All Forum Posts by: Kathy Henley

@Tzvi Ausubel  Now you are more aware of what is in your future.  Do you want it?  Sign and say yes.  If you want help, write a list of the specific items that showed up in the report that must be repaired by close, in your counter offer.  It must be balance with what you know the building to be worth.  If it is already way under market or at market value, trim the list or not. The sellers will negotiate some more because the conditions cannot be a secret to the next bidder.  

@Jeff Irwin   You are off to a great start. There are always more deals. 

Evaluating on paper is excellent practice. Get qualified by a lender during the down time. Talk with real estate agents, they know the local trends and continue to watch the MLS yourself. There will be a moment where you recognize a deal the first day it appears. Make the move.

@Alex Ballas Since you not talking about a lot of money for his services, a short description of the services that you are paying for, and how often, would help  you both understand each other. Signed by both of you, this becomes a contract. Your general business insurance may be enough to cover you for a negligent act, but not a willful act.  Ask your agent for clarification, since it is better add coverage than to be under-insured.  For bigger jobs, anything involving manly tools, like saws or tile cutters, any work that could cause water intrusion, ask your laborer to carry general liability insurance to cover him/herself and his/her work.  Contractors can buy a policy by the month.  I work in commercial management where the tenants are required to carry and show a certificate of workers comp.  If an employee is injured on the job, a company could go belly-up taking care of an injured employee.  Plus it is required by law.

@Matthew Brenner  My husband and I have always pooled our money for living, we do the same in investing--50/50 ownership.  Our first 3 properties have been purchased in our names.  The percentage questions are there, when one fills out papers for the tax man; so far, it is 50/50.  BUT, I work for a group of investors who own lots of property.  They randomly buy in one name or the other, depending on the deal and the financing.  Some are partnerships with other people than their spouse.  As the empire expands, a variety of financial structures get the deal.  

@Tim Romanowski  Ouch. What does the lease say?  We spread the CAMS out over 12 months, so the tenant is paying into the kitty all year long.  To reconcile once a year, the true maintenance costs are added up and the tenant either gets a credit or a bill.  The bill is payable with the next months rent.  On the same rec report is the coming year's estimate, divided by 12 months.  This first month's figure is also due. The forward year may be different that the last year's, based on the estimated rising costs.  The lease lays out what specific repairs and capital expenses will be passed through.  You probably know all this.

In your situation, there may have been negotiations and owner's approval for your taking over the lease.  Are there additional terms in this document? If the case had been that there would be a credit due, would the previous leasee have been eligible for 9/12's credit?  If you missed this meeting, call one now.  The landlord wants his money, as it was promised in the lease, and you and the original leasee must work it out.  Our company would accept a payment plan.

Thanks everyone.  I presented both offers, one without the vacant clause and the other, a higher offer, with the clause that the lower unit be vacant at closing, a 45 day closing.  I considered the value of the empty unit and the time and cost of someone moving out.  Neither offer was accepted.  The tenants in the first floor unit are friends with the sellers, hence the below market rents; that is why the building is for sale.  There happens to be another party bidding.  Our offers were very similar but the sellers signed with the party who will handle getting the long-term tenants out.  I could not top their offer and it still be a deal. 

The building has potential to cash flow IF the units are updated and rented at market rents.  May I include a request in my offer that the first floor unit be delivered to us vacant by close?

Welcome @Robin Blevins  I work in commercial property management in the Bay Area.  It is an exciting field because the numbers are so much larger than residential!  Please join up with investment meet-up clubs.  We need you!  

Are you investing? You will go far with your experience.

@Himanshu Jain

Not so fast.  Did you make your goals?  Were the estimates reliable?  Anyone with such thoughtful planning must have the numbers.  Please share!

@Tom Wood  What are the neighbors doing?  What are your customers expecting?  In my St Louis rentals, all in the same area, we refresh the kitchen and bathrooms with the same Cherry plank vinyl flooring, purchased at Home Depot.