they do not comply or make immediate plans to comply, you can begin the process of notifying michigan housing authority to inspect the dwelling and/or maybe chat with legalaid for suggestions.

Heat and Weatherization

Heat: Under the state Administrative Code, your heating system must be capable of heating every room to 68 degrees Fahrenheit, three feet above the floor and two feet from the exterior walls. If your home is too cold, you can withhold your rent. (See our information on how to withhold rent.)

In Ann Arbor, if a dwelling is cited three times during the winter by the Housing Inspection Department because the heating system will not maintain the required temperature without portable heaters, corrective action (e.g. storm windows, insulation, additional heating capability) may be required. Therefore, it is essential to register complaints with the housing department. (For more information, see our section on Housing Inspections.)

Weatherization in Ann Arbor: If you pay the heat bill, then you need to know about the 1985 City ordinance, ""Weatherization as Responsible Maintenance"" (W.A.R.M.). If you pay the heat bills or pay the landlord for the heat in addition to your rent, your landlord is required to provide basic weatherization. You can obtain a copy of the ordinance by clicking on the link above, or at the Housing Inspection Bureau office at 100 N. Fifth Avenue.

Under W.A.R.M., the landlord has the duty to caulk and weather-strip all doors, windows, cracks and gaps to the outside and insulate the attic to an R-30 insulation grade. However, if your unit was insulated prior to April 1985, it can have R-19 insulation. There are some exceptions to this rule, such as when the landlord pays the heat or lives there, or if the tenant is subletting. The landlord is also required to give an estimate of the average heat bill for the year to prospective tenants upon request. (Section 8:524.)

If your home is not properly weatherized and you are paying the bills, it is time to give your landlord some heat. Write your landlord a letter requesting weatherization compliance within a week or so. If you have already paid some heat bills without the proper weatherization, sit down and compare your heat bills from before and after the place was weatherized. Deduct the difference from your rent. Write your landlord a letter explaining how you came up with these numbers; include copies of the bills.

http://www.michiganlegalaid.org/library_client/resource.2005-05-30.1117489738292

People! This is being way overblown for a piece of paper bearing your name on it. A simple stop order with your bank would have rendered this paper useless. You know the money hasn't left your bank account yet right? If you are having trust issues, communication issues or c)all of the above with your realtor, its time to dump them and find someone you are more comfortable with. After all, your realtor is supposed to be part of your "real estate team." I usually include a scan of the check with my offer as proof of EMD. If the offer gets accepted, my realtor gets the check immediately after and delivers it same or next day. Sometimes I even have them just rip up a check if an offer is not accepted. do what works for you....

Finally an anecdote: I put down a 4 digit EMD on a short sale last march. offer ratified, check deposited by title co. fast forward to closing time: Seller fled the country. takes me 10 months and countless visits to small claims court to get a court order to permit escrow/ title co. to release my EMD back to me. All because the sellers weren't around to sign a EMD release form. Just got a judgement last week (victory dance!)...now THAT is a real EMD predicament with real money being held up...

1) they can sign the lease on feb 16, but the lease period will start on march 1. DO NOT give keys until the following occur: you get the deposit and first months rent in money order/ certified check, lease signed, and a confirmation that the utilities have been transferred to tenants name and a finally signed move-in checklist. Call utility company to confirm before handing over keys. That being said, even with above been satisfied, you do not have to provide keys until move-in. Tell them you'll provide the keys when you get confirmation at move-in that utilites were transferred for that effective date and move-in checklist is signed. This way you can work on stuff in the meantime. If they want to do things earlier, then the lease period starts earlier and above must be done earlier. Make sense?

2) leases typically go month to month after lease period on standard contracts like from your realtor. You can send tenants a new lease 60 days before end of period or anytime and ask them to sign a renewal.

3) move-in- Take pictures, movies or whatever you'd like to feel like you'll cover the whole house and note the condiiton before tenants are over with you. I do both. Pics are detailed, a video walkthrough might help to cover damage at odd angles that you cant capture with 1000 photos. I meet tenant and move-in and do a walkthrough with them. This is their chance to note any deficiencies and write those on the checklist. get it signed by tenant before handing them keys.

5) use the realtor association lease template specific to your state/county. Those are usually pretty sufficient and should be fine. make sure to read carefully on the terms of the lease and if you agree with how things are handled per lease rules. You can also use an addendum to include addiitonal rules i.e. quiet hours begin at 10pm, parking rules. They offer most protections.

If I'm not mistaken, the net cashflow (income minus all related expenses) is taxed according to your income tax bracket, which is around 30%. You will owe ~30% of whatever "net cashlow" you earn. If you were to have negative cashflow or a loss, that gets subtracted from your taxable income from your full time job for example and then they ask for 30% of that new lower total.

This would be good for a rough calculation, so you know not to spend the entire amount of the proceeds so you have them to pay when you prepare your tax return and pay your outstanding taxes.

Scott W. You raise a good point but I think we both agree that buying a new place and then finding a tenant for the original property seems like a better plan instead of his above proposal. If he gets someone to move in the day after he moves out, thats great! But given that Andy is new to rental marketing and the whole landlording thing and we dont know how hot his rental market is in his neighborhood , I'd plan for it taking a month to get tenants in there. If he can make it happen sooner, thats a bonus!:)