All Forum Posts by: Michael Dake

23 fine residential income properties including 6 duplexes and 11 single family homes all located in fast-growing North Alabama. This is a well diversified portfolio with properties in Cullman, Athens, Hartselle and Decatur. 

These properties are newly built and will require little to no maintenance in the foreseeable future thus offering a very stable cash-flow with very little head ache. They are also well located in areas that are experiencing some natural appreciation in value, offering the new Buyer an option to sell some of the homes separately to increase their Internal Rate of Return on this investment. In addition, the Rental Market is very strong in these areas, with occupancy consistently in the 96%+ range. 

We can predict a very high occupancy on these homes going forward, with upward pressure on rents that should allow for the possibility of rent increases up to 3%. Financing is available with 15-20% down, rates from 4.25-5.25%. We can help a Buyer secure financing for these homes, as well as professional property management if needed. Average rent is over $1225/month, and a typical property averages over 1350 sq.ft. 

These are new homes built by a prominent local building known for his high quality construction. At this return on investment and condition of these homes, this is a strong BUY for Investors interested in these growth areas of Southeast U.S. 

PROPERTY HIGHLIGHTS 

• 100% occupied 

• 8.0% cap rate 

• Likely 12% cash-on-cash return Year One 

• Rents should increase between 1.5 and 3% yearly, on average 

• All properties are newly built brick homes with interior upgrades 

• Internal Rate of Return on a 5 year Hold Period sits between 25 and 30%

Contact me to schedule a review of this outstanding portfolio.

WeGoLook dot com offers a mobile notary service in many areas of the country.

As I understand it, the comment "It's legal to have a person followup on leads" about property in Alabama is only true when that person is an active Alabama RE licensee under a licensed broker at a licensed office. (Not one but three licenses are required for compliance in most cases.)

Showing property owned by another or taking any action to "follow up on leads" beyond taking messages is licensee activity in Alabama.  The question "Can a non-licensed person return calls from email leads?" is a routine exam question here.  The answer is No.  

The Alabama Real Estate Commission (AREC) is always happy to answer questions in advance about whether a proposed course of action complies with Alabama RE license law.  Conversely, AREC is VERY strict about enforcing the law when the actions are discovered after-the-fact and do not comply.  Rather than rely upon assertions on BP, I recommend that anyone interested in this opportunity call AREC to confirm that this work can be done without a license.  Violating license law before obtaining a license can disqualify a person from later getting one.  Alabama is a buyer-beware state for RE transactions, but that does not make it a "proceed until apprehended" state for RE brokerage.

I am an AL RE licensee.  

Find a commercial brokerage to help.  That sort of property should be attracting national attention as investors in high-tax states look to earn income in lower-tax states.

Standard documents that change hands for a commercial transaction are P/L statements, rent rolls, existing leases and management contracts. Leases normally survive sale; management contracts are normally negotiable for carry-over. Is this an MLS transaction (that is, are you using a NAR-affiliate-sponsored contract that is geared to single family homes), or do you have freedom to write a contract specific to this transaction? The latter is preferable.

I am an AL licensee.

Find a commercial brokerage. Search "SVN Difference" on Youtube to get a view of commercial brokerage. The mindsets of residential and commercial brokerage are sufficiently different that being in a commercial setting is worthwhile. You may still have options to join a NAR affiliate and have access to the MLS (our office is not NAR, but some are), if that is important to you.

Keep in mind two things about title insurance and then ask yourself a few questions:  

1.  It is insurance, which is defined as a financial product that protects against unforeseen future losses that would exceed your ability to absorb.  That is, if you can afford to replace the  asset covered by the insurance, an insurance policy may not be needed.  (It would probably be a waste to insure a flip phone purchased from a gas station, but it would probably be a good idea to insure a brand-new iPhone that you borrowed money to buy.)

2.  The type of deed that documents the transfer of title to the land determines what the deed grantor is warranting to the grantee.  A trustee deed generally warrants only that the trustee did not take any action to impair the title and that the trustee is not aware of anyone else impairing the title while the trustee held it.  That limited warranty is part of why trustee sales are discounted: the title is less valuable because it has risk associated with it.  With a general warranty deed, which is the norm for open-market, arms-length transactions in most states, the grantor warrants that he or she has free and clear title and promises to protect future owners against any adverse claims arising from any prior fact, going back to the beginning of time.  That is a pretty valuable statement.  But that is likely not what your deed says.  You likely have a deed that says "I didn't do anything and I don't know what happened five minutes ago."  Anyone you subsequently sell to is going to want a general warranty deed from you, but you have no idea the "hidden history" of the property (deeds do not have to be recorded to be valid, and title searches only cover the recorded records).  That is the risk you face relative title as a future seller.  As an owner, you face the risk that someone with a prior deed or other interest may appear and challenge your ownership/rights.  You cannot go back to the trustee, since that deed does not warrant anything.

So, what is your view of the risk involved?  Can you afford to lose your investment to a prior claimant?  Can you afford to lose market value or other selling problems in the future due to a cloudy title (trustee deed)?  Can you afford the legal fees that might be involved to defeat a challenge?  What is your risk tolerance?  What is the title insurance premium and what does it cover?

Personally, I buy title insurance on every property I buy.

