All Forum Posts by: Curtis Bidwell

@Peter Lower Seems that partnering, while avoiding a direct monthly expense, is a very expensive way to manage a property that you are putting all the $ into.  

if your just looking for good property management, learn to interview property managers and keep your equity for future deals  (https://www.biggerpockets.com/blog/interview-property-managers-ultimate-guide) 

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $1,950,000

22 units comprised of 9 2/1 Duplexes and 1 1/1 Fourplex on 4.7 acre culdesac.

Property is in generally good condition. It has been family held since the mid 1970’s. Was not managed to keep pace with the market.

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

This property had 2 failed sales prior to my involvement primarily due to financing (debt service coverage). Rents were very low for the market. Based on the low rents the valuation was high. But based on quickly achievable market rents the opportunity became clear.

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

Property was listed on the MLS. Asking price was $2.05m. We had information that a $1.95m had been in play so that's where we started, coming to mutual agreement on Christmas Eve. The "no-negotiating" seller agreed to $12,600 in credits for repairs.

How did you finance this deal?

Financing made the deal! My lender gave me 1 year interest only at 5.25% (taking a 1:1 debt service coverage to a 1.3 dscr) with 25% down, then 5 years at 5.25% before adjusting. This allows me some time to get rents closer to market and additional funds to do turnovers.

This is the 4th deal I have used this lender for, so he knows me well and goes to bat for me with the loan committee.

How did you add value to the deal?

In this instance I will use Sec8 to set the new rent rate. Rents currently average $735 for 2 bed, 1 bath units. Sec8 will allow $1150. I should have 2-3 of these in the first month. Once the value is set it becomes easier for existing tenants to understand and accept incremental increases.

Significant upside in rents will be achieved over the next 18 months increasing value approximately 75%.

Lessons learned? Challenges?

Don’t skimp on due diligence. Always confirm assumptions. Seller did not disclose ecology requirements. Asking questions, talking to tenants, research public records, etc. Our research produced a $5500 credit.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I have worked with Cynthia Niles for over 15 years. She knows the business of commercial, multifamily real estate. Powerful negotiator, principled and focused on your success.

I recommend Ken Pekola of Olympia Federal Savings commercial department for multifamily financing. He takes the time to understand you and your deal and has the flexibility to do what needs to be done to make a good deal happen.

@Sharon Rosendahl  You don't have to go to Olympia, we just need everyone to send an email and follow up with a phone call!  

If you don't know who your legislators are, go to  https://app.leg.wa.gov/districtfinder/.  put in your address and your 3 reps will pop up with email & phone #.  Send them a concise (bullet point) email of your concerns and HOW IT WILL IMPACT TENANTS (remember, they don't care how it impacts YOU!).  Then follow up the next day with a phone call to reiterate your concerns to the aid that answers.  

Thanks, @Tiffany Johnson  If your available to be on campus, definitely touch base with the appropriate legislators and offer your input.  

If anyone can go on Thursday the 29th, the tenant union will be there.  If we can show that they are not the only voice (loud as they are!) it will go a long way.  

SIDE NOTE:  My complex got blanketed this week with anti-landlord flyers trying to unite tenants against landlords, gentrification, discrimination and rent.  

I will follow up with a letter showing the other side and encourage tenants to speak to the legislators to not impose destructive measures that will increase rent and make housing less available to the most vulnerable.  

@Jay Hinrichs  Actually I do watch it a bit.  And I feel for our southern friends!  I have a brother in Salem who got into multifamily a few years ago, after he sold his business.  I watched what they did to Portland the last 2 years and are now doing to the whole state!  Similar here.  What happens in Seattle/Tacoma becomes the legislative ideal for the state.  

Fortunately, unlike Oregon, we don't have a State-Wide Rent Control bill this year... but I can see it coming!  

@Steve Vaughan Yes, support the associations that have lobbyist! I spent all day Wednesday at the legislature with the Washington Landlord Assoc (walandlord.org/), our state's largest Landlord group.  We had a bullet-point handout with pros and cons of various bills that we took to each office along with our handwritten notes of personal experience, testimonial, concerns, etc.  We had several lawmakers speak to us and take our comments as well (from both sides of the isle - just not the ones we needed the most -the Seattle-Tacoma ideologues pushing the agenda)

Unfortunately this is more ideologically driven than pragmatically designed.  It won't help the ones they claim to represent, but will instead create even higher rents and fewer options for the ones that need it most. But, hey, it makes great sound bites that they have created "protections for suffering tenants at the expense of wealthy landlords". 

And Yes, @Eugene M. it is much easier to get a meeting with a state rep.  Just call in advance to schedule (1-2 weeks).    

