All Forum Posts by: Ricardo R.

Hi everyone I wondering if anyone knew of any dependable property managers with experience in small multi-family apartment management of 6-20 units, within the Ann Arbor, Novi, Detriot areas of Michigan.

@Ryan Murdock

Great idea, with some really valid, level headed and unemotional points, you should try it... let me know how it works it out.

@Christopher Hunter

Chris, is this agent a friend of yours or have some sort of specialty? I guess, why are you deciding to go with this agent?

My view is that just as @Brandon Battle mentions he is trying to mitigate his losses for his time should you not close on a property. However, whatever doubts he may have about you as a buyer (whether said or just implied through actions) they are canceled out by the fact that he is a new agent; what are the guarantees that he knows what he is doing and in turn not just wasting your time, so it goes both ways. 

At the end of the day, you are the guy with the $ and the transaction does not happen without you period, everyone else realtors, brokers, inspectors, sellers are only there because of you the buyer. As the buyer you are only going to buy something with which you are comfortable with and do not need to be putting yourself in a position where you have to buy or loose money, even before you get started. If that agent wants to work with you fine, but his price for doing business is to show you the market to see if anything suits your needs, if it does great he gets his payday (performance based) if he doesn't then he didn't really fulfill your needs as a client and thus no pay day, that is just he business he's in. The fact is that there are countless other agents and brokers out there that are far more experienced that him which will not waste your time, he works for you not the other way around.

Personally, I would find another agent, I would sit down and explain to them what I would like to do, show them that I am pre-approved and ready to move, I would not pay anything (I don't know of any buyer that has) for me to bring them a potential sale and I surely would not sign any exclusive agreement, I would explain that I am also working with other sellers, wholesalers and agents. If I move on any property they have sent me paperwork on, showed to me, ran numbers with me or did any work with me on it, it's theirs otherwise its the other guy's. Agents have to realize that the property is not theirs to control it's the buyers and sellers, without them the agent does not exist.

And remember you team of realtors, lenders, title agencies, etc. are all on your side UNTIL you get to the closing table. At the closing table you have a conflict of interest with everyone... in that if you don't close (however messed up the deal is for you) they don't get paid.

Alex

Thomas S.,

The difference which I think most forget to take into account including yourself which suggest it's no different than a mechanic's lean or an HOA doing it or 'professional level of understanding' when you suggest towing a non-paying Tenant's car is that you the landlord/manager/owner have your much higher value asset being controlled by a Tenant which you are fringing about the law. As 'seasoned investor' you would agree CONTROL of your asset is your number one path to running a profitable asset, the moment you tow a disgruntled non-paying Tenant's vehicle which may by all accounts be their most valuable possession, I would like to see just about how much control you have over your asset. I don't think anyone is arguing that the Tenant needs to stay, instead I'm amazed as to how a 'seasoned' investor doesn't understand that separating the cause of negative income (the Tenant) from their asset (their property) is NUMBER ONE on the list.

@Levi T.

There are many legal concerns you should clear by a lawyer here but even if lets say the law free and clears you to tow their vehicle.

The main points: 

1 - As many people have said, why would you want to remove the Tenant's means of traveling to work so that they could pay you? 

2 - You understand that they have control of your asset. You can impound their vehicle but understand they do have control of your asset and as such can do ANYTHING to it while they are there, some which insurance may not cover and some which you may not even catch until they are long gone.

3 - You pointed out that HOA's do it and the reasoning is why not landlords. May be true but again understand that if HOA's tow your vehicle, what vindictive action can you take, destroy your own home? - However, you're towing the Tenant's vehicle who is living in the home of the very person that towed their vehicle, do you think they'll be understanding or be vindictive? Aside from property damage as stated above, you open yourself up for legal repercussion. The Tenant now has the resolve to fall down the stairs and test exactly how strong your lease and insurance is when they claim the landlord's at fault, or disable the fire alarms claiming they haven't worked in months and you did nothing about it, regardless of what your lease says as to who is responsible for maintaining them, god forbid they start an 'accidental' fire and now your insurer is looking to you as to why the smoke alarm was disconnected not wanting to pay out; you may get some of your $ back out after countless court sessions, time wasted and $$$$ for your lawyers to justify it all for you and set it straight, completely cutting hard into whatever investment strategy you may have had.

4 - Just because you put it in a lease, review it with them, have them sign it, have them take a picture with it, get their DNA on it... does NOT make it legal. Example: Lease says -'Tenant agrees that upon non-payment Landlord may self-evict Tenant after 10 days' - Tenant agreed, Landlord agreed, a there's even a written instrument ---- Self-eviction still NOT legal if Tenant protests; because your Lease can not supersede the law and that law is interpreted by a judge and that judge may actually find you, the Landlord, as trying to circumvent the law and there may be real repercussions from doing so. Not only have you lost control of your investment when that happens but even worse you've placed control of your investment in someones hands which has no vested interest in it, the judge, how's that for controlling your asset?

