All Forum Posts by: James Mc Ree

@Stephanie Mccolaugh You are relatively safe closing in a few weeks with regards to the eviction moratorium because you probably won't have a tenant in place until around when the moratorium ends. The risk is the moratorium keeps getting extended. Do great screening on your tenants to mitigate eviction risk in general and consider using short term leases for further mitigation.

I agree with @Nathan Gesner. Everywhere your tenant goes is a business that says, "The price is..." and it has nothing to do with her situation in life. Tell her the rent is... A tenant that is always on time with rent payments doesn't look like a tenant who is struggling. She might be telling her friends what an awesome deal she has living in your place.

Now is a perfect time for tenants to be seeking rental assistance with all the COVID aid out there. If you feel guilty, you can google for local rent aid programs.

I just started looking into DSCR loans and am seeing 5% - 6% rates from Lima One and LendingHome. Is this typical? Naturally, I am very interested in the 3-4% rates mentioned above.

My lending product/profile is PA properties, 30 year fixed, 25% LTV, 760+ credit for mortgages around $150,000. I would prefer no escrow, but haven't found that yet.

I see 3 near term drivers of supply increases coming:

1. Foreclosure moratoriums are/have ended creating a wave of properties being auctioned and flipped.

2. Eviction moratoriums will (may) end June 30. Evictions may lead to weary landlords selling their properties.

3. Workers who changed jobs and didn't move, but otherwise would have, may now need to move as work goes back into the office.

It seems that all 3 of these were pre-pandemic drivers of supply that effectively stopped in Spring 2020. As foreclosures, sheriff sales, evictions and moving for the new job all return to normal, do you think we will see a surge in properties for sale that might drive down prices, if only temporarily?

Your rent seems a bit high for a 2BR place, especially if it is becoming unfavorable due to the construction. I don't know the area, so check your asking rent to be sure it is competitive. Consider pricing a little under market to get more interest. For example, if you price at $1,200 instead of $1,300 and that makes your place the cheapest place around, you get a set of applicants to choose from at the cost of 1 month's rent ($100 x 12 months). You can then raise the rent for month 13.

Reach out to your prospects who saw the property to see if they have further interest. If not, ask why. That feedback is likely to hold the answer to your question if you get prospects who are willing to share an honest opinion.

Regarding the variance, consider asking the city if they would allow you to demolish the current building and build a new triplex. They should say, "No, unless you get a variance." With that in mind, you apply for the variance to just that. If granted, you now have permission to rebuild, but you don't have to demo/rebuild. You may have to do something to freshen the variance every 5 years or so as some municipalities expire unused variances.

This approach will have a cost to it. You will need to hire an attorney, an engineer to draft some plans and take time. Maybe you can get the seller to compensate you for your expense. The end result might be what you are looking for, but it is not clear if it would be worth it.

The buyer would have the option to end or renegotiate the deal since the information presented describing the property was materially incorrect.

I disagree that it would be obvious to the buyer that a property is 1.5 versus 2.5 acres. An experienced real estate investor could possibly do that, but there are many properties where the seller represents the property line as "about 100 feet or so out in the woods, past the fence" only to learn their actual property doesn't extend out into that open space. Likewise, a typical homeowner moving from a city setting to suburban with only a 20 minute walk through of the property could easily miss the actual lot size since virtually no one does physical measurements on a walkthrough.

You can accomplish this through the terms of an amended lease. You want to create a situation where tenant A can have a dog, but maybe not your other tenants without explicitly saying so. Your pet addendum could have clauses like these (figure out what works):

Tenant is permitted to have 1 dog of {your qualifying characteristics here} in exchange for a non-refundable pet fee of 1/2 month's rent and the tenant's agreement that dog damage does not constitute normal wear and tear on the property, provided that:

1. Property's flooring has not been replaced in the last 4 years.

2. Tenant's tenure in the property is 48 months or greater.

3. Tenant paid rent consistently on-time {or 90% of the time} for the past 24 months.

4. There have been no police, municipal, legal nor maintenance complaints against tenant for tenant-responsible maintenance or behavior in the past 12 months.

Documenting your pet policy now will allow you to flex like this and you can always change your pet policy in the future.

Your rationale here, should you need to defend it, is your pet policy is flexible but protects new flooring (#1), requires a profitable since the pet is likely to do damage (#2, #3) and a tenant who is not a p.i.t.a. (#4); uh, I mean who honors the lease and is well behaved.

Prepaid 1 year in advance looks wonderful if all your other conditions are met. Assume that is in the bank.

Focus on month 13. Ask your tenant for the plan after year 1 to determine if she will still qualify. She might not be able to show you recent work history, but could convince you she has marketable skills and could earn enough to qualify. Alternatively, maybe she's a retiree and can point to savings. You might be able to work something out where year 1 is pre-paid and year 2 is escrowed and she gets it back if she moves out; otherwise it is used for rent. It is probably unreasonable to plan past year 2.

Getting a co-signer would be ideal.

The lease is the governing document. It states what the tenant pays for. The deal you made is to charge for the front end (water supply) and not the back end (sewer). It doesn't matter that water flows into the sewer.