I am an AL licensee.

I would ask the seller's agent, in writing, to confirm delivery of the offer to the seller.  I cannot find, in a quick search, whether a FL licensee has an affirmative obligation to deliver all written offers to the seller (I assume the offer was in writing), which would be the case in AL.  The best I can find in two minutes are positive obligations to be truthful in all matters and to handle earnest money properly.  Your statement of the facts does not address a deposit.  FL licensees can also be charged with failure to comply with the terms of a listing agreement, but you would not be privy to those terms from the buyer side of the table, but I would expect that an obligation to present offers would be included there, if only by inference.

Sellers are not, in general, obligated to respond to offers if they don't want to.  Sellers incur obligations, through their agents, to handle deposits properly, so following the money, if present, will help answer your concerns.

Just ask the seller's agent.  The answer is required to be truthful.  Will be interested to see how this works out.

I am an AL Licensee.

@Reese Thompson, 

1.  "Just because it's the majority of the way things are done doesn't mean it has to be done that way."  True.  But people's expectations are normally founded on what happens most of the time.  Most of the time, when a buyer makes an offer on a house, the seller does not counter with a price over the advertised price because brokerage services are involved.  Most people expect sellers to have set a price that covers normal costs of the transaction. Your cousin is attempting to do something that is encountered a minority of times.  He should not be surprised when it doesn't happen the way he expects it to.

2. "If the seller doesn't want to pay for having agent representation, he shouldn't have to pay for it."  True, again.  No one here is saying that your cousin, as the seller, _has to_ have or pay for sell-side brokerage.  The majority of the comments have been that a seller who opts out of sell-side brokerage is implicitly or explicitly accepting frustration in lieu of cash payment.  Most of the posters have given the opinion that this is a bad trade-off.   My point was that the seller should not begrudge the buyers having representation.  There are two sides to the transaction, each of which has potential pitfalls that real estate licensees are paid to help avoid.  Each side is distinct.  At issue in this thread is buyer representation.

3.  "If the buyers are wanting it, then they should pay for it, not the sellers."  The buyers are the ones bringing the funds to the table, so they, in fact, would be the ones "paying for it."  As an example, the buyer brings the funds that are used to pay off the seller's loan.  Very rarely do sellers bring funds to the table; all of the money changing hands originates with the buyers.  The point here is that your cousin did not anticipate this cost and price it into the deal.  (If he had a seller's broker, that broker would have told him this.  By not paying a sell-side commission, he chose to pay with time and frustration instead.)  If a buy-side commission were priced into the deal, the buyers would have paid it as part of the agreed price, probably without batting an eye.  Yes, the money would pass through the seller's hands, metaphorically speaking, but the funds would not originate with the seller.

In your reply to @tim puffer, you assert that "buying/selling a property is not rocket science."  Also true.  It is a complex legal transaction that normally involves significant emotional and financial risk and is heavily regulated by state and federal governments.  Complex things normally attract specialists.  Real estate is no different.

You said "involving agents increases expenses to buyers and sellers."  Not true.  Involving real estate professionals allows the buyer and the seller to obtain brokerage services that are denominated in cash versus time, effort, and frustration.  Transactions without real estate professionals are not inherently better transactions that do not impose transaction costs on the participants.  They are not like LED light bulbs that generate light without heat.  They simply do not have dollar amounts associated with those costs.  

You said "That's why many of the investors who've done well have gotten their agent's license so that they can reduce that expense on something that anyone can do." Investors who become real estate licensees incur costs. They incur the cost of licensure and MLS membership, at a minimum (which cost considerably more than you probably think that they do). Again, obtaining a license to eliminate case-by-case, sell-side commission costs is simply a transfer of the cost from per-transaction, cash payments to ongoing payments of time, effort, and, yes, cash. It would be interesting to see the balance sheet over time. They probably do come out ahead, eventually. But the cost is still there. Investors who obtain real estate licenses should probably not attempt to handle both sides of transactions in which they have a financial interest as the seller. Most states require disclosure of licensure status when a licensee is a party to a transaction. Done correctly, these investor/licensees price buyer representation into their asking prices.

BTW:  Anyone can do rocket science as well.  With a real estate professional, at least you are assured of some level of instruction in the subject matter and a license (which exists to protect consumers).

And if you can find a lazy appraiser in the era of TRID, take a picture, as that is an endangered species nearing extinction.

Paying real estate brokers is a normal seller cost of doing business and is normally built-in to the asking price (not a list price in a FSBO, since there is no "listing"). FSBO sellers frequently make this mistake and then react badly to buyers who have brokers. That frustration is part of the DIY opportunity cost FSBO sellers accept, even if unknowingly. Just because the seller does not want the protection of brokerage services does not mean that the buyer should sacrifice that protection as well. Anyone selling a FSBO should be glad that a real estate licensee agrees to bring a ready, willing, and able buyer to the table and pay the broker for that service. Most don't want the hassle. Trying to "educate" buyers that they have to pay the broker doesn't work too well.

Posting an asking price that does not include the potential for brokerage costs makes about as much sense as posting an asking price that does not cover the loan pay-off.  Include the potential costs and then negotiate a sale once a buyer appears on the scene, with or without a broker.