Sure you have their ride and possible 'collateral' but really who has more on the line here? the guy with the 5-25K car or the guy with the investment of tens of thousands of dollars, your 'collateral' is not collateral at all if its the trigger that causes the Tenant to lash out towards you through your much more expensive investment.

Of course all of these are extremes, my point is that just because you can do something (big if) does not mean you'll come out on top, you may very well still loose in regards to protecting your investment, reputation, cash-flow, profit margin..... get my point. I would go back to the drawing board and find another way, preferably one which separates that Tenant from your investment. 

A big warning to everyone: There are the legal ways of doing something and then there is the reality. Just because we can justify something as being legal, remember reality does not follow suit even more so when that person currently has control of your asset.  

@Antoine Flack

Thank you for your service, I can relate. All is green ahead. One thing you have that most do not to help you get started sooner than you may have even realized........is your VA loan. You qualify for a VA loan. This type of loan for the most part is backed by the US govt or more specifically US govt entities. Because the VA is essentially backing the loan or in other words letting the lender know that if you default for some reason, their loan is guaranteed to be paid back to them. You do not have to put any money down with a VA loan and the rates are comparable to market rates. So essentially you can purchase a home with 0% down, at comparable market rates and without PMI/MIP. I believe there is a funding fee however, because you have a service connected disability, this funding fee is waived. There is one catch, well actually two:

1. The VA loan may only be used for a home you live in.

2. There are purchase price limits with the VA loan or how expensive of a home you can purchase using the VA loan.

---1. Although it can only be used for a home you live in, keep in mind that you can still achieve your investment property dreams. Simply purchase a duplex/triplex/quadplex and live in one of the units, Brandon Turner and many others constantly refer to this technique as 'house hacking'. Can you purchase more that 4 units? no, as 5 units and up is considered commercial property but verify that.

---2. You are in Fayetteville, NC - airborne country - which is Cumberland County... I believe the current VA rates for Cumberland County are at $424,100. Meaning you can purchase a duplex/triplex/quadplex for as much as $424,100 with 0% down and without PMI/MIP.

In other words...... you have your NMD technique in hand! 

My road map if I was in your shoes..... I would use the VA loan to purchase the best and most cash-flowing duplex, triplex or quadplex and live in one of the units while renting out the rest; essentially living there for free since your Tenants would be paying your mortgage collectively for you and even so you may even still collect some cash-flow on top of that, if it's a good enough deal. This would put you in a strong position to learn the 'biz' easily in the 'real-world' since you'd be living there managing. Later, once you have lived in it (hopefully while using your GI Bill which also pays for BAH) for a bit and have mastered your NMD techniques you could move into your own place with your kids if you wanted and then rent that 4th unit you were living in, bringing you in even more cash-flow; the VA loan would stay with the property. Or.... better yet, once you have paid the principal down 20% or more, I would refinance the property to a conventional loan, freeing up the VA loan and then reusing it once again (you can do that) on another property whether it be another investment property you live in or your forever home. You would be in a very strong position then, but you are in strong position now as well.

You first step is to check with the VA or DAV. Next you need to reach out to a VA loan friendly lender. The VA does not issue loans itself, you to go through a lender. Read the posts, watch the podcasts, read the books and hold that VA loan eligibility close and move forward and use it, you have the means now; now you just need the knowledge before moving forward.

I hope this helps.

Alex

@Charles Craig

From my understanding a Secured line of credit is one that the lender has the security of that loan being backed by some type of asset such a home, car, etc. A HELOC I believe is a type of Secured line of credit since it is backed by a property.

An Unsecured line of credit is then the opposite; one which there is no asset backing it. Because there is no asset backing it i.e. no home to foreclose, or car to repossess, which the lender can sell and help minimize their losses should you default, it is perceived more risky by the lender. Because it's more risky the requirements for the borrower would most likely be more stringent than that of a Secured line of credit. A credit card, I believe IS a type of Unsecured line of credit.

I hope this helps.

Alex

@Brian Lesko

Without looking at property, these are just a few that come to mind, of course some of these are a bit to soon to ask during a showing and even the realtor may not be prepared or know the answers to these, but eventually if you want to proceed with this property you should definitely get answers to these:

How long have current Tenants been there?

When is their lease up? (are you stuck with them for years to come, or is their lease up before closing)

Can you review the leases? (would it be a surprise if you find out subletting is allowed later)

Can you review their initial applications and background verification if any? 

Did the Landlord offer any concessions to the current Tenants i.e. free month's rent, credit towards utilities, etc.?

Can you show a rent payment history for current Tenants/have they always paid on time? ( any deposit paperwork from the current landlord would do for as far back as you need to show that indeed they have been receiving rent for those months)

How will the current Tenant's security deposits be treated upon sale? (preferably transferred directly to you and hopefully not back to Tenant and then to you or worse not transferred at all)

Would you be able to meet the current Tenant's prior to closing?

