All Forum Posts by: James Mc Ree

I would paint white instead of black if you are going to paint.  A black ceiling will make the basement darker.  Maybe that is just my preference.  One of my favorite restaurants has a black spray painted drop ceiling.  It looks nice in a restaurant as a "night sky" kind of look.  I am not sure about a home's basement joists.  I prefer the natural wood color, but paint might be better if it is unsightly.

Jim.

I think avoiding Section 8 clients is as easy as stating Section 8 is not accepted in your ad.  Section 8 requires an additional lease, inspections and has some limitations.  There is no requirement to accept it (to my knowledge).

Section 8 is a great program, IMHO.  3 Of my 4 investment properties house families supported by Section 8.  All 3 are single mothers with kids.  2 Are working jobs.  The 3rd is disabled and unable to work, but one of her older children is working to support the family.  I've had no notable issues with any of them.  The only notable tenant issues I've ever had came from a tenant who was not supported by Section 8.

I agree with the prior comments that focus on tenant screening for success.  I would add regular communication and follow-up to also ensure success with any rental: check-in from time to time to make sure everything is OK.

Jim.

I have Pennsylvania zoning experience, this might not apply.  Good prior advice: Lawyer up.

What does the new STR ordinance require you to do and are you doing it?

In PA, a pre-existing use will be grandfathered in which would mean you might not need to comply with the new ordinance if you can show you were operating legally prior to the issuance of the new ordinance.

Ask your municipality (mayor, city manager, board, etc) what a tie means means?  If it was a budget vote, for example, the budget probably doesn't pass.  This is different.  The municipality needs to approve your request or deny it for a specific reason, such as not following a specific ordinance requirement.  In PA, failure to do so within a specified period of time means a default decision of "Approved."

Once you are denied, if that is the case, the local courts open to you as an avenue of appeal.  This is where in particular you will want to lawyer up.  Politics are out (or should be).  The court will decide your case only in the context of the governing law.  Your neighbors could register as parties to the case, but really can't interfere just because they don't like what you are doing.  This might also be the right approach for a tie vote in which the municipality can't state what a tie means.  Such a lack of explanation is probably good news for you as courts often decide such matters in favor of residents.

Keep in mind this is a PA perspective.  TX might be a little different.

Jim.

There are at least 2 types of fee-like expenses: government and everything else.  Government is going to include taxes, U&O inspections, recording fees, etc.  They are typically split between the buyer and seller.  Everything else can include real estate commissions, for example.  Those can be negotiated.

I would expect the firm will want you to pay them for finding you a buyer.  You can make that a negotiating point if they ask you to pay them (thanks for the lowball offer - your buyer can pay your fee; thanks for the awesome deal - here is your fee!).

Jim.

Talk with your other neighbors to learn a bit of the history.  My guess is this has been an ongoing problem.  Call the police if the neighbors tell you they have already spoken with the tenants, landlord, etc.  A visit from the police can be a wonderful thing to calm an unruly property.

Jim.

@Jeff Rabinowitz

I wouldn't recommend that pitch to a stranger like you at all (nothing against you - just someone I (and OP) don't know).  The OP said his partner was his mentor and a family member, someone with presumably a strong relationship.  My first suggestion was to ask what the lender wanted.  I specifically said said not to jeopardize the relationship.  We don't know the depth of that relationship so I gave a few options.  I think it is perfectly reasonable to a close family member.

Jim.

You could ask your potential investors what they need as a return for their investment.  As mentioned, 10-15% might be the professional norm, but you might be offered a family discount.

Your investor might say, "Pitch me!"  In that case, you could acknowledge that 10-15% is the norm and that you are asking if the investors can do better, such as 8%, if you have a strong pitch (ie. low risk).  You don't want offend and you do want to get a deal.  Remember that this person is likely to fund future deals and saving a percent now might come at the expense of future deal funding.  Think more "partner" than "lender".

Profit sharing may be something you could safely offer in conjunction with a lower interest rate if you were comfortable with that.

Jim.

Consider adding a rent escalator.  You don't mention if $350 is a market rent now, but it will probably be very low in 20 years.  You taxes, insurance, maintenance and all other expenses will go up which will impact the commercial value of your property.  Alternatively, factor it into your purchase price.

The lease should end if the tenant violates the terms of the lease, just like any other lease (failure to pay rent, follow your rules, etc).  You may have to evict the tenant, but that is your way out.  Leases continue with property sales - your future buyer will inherit this tenant.  The situation will be a feature if he is a good tenant paying market rent.

You might also want to ask for the establishment of an escrow account to pay the rent if the special situation involves a question of whether the tenant can handle his own affairs (or whomever is caring for him).  You could ask that it be maintained with a minimum balance to ensure the tenant is covered for at least the coming year or so and you could have automatic payments drawn on the account.

Jim.

Check out Consumer Reports for ratings and watch holiday sales for prices.

Jim.

You can certainly be an investor and an agent.  A lot of people are.

As an agent, you will have certain responsibilities to your broker and clients.  You will need to be aware of conflict of interest and follow the laws pertaining to CA real estate agents.  Beware of conflicts of interests, for example.  There's no issue if you are a real estate agent and want to buy a property, for example, but there is a big issue if you submit an offer on behalf of your buyer, then undercut the buyer with an offer of your own on the same property.  You can save some money and have better information access as an agent than non-agent.

I don't think you gain any more credibility as an investor who is a professional real estate agent than any other career.  The seller is going to look at the offer and care little about the buyer except for his/her ability to close the deal.  You may encounter resistance from buyers/sellers if they perceive that you have "an edge" in the process .  You may also get more requests for unfavorable prices because you are making money on the deal.

You might gain an advantage if you can market yourself as an investor friendly real estate agent.  That might help you build your network and gain some knowledge of opportunities out there.

Overall, my guess is that it is a plus, but I am not aware of any studies to show an effect either way.  There is a lot of content on the Internet about investing as a real estate agent.  My recommendation is to read as much as you want, consider all the input and just decide what will work for you.  You will learn and adjust as you go.

Jim.