All Forum Posts by: John West

I lease optioned a property to my tenant. The option is expired, but tenant still wants to buy. Agreed purchase price was $100k, but tenant can’t get approved for that much. Tenant has secured a hard money loan for $75k. He is willing to pay off the remaining 25k but obviously whoever is giving him that $75k is going to want title. He agreed to pay, but I don’t know how to structure that. Even if there was another note on the property, I don’t think that would end well. If he gets foreclosed on, I probably would never see a penny of the $25k.... I had a real estate agent walk through the house and want to list it at 125k. Realistically I’m guessing it will only go for 110-115, which after commissions won’t be much more than the 75k + 25k. I’d rather sell to the tenant cause I’m a little worried of what he/she might do to the property if I evict. Maybe that’s an irrational fear. Maybe the first scenario is crazy. Any advice?

Welcome Cameron Avery . The podcasts are a great source for inspiration, and the forums a great place for follow up questions. I started with a recommended reading of Rich Dad Poor Dad and listened to tons of podcasts. I have gained a ton of knowledge in the last year and am currently closing on my third multi-family property and have BP to thank for a lot of that.

I did exactly this @David J. I bought a property all cash for $50k at auction. Within 2 months I had taken a mortgage out on the property (cashed out) for $60k. The key is finding the right bank.

Most banks will only want to give you a mortgage of 80% of purchased price. They will claim that there is a 1 or 2 year seasoning period you have to wait for before getting more out. Thanks to BP I found out that not all banks go by this. Call all your local banks. It took me 7 or 8 calls before I found a good one. What you're looking for is a "portfolio" lender. Portfolio lenders keep all of their loans in house and don't sell them off to major institutions, therefore don't have to follow all of their rules. 

Small banks/credit unions with 3 - 10 branches are your best bet.

I'm certainly no expert, but if I can help in any way feel free to private message me.

Thanks for your input @Jeremy Roberts. I offered 179k. I'm almost next door and know I can turn the park around. If I discovered anything major during due diligence, I could always adjust, but the owner still didn't bite. I'll keep at it. Thanks again.

That’s what I was thinking Thomas S. Thanks for affirming my plan. Ryan Groene I might entertain this idea, but I’ll definitely have to find a partner. The other park is 25 lots and completely full. It’s worth a lot more and I’m guessing he thinks it’s worth double what it actually is too. Part of the problem is what he paid for it. I found the tax card online and he paid way too much and on top of that let several lots go vacant in the meantime.

Thanks for your input @Ryan Groeneand @Jonathan Pflueger. I had a face to face with the owner. It was terribly run. He has a thriving business and another park. It appears he just throws everything in together. He didn't know any of his numbers aside from what lot rent was. Everything else was just guessing. I ran the numbers this, that and the other way. I know there is a ton of upside if I can buy the property for what its worth right now,  but at the end of the day he has unrealistic expectations of what it is worth.

I’m not going to condone or condemn, but here’s my two cents. Ultimately, I think you have the ambition and mindset to be successful. Just take a step back after each investment and make sure it’s going to cash flow and align with your plans the way you had planned. If you set aside money for vacancies, capex, repairs etc... a good investment in Maine here can yield $100/month/door. If it’s a grand slam $200. Given the latter and you live in one of the 4 units, that’s $600 a month in cash flow. Is that enough to cover your truck payment and help you pay down your student loans? Lastly, do you have realistic expectations for cost of construction? I didn’t until a few weeks ago. I was planning to build a large triplex for my family to live in. My family and I to live in the oversized first unit and the other two to pay the mortgage. After getting the first quote of ~$600k, I’m being forced to take a step back and reassess.

I have just taken my first section 8 tenant this past month. My small time property manager has dealt with the local housing authority and spoke highly of the program. The inspection failed first time because of a vent that wasn’t covered, a couple of non-grounded outlets, and some chipped paint. Next inspection everything passed. Both inspections happened w/in a week (though I’m sure timing is highly area dependent). I have a property manager who took care of everything so all of this was very seamless to me. Total rent is $600 for this unit. Section 8 is paying ~$450 and tenant covers ~$150. I was reading another post from someone regarding section 8 and he was saying a tenant is a tenant. A section 8 tenant isn’t going to take better or worse care than a tenant with a similar income level that doesn’t have section 8 subsidy. I know the tenants can lose their subsidy if they don’t pay their portion. Around here the waiting list is over a year I believe. Logically, I can’t imagine a tenant not paying or taking care of their unit... but we all know tenants aren’t always logical. I think I’ll sit on this building a few more months and see how it goes, but I’m already thinking about getting more buildings and getting them inspected for section 8.

Thanks everyone. This has been helpful.

Thank you @Gulliver R. That's helpful. So you pay 100% of the water/sewer bill? Do all of these expenses add up to about 40% of gross revenue?