All Forum Posts by: Jon Sheffield

Long story short on June 22, 2016 I finally closed on my first multi-unit property in South EastD.C. for my fellow Washingtonians it's in ward 8 near the st. elizabeth's campus. It was a very long process and I learned some good things along the way but also realized how much I didn't know. I have to occupy the building due to one of the programs I used, but at the end of the day out of pocket for a 418k property was $5,681.

Thanks to Tony Taylor (sorry couldn't figure out how to tag you tony) my realtor he's on bigger pockets look him on NOW, he really worked his tail off to get this deal done. If you are an experienced investor or first time Investor Tony is the man, I will explain why in more detail below.

Now For the long story, this is my story and process I went through for the multi-unit property:

I started my search back in October 2015 after dragging my feet for a very very long time how long you asksince 2007, Yikes. You can get very comfortable in a W2 job, anyway I digress back to the process. I did a general search and found a realtor; this realtor who shall remain nameless wasn’t bad but was average. When you are looking for a team do you want above average or just ok. The realtor contacted me on the phone told me there were no multi units on the market and would send me an email when some came on the market. If you are familiar with the DC market multi-units now are staying on the market less than 5 days. I didn’t know that at the time, so several weeks later when I received an email from the realtor with about three choices which weren’t even in my search criteria I was highly disappointed. Now this continued even after a phone call to the realtor that what he was sending didn’t fit my criteria.

So fast forward to the point where I met Tony Taylor the experience was night and day. I met tony in person we had a discussion about my criteria he told me about several programs I could use as a first time homebuyer to reduce my out of pocket cost, where we would be looking and why, how he would use direct mailing to reach owners off market to get a property under contract before hitting the MLS. The road was long and frustrating I put in about 15 bids on properties and was outbid most of the time the other times there were other issues with the seller. Now to the property that I have purchased tony found this investor from a house that he was renovating next to tony house and through his mighty investigation skills found out the investor was selling a building in my criteria. We saw the property I liked it tony explained the renovations that would occur in ward 8 and what was actually happening in that area at that very moment. Tony broke down the numbers explained my options and let me make my decision. We put in the contract and it was accepted, side note I found out later that someone I know put in a bid on this property. Their offer was way below what the owner purchased it for about three years ago. They were instructed by their realtor to do that, not a bad move if it's a buyers' market or if the building was a mess but neither scenario's applied here.

After the contract was accepted there was the home inspection which was about $550, appraisal which was about another $500, earnest money deposit at $5,000 and the purchase price set at 430k. Remember these are Washington D.C. numbers you area will vary, through home inspection and seller credits the purchase price came down to 418k. The major reason being the roof was past its life expectancy, but three of the four units were rehabbed. The home inspector couldn’t believe that the building was in such good shape, his exact words were the last couple of multi-units he inspected for purchase needed to be condemned and had no soul. There was a major hold up due to the loan officer which is a longer story, but on June 22, 2016 we closed the deal.

I have to occupy the building due to one of the programs I used, but at the end of the day out of pocket for a 418k property was $5,681. If I hadn’t received down payment assistance or seller credits towards closing which was negotiated by my realtor tony I would have had to come out of pocket with about 30k. That 30k includes down payment, closing cost and earnest money deposit. I have to pay $700 a month to ensure I have enough in reserve, although the rents cover mortage, insurance, taxes, home warranty, and 3% for repairs. This is was my experience I may have left something out just ask if you have questions. Thanks to everyone on bigger pockets and to Tony Taylor you guys rock.  That's tony on the right me on the left. 

 So true russell it's definitely a sellers market. Thanks I wasn't sure of the number of units for rent control.

DC has a program called DC open doors that will give you down payment assistance if you haven't owned a home in the last three years. It also allows you to buy a SFH, triplex, 4plex.

The same with me I would get outbid by a couple of K that was my experience. 

Send me a message and I will send you the realtors info.

Also awhile back in the podcast there was a landlord from DC I believe it was episode 66 with Michael Blank gives some good tips.

 Look at my post above Rao

From when I posted about a year ago I started really looking for a multi-unit in DC last October. I am about to close this Tuesday so it has taken some time. As for SFH and renting in DC the rules are the rules, although if all you have is one unit you can charge what you want for rent. I believe once you have two or more units there is a cap on how much you can rent units for.

If you aren't familiar DC is very tenant friendly the eviction process is long and taxing with very strict timing and rules. Officially if you rent even just your house out you need to have a basic business license, get the house inspected to comply with DC. You can choose not to follow the official process although if your tenant files a complaint with DCRA you will have serious problems. 

As for area recommendations to look for houses is based on your budget. I will suggest you pick an area and contact owners off market houses on the mls last only days with multiple offers. This is easier said the done.

I would suggest that you work with a realtor if you aren't fimilar with DC. I can give you my realtors info if you want.

My last bit of advice is to keep at it just like with many things it comes down to money and structuring the deal, don't be discouraged about the number of bids and amount of time. I put in about 20-25 bids before I got one good one and turned down a couple not so good offers. 

@sidrao Is this your first time purchasing a home in three years?

Returns are good in DC there are a lot of investors at this time your joining the gold rush not late but well after the start. 

@John Fabros Just ran into a topa issue as well on the last building I had I know your pain. I wanted to wrap the closing cost into the loan, but couldn't because the current owner bought out the tenants topa rights. Meaning instead of asking if they wanted to buy he offered them money to leave and give up their rights to purchase the building. D.C. is a anomaly and can be very difficult to deal with from the tenant aspect. Although it is worth the headache in the long run. Good luck to you my friend

@Sara N. I'm not sure of the exact cap rate giving the high demand of d.c. properties I believe it would be fairly high due to the low NOI of the 4units. Typically the owner pays water and the tenants handle everything else utility wise. Beyond that you have your normal maintenance, taxes, property management fees etc. But I'm really out of touch on the cap rates for DC, hopefully someone else can give you a real solid answer.

Ok, so I have put in a contract on a 4-unit all with 2 bedrooms and 1 bath in Washington, d.c. and I am very excited. There are currently two tenants in the building and I am requesting the rent roll from the last twelve months etc. My question is once you have purchased your property with tenants what should you be doing before the contract is accepted and after the contract is excepted. Should I be sending letter to the current tenants about the change of ownership, what do you do to set the tone for your tenants such as sending out rules and guide lines. What are some things to watch out for, I know this is all general just trying to pick everyone's mind.   

I know one thing that I haven't seen talked about is closing cost, the property I am purchasing is 420k and when you talk about a 3% down payment plus possibly is 3% for closing cost. I say possibly because most of the time I believe sellers pay closing cost, but if they don't pay it you have to pay it.  

I currently setting up a LLC with an attorney, and have a cpa. If any more information is needed just let me know

@Matt Medvene Thank you for the info I will give them a call today.

Does anyone know of, or used an attorney in the Washington DC area. I'm want to discuss business structure and have them review lease agreement, to ensure I'm not violating the dc tenant/landlord law as well as any other laws. So I need help with setting up business based on my goals as well as reviewing documents. Any recommendations are appreciated.