What company/who currently maintains the yard/snow removal? (you can verify later as to how much they charge)

What do the current owners allocate for maintenance/repairs currently? Would they be willing to allocate all of that or a portion of that to you (for this year currently), since they have collected it and you are starting with 0 for the maintenance/repairs?

If any units are empty, would the current owners allow you to list and show the property for rent before closing after you sign the purchase agreement?

Does the county/township require that your register your duplex? If so, how often, how much, is it currently registered, can you see it? 

If utilities are paid by Tenants, which ones specifically? Does that mean water utility is currently in the Tenants names? (You would like that specific utility in your name and then forward the balance to your Tenants) would current owner help facilitate that before closing if you sign the purchase agreement? (I would like to think the Title company would catch this but, if water is in Tenants names you need to ensure they have not racked up an unpaid balance, because this is the one utility that will not follow the Tenant and will instead stick to the property, like I said I'm sure the title company should catch this but never hurts to be sure otherwise you may be facing the option of paying an extremely high water bill or having the water shut off.) - This may also be a question for your Title company first.

In your inspection contingency  you would like to review most of the above during that time, can it be provided for your review then? -- If you are not going with an inspection contingency then when can you review the above and verify? What if the paperwork doesn't check out and you want out but you have no inspection contingency what options do you have then - can there be some kind of 'document review period contingency'?

Are the owners open to owner financing? 

Hope this helps.

@Tom R.

     I think some of the things you are looking for have already been drafted up for you, but I'll make a list of some that come to mind in order.

Before you start showing, make yourself a one page 'Tenant/Applicant Acceptance Standards' list and type out your acceptance brackets i.e. income 2-3x's rent, minimum credit score 450, etc.... etc... and absolute denial (i.e. no previous or current sex offenders, etc.) and get it notarized at your local credit union (or you lawyer) make sure you consult fair housing standard and then have it dated and then make sure you apply those standards to all applicants - Important if for example, anyone tries to later accuse you of discrimination for denying them for having a low credit score or getting denied because they were a felon previously (just an example) , you can then clearly show that your standards where well established long before they ever came into the picture as the notary shows - won't protect you for all, but better than nothing. Nothing fancy, just the property address, date, and your standards made on Word, notarized to establish date worthiness.

1. Rental Application- you can get one on Zillow if that doesn't suit your needs, you can at least build or change off of it

2. Consent to Release Information form - this would ideally be attached to your application when potential tenants apply to your rental - without it, it may be nearly impossible to verify their application as most rental complexes, utility companies and employers will need this before they answer any questions regarding the applicant. - again you can find this online and then modify but for the most part it should include the applicants name, social, date and signed by them, the person allowed to receive the information (you), the purpose of information and what it will be used for (rental/housing), a list of agencies/ institutions it applies to (current and previous landlords, utility companies, current and previous employers, etc..... etc....)

3. Application approval/denial forms - not so much needed for approval; more needed for denial especially if it's due to credit score or credit worthiness.

4. Residential Lease with damage checklist - have your lawyers draft that up... come in with ideas from other reviewed lease clauses from other leases ---- but have him/her draft it up for you - no shortcuts on this or you'll regret it.

        On this.... I would have a 'main' lease drafted and then apply amendments/addendum as different Tenants or properties might require different things. For example,  even if I happily allow pets (example) the main lease would state no pets allowed and the consequences, etc, however if the Tenant has a pet and you want to allow a pet, all you would have to do is attach the pet amendment allowing pets, same with utilities. - This way you don't have to constantly keep changing your lease wording... as it can get pretty confusing pretty quick when you start getting multiple properties with different tenants some with pets, some without, some properties you cover utilities, some you don't ........and then you have multiple versions of your lease out there - hard to keep track of that way.

    --- Pet Amendment (addressing # of pets, size, breed, pet fee, that the tenant is responsible for pets behavior, what happens when there is an incident, etc.)

    --- Utility Amendment (How utilities will be addressed, who pays, in whos' name, etc.)

5. Credit Reporting Disclosure - which would be part of your lease - run by lawer

6. HOA agreement - if your property is part of an HOA, part of your lease - so they notify you of if notified by HOA of infractions, that they are responsible for any infractions on their part, how long they have to correct those infractions. - make yourself run by lawyer

7. House/property rules - part of your lease - make yourself then run by lawyer

8. Security deposit letter - notifying where security deposit will he held and who to contact regarding issues.

9. Early occupation amendment - if they would like to move-in before the lease begins - Lawyer

10. Lease extension addendum - Lawyer

11. Early termination amendment - lawyer

12. Charges against security deposit - itemized list template - you can make yourself - have lawyer look over to save some $

In regards to eviction notice paperwork, I would stop by your county's office first and inquire about such first; most counties have their own notices already and you need to use those... so just check there first, print it out, take it with you when you meet with your lawyer and ask questions so that you understand how to fill it out and how you need to have it delivered. 

These are just a few that come to mind which I think your lawyer should at least just look over. I hope this helps.

Alex