@Mike R. I think you hit the nail on the head! I've been saying this for a few years now, those in power want to turn housing into a "right" that must be provided, and only the government is capable of doing it 'right'.  Get rid of the little guys that are hard to control and consolidate into the corporate conglomerates with deep pockets or government housing, just like they did with insurance companies in Washington several years ago.  and we see how well that worked.  Fewer insurers, higher premiums, less options.  

We need a response like the hairdressers did just over a week ago when thier livelihood was on the chopping block!  The lawmakers are still talking about that!  When their constituents show up in force they listen because that translates to votes for reelection.  

In an effort to address the housing crisis the Washington State Legislature has numerous bills to consider, most all of which limit a landlord’s ability to conduct business and preserve their financial investment.  Landlord’s must be informed and respond to the legislature to protect our rights as property owners and business people. 

While these proposals are perhaps good intentioned (?) to help tenants stay in their home, it is my opinion that these laws will further exasperate the housing crisis leading to higher rental rates and fewer rental options on the open market -especially for the marginal tenant.

DO NOT BE SILENT! Lawmakers need to hear from individual private landlords and hear your story of how these laws will impact your ability to conduct business, provide much needed housing, and keep rents reasonable. 

Look up your representatives for your residence as well as where you have property: https://app.leg.wa.gov/districtfinder/

Among the most serious issues are: SUBSTITUTE SENATE BILL 5600: http://lawfilesext.leg.wa.gov/biennium/2019-20/Pdf/Bills/Senate%20Bills/5600-S.pdf

1. Judicial Discretion is given to the judge to determine if the defendant should be evicted and when –regardless of the validity of your claim.  It removes the rule of law in favor of an arbitrary decision based on emotion or other arbitrary factors, and there is no remedy for the landlord if the judge rules in the defendant’s favor.

2. Just Cause: Leases do not terminate and you cannot remove a tenant without Just Cause.

Closely aligned with the Just Cause provision, the 20 day notice to terminate may be removed or replaced with a 60 day notice.

120 Day Notice to terminate if you are substantially changing the use or major remodel (see Tacoma’s new provisions: https://www.cityoftacoma.org/cms/One.aspx?pageId=163079).

14 day Notice to Pay or Vacate instead of the historical 3 Day Notice.

Redefines “Rent”: Fees and Deposits may not count toward rent and therefore cannot be evicted for non-payment.

Landlord required to accept 3 equal installments for Security deposit.

Attorney’s fees, etc may only be collected on an evicted tenant only after proving they did not act in good faith instead of merely hardship.

... And yes, there is much more! If you want a sample letter/email to send your representative let me know, I'll send to you what I forwarded to the housing committee members.  

I had a mixed use building (38 apts, office, nail and hair salons, restaurant). While we kept occupied and cash flowing, our loan came due and nobody wanted to refinance us because we were a “tertiary market”, and many other excuses!  We went through brokers and banks for over 7 months befor finally getting a small local bank to buy into us. 

In other rentals, sfr & duplexes we kept occupancy and never dropped rates on existing tenants.  HOWEVER, we lowered rents on empty units to get them occupied.  We were competing with many unintentional landlords: people who couldn’t sell their homes so they rented them creating a glut of homes on the market.  

Our C class apartments stayed full. The price point was ideal for the market, and we accepted Sec-8. So when we needed to fill a unit we could always go there and get full market rates. 

Short answer, “No”.  You can’t cheat the system (why are you trying to get out of a known debt?).  As has already been said, any action will be against the property, you’re name just gets caught in the middle.  Doesn’t matter when they get the lien it will still attach to the property and won’t go away until they get paid. 

My recommendation is you start talking with them and arrange an appropriate payment plan to keep you out of court and not add unnecessarily to your costs.

Don Lesky in Puyallup can either help you or direct you to the guy in your area.  He knows and works land deals, plats, subdivisions, etc

@Evan Mack Market conditions don’t really change my strategy.  There are still deals if you know what your looking for.  

I’m currently working on a mid-size complex that was on mls for several months.  It was under contract at least 2 other times, failing primarily due to its inability to debt service based on current rents -which are significantly under market. 

 I like these kind of deals.  They don’t make sense on the surface (leading to less competition), but if you know your market and can arrange favorable financing you can do REALLY well.  

Once stabilized rents will increase $385/unit and the value will almost double! 

On this deal I will do 25% down, interest only for the first year of a 5 year adjustable note giving me time to get rents closer to market (which I estimate at 12-18 months).  Actual debt service is only .98 but with interest only it jumps to 1.38!  

Bottom line: the deals aren’t typically announced as such.  Know your market, know your lender, review lots of listings, be ready when you see the difference between what is and what should be.