All Forum Posts by: Christian Malesic

We rent to upper Lower Class to Lower Middle Class tenants.

I would not say that we are 'blessed with good tenants'. Yes, we have a number of solid, hard-working Americans. We also get our fair share of deadbeats. We are constantly reviewing our systems and trying to continuously improve.

My reason for debating this thread is to see if there is a better way than we are currently operating. I am not yet convinced, but my attention is raised.

The Fed meets again this week. Smart money says that they will drop rates again.

See this AP article to be brought up to speed:

http://ap.google.com/article/ALeqM5h8KpyRBjeJw2gfbZZF3Kt4NfKeDAD90AO4D00

Your thoughts?

I am finding that the problem is not the current rates, but that the money is too tight. Lenders are not 'lenders' at all, but rather 'hoarders'. When, and if, they cut again this week, will it effect our business?

I almost forgot…

I expect the as complete appraised value to be around $150k. There has been much debate as to whether that is the number it would actually sell for – I think it would (though we are not planning on flipping it, so I will never really know).

The $25k in rehab is what I believe is scaring investors away. It is nothing for us. We actually plan on doing very little work ourselves and just plan to manage the contractors. I expect less than 1 month until it is complete and on the market for rent.

We close on 21 May 08. I will post the actual appraisal number when I get it.

We came to an agreement on 11 Apr 08, but it took until 24 Apr 08 to actually get the signed contract in hand. This is about my 6th successful REO deal, though I can tell you plenty of stories about unsuccessful deals where I walked or was outbid. It is, however, my first with Freddie Mac. Here are the details.

It was purchased by the bank (Freddie Mac) at Sheriff’s Sale on 10 Jan 08. By looking up the records and liens at the county Recorder of Deeds office, I am guestimating that the defaulted loan amount was $140k.
It went on the market on 22 Feb 08 for $101,000

They re-assessed the situation and lowered the asking price to $92,500 on 1 Apr 08. Note: this was not at the 30 day mark but rather at the 1st of the month mark.

My initial offer was for $80k with mortgage contingency for a loan of $105k (to cover rehab costs), a 45 day close, and $500 in Earnest Money. No other contingencies, inspections, etc.

There were multiple offers submitted with mine and we had to fill out a multiple offer form as well as a number of riders and addendums that SUPERCEDED the contract.

On the 5th business day, they countered with $89,900 and $2,500 Earnest Money with mortgage application within 2 business days instead of 10 that the standard PA contract form we used listed. They also had to change the acceptance date as the date in the original offer had expired.

We agreed to all changes in terms and countered at $83,000.

They re-countered at $84,900. We accepted. All of the above jetted back and forth on the 5th business day and we had a ‘verbal’ deal by the end of that business day (11 Apr 08 ). That is with me giving instantaneous responses to my Realtor, so there were zero delays on my side.

Now that we have that settled…. (thanks for the back and forth so far, but I am not done yet).

We have never had the situation you describe; meaning, where we wanted to get rid of a tenant who has violated other than the payment clauses of the lease. I can visualize it. It is not far fetched mind you – it just has not happened to us. So far, every tenant with those ‘other’ problems also has payment problems.

Now, let me give you the other side of the coin in favor of a yearly lease.

We HAVE HAD 2 tenants who wanted to get out of their lease early (before the year was up) and paid to do so. We have a 60 day notice clause. I do not remember the particulars, but in both cases they paid ‘early out’ fees of approx. 2 months rent, plus all of the rent they owed. We made out like a bandit! That goes away if you have a MTM lease.

Additionally, we are aware of at least 4 tenants who called to attempt to get out of the lease early and after having the lease re-explained to them, particularly the above referenced clause, they stayed through the whole lease and left after the full year was up.

In each of the 6 cases mentioned above, these were ‘good’ tenants with little to no payment issues before the above happened and through the process of the above.

We bought a 2 unit with a $4k water bill! It was attached to the property even though the seller (landlord) had a tenant pays clause in his lease.

We did not have to pay it, the seller did at the closing table; but, it is a scary thought.

In our area water bills must be in the owners name and sent to the owner address. In one of the municipalities it is quarterly whereas the others are monthly. Thus, to have the tenant pay it is usually done as a reimbursement as the owner needs to pay the bill within a deadline and the tenants are not that fast.

You are debating oranges and I am debating apples.

I like your points a lot MikeOH and PNW. I will need to ponder.

What I am saying is that in either case, we need to follow the eviction rules and wait the required days, see a judge, wait some more, etc. to get them physically out. All of that is exactly the same in either case. If I am reading you right, you are narrowing it down to winning the case in court by making it crystal clear and requiring easy to obtain proof (are they still there?)

I would probably accept the money as advanced rent.

This is what I would consider and why.

What is my likelihood of wanting to evict them because they broke our lease on terms other than payment?

It will be much more difficult to convince a judge to remove them from the property if they have paid in advance. Thus, if they break any rules of your lease (be it: pets, waterbeds, drugs, loud parties, etc.), you will find yourself in a bit of a dilemma.

Having said that, you already have a track record with them, which does not guarantee future behavior, but gives insight into their personalities and normal SOP.

I am now more clear on your point, but I still do not 100% follow your logic.

Let me try it this way:

Hypothetically...

If I offer a low-income tenant a yearly lease

And you offer a tenant next door a month to month lease.

Both tenants throw big drug-infested parties and do other unsavory things. Let us say, for sake of conversation, that they DO PAY THEIR RENT, just to take that out of the equation.

What makes you think that your MTM lease will get them out faster than my yearly lease? If they say they are staying, both of us still need to go before the judge to get them out (same judge in my hypo example). I have a great lease that says no drugs and lists out other unacceptable unsavory behavior. At that point, your MTM lease will have expired. Either way we both go through the eviction process and both likely WIN just to get them to vacate our premises.

I have been more busy lately than I normally am so I toltally missed this thread as it unfolded.

I found it enjoyable and educational. Thanks for hanging in and posting your thoughts. Sometimes a 'back and forth' really helps the reader's mental juices to flow.

Thanks to all.