All Forum Posts by: Justin Hoggatt

Hi, Tiffany!  I know what you're going through!  When you're competing with many other first time home owners and a shortage of product, it's extremely difficult to enter in. You will need to either have a good resource, a good marketing plan, a stomach for a true fixer upper, or get lucky. 

An area that I think can be a great opportunity are syndicated deals.  This allows you to pool with other passive investors and get into a deal that you wouldn't normally be entering into.  Many times you need to be accredited. but there are crowdfunding deals that you can get into with varying degrees of entry.  It may be tough to consider when you've got your eyes set on doing your own deal, but can also be a savior when you're stuck and when you are busy working and outing another interest like you mention.

I'd be happy to talk with about what we do.

@Kwasi Safo-Asante, i’m sorry if I was confusing. What I was meaning to say was that I agree with the anticipation for lawn care expenses and that it needs to be covered by the landlord. You might be able to get away with having a tenant take care of their side on a duplex, but I don’t have that experience. On any multiunit properties, I take care of the lawn care and would suggest the same so that it stays up to your standards and you know it’s getting done. You could, however, add in a nominal monthly charge if you feel the need to cover this expense and earmark it as lawn care needs. I’ll add caution this tactic though, so the tenant doesn’t feel like you’re charging for too many things.

Hi, @Stephen Brown!

I think you've done a good job of estimating some money to set aside and many people don't do this, spending all their cash flow as income and then not having enough when needed for a repair or issue. On the CoC, I prefer to look at the project in this way:
Ask yourself what it will take to the get the property in good shape, ready to rent, and hopefully no more real upgrades needed. I.e. Purchase price $90k, Upgrades $10k, final price $100k. With the downpayment of $22,500? (25% down) and the $10k of Capex on the property, you're all in is $32,500. Obviously these are rough estimates and there will be closing costs or other things to factor in - you're a broker, you know.

Then you'll know your real CoC returns and over time you'll realize your true investment. The money set aside is still equity until it's used. So, that money you're setting aside may or may not come out of operating expenses, it's an escrow of sorts. I think you're on the right track and do what a lender does, do an escrow analysis each year and adjust as necessary. Once you've set aside a comfortable amount (say $5k?), then you're probably good and can stop placing money aside - unless you know you're going to be doing a big remodel.

As for the charges - what are you factoring in as management fee?  I think you'll be able to self manage this no problem so I'd look at doing it yourself.  I would personally charge the tenants back for the water (by way of RUBS if it's a single tap) and the lawn care I can see as a need.

@Mary Ciccarelli, you're going to need to purchase the home with a private loan and personally guaranteed. I assume that you'd both be on the loan and in that case you'll both need to be somewhat equally responsible for it. I think you'll want to setup an LLC which isn't usually much expense with the state and then you can work the details out with that and doing a quit claim of the property into that LLC. Make sure you're the only owners and partners of the LLC. The expensive part of the LLC can be the Operating agreement, as Caroline is pointing out. The operating agreement can be something you write up, something a lawyer gets involved with, or find a template online and edit it to your liking. The point of it will be mainly keeping each other accountable after the "honeymoon" phase expires and the work really begins. This will be what to do with proceeds and expenses. You won't know where this ends up, hopefully in a great outcome, but be prepared for the other side and if it isn't as rosy as you hope.

Good luck!

@Robert Belz, @Bill Exeter and @Dave Foster both gave great advice and feedback.  I would certainly suggest finding a good exchanger and they will then help in your questions and process quickly.  I have previously utilized a highly reputable 1031x company and it was worth every dollar.  I have also been involved with a intermediary who was the same cost and was just a real estate lawyer who didn't really work exchanges.  It was not so much fun and came with a lot of headaches.

Good luck on your sale!
 

From my experience, when someone is interested in selling, they aren't actually willing to wait 14 months.  They can say that, but if selling is in their mind, it usually will happy relatively quickly.  I think you're right in that you want to get it tied up.  I would look into a subject-to because then you can hold the property until the 14 months is up and then if for some reason the house isn't worth it or the system takes a dive late next year, you're even more covered.  Otherwise, I'd offer to pay the penalty for him - which can still be negotiated on the final purchase price.  What are rents on the property and are you looking to continue renting it or a personal residence?

It appears that people do different things and have different policies. I think based on your question here, that it depends.  Usually this is a pretty big red flag but a double deposit is also something that a lot of people really don't plan for.  If the home is in a highly desirable area, I'd move on from them.  If it's in an area that you need to have a bit of flexibility, then I'd certainly consider a payment plan if I liked who there.  I would absolutely make sure it's the full 1x deposit and if they need another month to pay the other portion of the deposit, I'd set that up with them and then any future payments are applied to that deposit and then they would be late on rent if they are late on any future payments.  Yes, we've had to fight people for that payment and we don't always get everything as entirely planned, but we do have the unit rented and they are paying.  If we wait another two weeks, we think of that as losing something like $750 so it's also a bit of gamble where not getting the final amount is a bit of a wash anyway but at least they would owe it and it's on a contract where if we waited, it's our loss entirely.  Again, it really depends on the person and what kind of background we were able to uncover.

Just because someone mows a piece of land shouldn't mean you can then claim it - that sounds ludicrous.  I assume even if she did try, you'd be allowed to fight it, so I wouldn't worry about it.  Maybe ask her if she would like to do your whole yard?  Would she be for hire?  Figure out maybe why she's doing it?  Would it be because you aren't mowing yours enough?  Or, like Chris said, put up a fence.

You could talk to the city.  Often times there is code enforcement and they will reach out to the owner or someone that would be responsible.  I know you said the owner is deceased, but the property will be in the hands of probate or someone else.  You may want to try and figure this one out and see who actually does own it right now and see about getting your hands on it.

@Naveen Chitluri - Do you have experience being a landlord and investor already?  Assuming you are because I don't think you'd want to get wrapped up in 35 units right away - especially if fire damaged.  How have you analyzed deals in the past?  Don't go on what a broker is telling you is "Proforma" because it's almost NEVER accurate.

To answer a couple of your question, 60 days to close - but if you don't have a lender relationship yet, it could take a bit longer.  If appraisers are backed up for any reason, that could take longer as well.  Make sure that you look at DD seriously - ask for bills, leases, rent roll, etc. and make sure you see ALL the units.  

For the offer, are you anticipating that it will have significant interest?  I think to make it more serious, you'll want to share your experience with them, or show a proof of funds.  Anytime someone sells anything, they want to know it will go through and they aren't wasting their time.  

I personally would have the seller fix the units so I didn't have to after closing.  Having him work on that now saves you time later and then you'll be able to rent those out quicker.  If you them done a certain way, then work that into the deal and ask for decision making on the design.  

Earnest money - not a huge risk as long as you have your contingencies laid out.  If you have the earnest money to have it tied up and it doesn't matter, then you can do more to show you're serious and a more capable buyer.

Good luck!