All Forum Posts by: Edward Liu

I have heard horror stories when HOA and management company is controlled by single owner. That owner can raise HOA fees, do special assessment, etc. at will as they have full control. They can do major improvements to units they own while you pay most of the cost. I even heard a story of a controlling owner did a special distribution of HOA reserve back to owners before person sold his properties.

You assume people will be professional, but power and money corrupts.

I do all cash deals to get a leg up in a competitive market - usually sellers prefer cash buyers who can quickly close the deal.  Then I do refinance (usually within 1 year) after I place a long term tenant.  

For SFH or duplex, you can get under contract and then ask for more details later. For these commercial 5+ units, we usually request info first before making an offer. For example, for SFH or duplex, normally owner is not responsible for utilities, but for 5+, owner can be responsible for some or all utilities. Depends on utilities cost (varies a lot), it drastically changes the valuation. Before offer, please at least get basic details about the property, then once under contract, then verify if initial details are accurate.

Without much info, based on your rent, price and class C, likely this deal is negative cash flow or very low CAP. For class C, higher rent to price ratio for 5+ is needed. I don't know enough about the local market to say if deal is over priced.

You can not finance 12 unit with conventional loan.  Banks will underwrite conventional loans for 1-4 units, 5+ is treated as commercial.  

In addition, for larger multi-plex, not sure if you want to get loan into your person name. Typically we don't mix personal finance with LLC finance (maintain a wall). If wall is not well established, your personal assets could be held liable to liability from LLC

Due to trade war, there is significant less Chinese investment in the US.  See article https://markets.businessinside...

A few years ago, there were so many Chinese cash buyers in hot markets such as SF Bay area, Seattle, LA, NY, etc. that it helped propel the real estate valuation. My wife has a client from China that brought up 1000+ SFH in Houston and Dallas, all paid in cash. Many other Chinese clients brought tens to hundreds properties each. All of these clients have stopped buying around 1-2 years ago.

As real estate investors, we are all indirect losers in the trade war - although not very obvious vs. groups such as farmers.

In really depends on the city authority that manages it.  I have section 8 tenants in different cities and experience varies a lot.

In one of the cities, the inspector always find long list of issues to fix with every inspection and blame owner for tenant issues.  With city so pro tenant, section 8 tenants thinks they can get away with anything, and they do.  They have no incentive to take care of the unit or building.  Too many ridiculous stories to share.  

On the other side, in another city, one of units I own has same section 8 tenant for over 15 years.  No problem at all.  I have inspected the unit recently and it is one of cleanest units for any type tenants I have seen.

In addition to the city, you might need to consider how section 8 tenant affects your other tenants and neighborhood.  Many section 8 tenants don't have jobs and with many kids.  Some have tendency to 'hang out' on the poach.  In a B/B- area, where I inherited one section 8 tenant.  My other units in the same neighborhood initially had issue attracting good tenants despite being in pretty good location.  My property manager advised and removed the section 8 tenant.  Once the section 8 tenant was gone, other units in the same neighborhood immediately saw better tenant base and had less time on the market.

Most banks would not lend to non US residents or people with limited tie in the US.  Even for US Citizens, many US banks won't do loans with investors from out of the state (they want local tie).  

I used to do more C areas to chase the returns, now I prefer to invest in better areas with better schools and better tenants.  Better areas do have better tenants and much less issues, no matter what city/region you invest in.  

Over long term, better area has better returns (less tenant turn over, rents on time, less management fees, less turn cost, better rent increase rate, etc.).  In addition, better area tend to have higher appreciation %.

I recently purchased insurances for 2 different duplexes in Hartford area, cost about $1500 per year for each property.  Insurance is full replacement cost along with $1M liability.  The insurance is through 'the Andover Companies' and purchased through a broker.

For schedule E from seller, did you remove depreciation, interest payment, when calculate net income?  Key for me from seller schedule E is look at utility cost, insurance, property tax, or maintenance items that are unique.  

You should ask for cap Ex sheet in seller tax return for this property and see if seller has tried to shift normal maintenance cost into Cap Ex to make net income look better.

You can definitely walk during due diligence period for any reason.  It depends on how strongly you feel about this deal.  The good news is at least you have seller schedule E - many sellers don't provide them.