All Forum Posts by: Daniel O.

@Kenny Chen Yes, absolutely, you can and should lie to the loan officer. The problem here is that you are also paying income taxes, and they found a discrepancy between what you said on one official government document and what you are saying on another government document. The solution is to stop paying your income taxes too. There may be other ways they can find out about your other property. Utility bills are always a problem in this regard. You should have all the utility services turned off. Immediately. For electricity, you can just take some jumper cables and clip on to the transformer directly. Use a 5 gallon bucket to catch rain so you have water.  Unfortunately, as others on this forum have pointed out, you have posted on a public forum which can and will be searched. And you have posted your picture with it. Oops. Consider changing your appearance too. Maybe a blond wig? Don't get too attached to the wig though, as they may not let you keep it when they catch you and arrest you for felony fraud and income tax evasion.

If all of this sounds like a big hassle, you might consider taking the easy way out and just telling the loan officer about the other loan. This is the course of action I recommend. If they won't loan you money because of the other loan, they probably think you will have trouble paying both loans. Really look over your finances and figure out whether they are in fact correct. If you can make the case to yourself, you may be able to make the case to them. If not, they may actually be doing you a favor by keeping you from getting in over your head.

@Arnie Guida, Does the tenant have a basis for saying that you refused to accept rent?  If not, then you just show up in court and explain to the judge that there would not have been an issue if the tenant had provided rent as agreed....but that now you just want him out because he lied to you and lied to the court.  What will you do on Tuesday if the tenant has the rent?

I am unclear about how you hope to get your problem tenant to move on once the weather improves. It is pretty clear that your tenant knows how to play the game and that they have no scruples about making stuff up. As I said before, Get them out ASAP.

@Les Crow there is a key piece of information that you have not provided. What will the place be worth after you put all this money into it? If you are in essence putting 70K into a place to purchase it and make it worth 7K more than you are paying for it, then it may not make a lot of sense. The question is, can you get a better ROI with your 60-70K elsewhere?

I agree, requiring the owner to abate the asbestos is a good idea. That will be expensive, and will also be disruptive for the tenants. You might consider having some sort of indemnification concerning the asbestos so that nobody can come after you if there is a problem down the road.

Armed with this repair list, I think it is time to go back to the owner and explain that the deal just doesn't make financial sense when buying it for 123K. You can run the numbers yourself and play with different purchase prices to see what gets you to an acceptable ROI based on your market and your own comfort level. I would not expect the owner to agree to replace furnaces that might need to be replaced in a couple of years. But the roof and chimney are no-brainers. If they need to be replaced, the owner will have to do it if nobody buys the place anyway. The tree is somewhere in between, with the owner probably thinking "it hasn't been a problem so far" and you recognizing that it is a problem waiting to happen and wanting to take care of it.

Keep in mind that part of what you are offering is to reduce the pain in the butt factor. Assuming this makes the numbers work better, ask the owner to drop the price 20K so you can do the roof and chimney as soon as you close. Ask him to take care of the tree or provide the funds for you to do so. My guess is he won't agree to everything you ask, so treat the tree as the throw-away item in your ask.

I am not certain, but I believe that once the owner has been notified that he has asbestos, he is required to disclose it. Ask your agent about this. But hold firm on him doing the asbestos before you close, and make sure it is done by a licensed asbestos abatement firm. If the owner won't do the asbestos, walk away.  

I don't know what the laws in your jurisdiction are, and a lot of folks here are also based outside of Wisconsin. This might be a good time to spend a little extra $ and talk to a lawyer. If nothing else, it might help you avoid an expensive mistake, and it will give you peace of mind as you are moving forward that you are on solid legal ground.  

That said, I think you also need to really look in the mirror and be honest with yourself about how your own behavior is creating this situation. It sounds like you are training this person to be a bad tenant and to walk all over you. I say this not to criticize, but to help you to recognize the pattern so you can change it.

When you offered to vacate the eviction if you also received March rent, did you at least do that in writing? Not to be flip, but did you also offer them a warm glass of milk and a cookie?  

There is no need to be mean or vindictive or nasty (ever), but you also need to be fair to you. If you were managing this property for someone else, they would be justifiably pissed at how you are doing it. You are the cause of your own ongoing suffering here.

Get this tenant out now.

@Larry Smith The general view here is that this is a good deal and you should do it. While I agree, I would caution you to do a little more number crunching and due diligence before you jump in.  Here are some other things you should be considering. If you have already considered and accounted for them, great.

1) What likely cap ex will you have over the next couple of years? Think furnace, hot water heater, roof, things like that. Does the deal still work if you have to buy a roof this year or next?

2) Lead Paint. Does the house have it (probably), and does it need to be abated (maybe)? If so, what is involved and how much will it cost?

3) The tenants you will inherit. Sounds like they are getting a pretty sweet deal at way below market rent. Are they tenants you would have leased to if they were not already in the place? Credit history, payment history, income, etc. Be sure you are not inheriting a problem. Also, look at the landlord/tenant laws to confirm your ability to raise the rent to market level. If they are on a lease vs. month to month will make a difference.

4) Who pays utilities?  If the units are not separately metered and the owner pays utilities, this could almost completely kill your cash flow, especially if the house is poorly insulated. At a minimum, you need to talk to the utility companies and look at useage / bills over the last year+. If you can look at a period when both units were occupied, all the better. Unless the units are metered separately, build these costs into your model as well.

5) Taxes. Make sure you have factored them into your cash flow calculation.

6) Is there any kind of HOA (unlikely but worth checking) and if so, what are the dues?

7) Flood Zone. Make sure this place is not in a flood zone. If it is, you will end up having to pay through the nose for flood insurance if you have a mortgage. This too could kill your cash flow. 

8) Unless there is some new catalyst such as a new major employer or transportation infrastructure going in, it seems unlikely that this house will appreciate greatly unless you are adding value. But even if you are adding value, appreciation will be limited to a large degree by the houses around you and what they go for. As part of your plan, you should also be thinking about your exit strategy. If this place cash flows as well as you think, then maybe that strategy is to just buy and hold it for a good long time. Nothing wrong with that. But it is always good to have some sort of plan in case you do need or want to sell.

Good Luck. Let us know what you decide to do.

Why are you even considering granting her request for an extension of any kind?  Are you running a business or a charity?  I don't mean to sound overly critical, but you have a tenant who has not paid, who won't pay, and who has lied about it.  Get. Her. Out. 

Math. Math is keeping me from buying large apartments right now. Commercial stuff is just too expensive right now relative to what it generates. When interest rates rise back up and institutional money starts chasing returns somewhere else, then the math might start to look better. Not saying you can't find a deal, but it takes a LOT of legwork at a time when there are still lots of compelling options in the SFR and small multii space.

I suggest you take detailed photographs with time/date stamps of the electric panel and any other pertinent parts of the system. If Daddy is poking around, who knows what else he might be doing. I doubt you will need the photos, but should something come to pass, you will be glad you have them.

Ask your lawyer what to do. If the owner is liquidating to pay debts, it is entirely possible that there will not be enough money to go around. The lawyer can tell you whether filing will move you to the front of the line or someplace close.

@Craig His this is a no-brainer. Sell tax free and take the money to put to more productive uses in your new home area. You have a relatively brief window in which to do that (3 years before the benefit decreases, 5 before its gone). Your scenario doesn't take into consideration the problems of being a landlord from a long distance. You would need to have some sort of property manager, which would probably cost you 10% of rents received. That alone makes your cash flow even more negative if you hold onto your primary. 

Take the money and run, but really take time to understand the area where you are relocating and the market there before diving in.