All Forum Posts by: Oren K.

Justin, 

Sorry for your problems. 

Even if you could find the name of the person / company who did the work, it is unlikely that they will offer any warranty and even if they offered to 'fix' it, would you trust them? As to the seller of the house, unless there was some unusual language in the purchase agreement or warranty offered as newly rehabbed house, they have no responsibliy since I assume you had an opportunity to inspect during a due diligance period. That only leaves the inspector (assuming you used one). Even then, if the bad joints were all in the walls, an inspector will not make holes to check stuff like that.

From what you wrote, the tell-tale was the smell over time. If the place was un-occupied when you / inspector went through it, the smell was probably was minimal or non-existant. Even if present, in the 'excitment' / 'rush' of going through the place, it would be easy to miss / dismiss unless it was quite strong.

Unfortunately it is unlikely that you have any recourse other then to get things fixed yourself.

Oren

@Seth Borman - Not to be contrarian but rules of thumb (ROT) are a very efficient way of doing business. If it only takes 10 seconds vs 5 minutes you are saving ~97% ;). 

More seriously, I would challenge the 5 minutes assertion. It is not just the 5 minutes of data entry into Excel. In most offerings, the current rents are presented in the flyer / ad / posting. To get the next level of data (e.g. taxes, utilities, etc.) you often need to engage with the seller / agent which takes time; a lot more then 5 minutes.

ROT are used for all kinds of things in life. You will make mistakes at times with a ROT, like missing out on a potential deal, but people continue to use them because the find the trade-off worthwhile before they 'deep dive' on a property. A ROT should NOT be the only, final or even primary buying decision point but I do think it is useful as a starting point.

Happy investing,

Oren

Arron,

Owner has no intention of making good on the loan. 

Current occupancy just covers operations so they are basically milking it as they can and waiting for the axe to drop. The sooner someone does, the less the property will deteriorate.

If I can pickup the loan at a discount and they 'make good' (extreamly unlikely), I still come out ahead.

Oren

Alan,

Firstly don't believe everything you read ;), Yes over the long term, commercial multi-family does trend towards the mean of ~50% but New Build, Just Rehabbed, Older Buildings, etc, have very different operating characteristics. As well, you should not compare SFR or Residential MFR with commercial MFR. In an area of rising rents and everything else staying stable, by definition, operating expense ratios will decrease.

From all the non-residential commercial investment opportunities I have reviewed, expenses seem to hover in the ~25-35% range. I have seen legitimately better and worse by a wide margin as local area rents / utilities / taxes / building services each play a big role.

Also, from a landlords perspective, it depends on what gets passed on to the tenants (e.g. NNN (all), Modified Gross (some), Gross (none)). On true NNN leases, the tenants are reimbursing for all expenses including management and CAPEX; @Joel Owens - care to pipe-in.

Oren

Hi All,

There is a Project HUD property in Ohio market that I have my eye on which I know has lost its status due to continued low REAC (annual inspection) scores. I also know there is a mtg on the property, on which no payments have been made in nearly a year, and have the lenders contact information.

I am considering approaching the lender and offering to buy the note with the intention of foreclosing on the property. I know enough about its condition to ball park the work needed to bring it back online not as a Project HUD (that ship has sailed) but as 'good' C-Class property.

Having never done this before, I have a lot of questions;

- How to approach the lender

- How to value the note

- How long a foreclosure in Ohio will take

- Etc

Anyone out there willing to have a phone conversation or two to help me up the learning curve?

Oren

#notes #notebuying #foreclosure

@Kelly Wylde - As a Canadian, I am assuming since you have a Canadian Credit  Score, from an American perspective you are a Canadian Foreign National.

@Sam Shueh - Correct that you can get a US issued credit card or small line of credit from many banks that are used to dealing with Canadians (e.g. Florida, New York, basically Eastern sea board and border states) with your Canadian SIN or US ITIN. Unfortunately neither of these ID numbers helps with building a US credit score.

@Benny Gelbendorf - If your approach is BRRR, you are correct that many private lenders primarily care about the property and your track record. A good credit score would be a bonus assuming they even check. For a SFR long term hold, you may find credit unions / local banks that will provide "small" (<100K?) mtgs / loans at lower LTVs and somewhat higher interest but good luck with medium MFR (>10 units) / higher value assets getting anything better then what Kelly was quoted. If you do, let me know.

Nancy,

I don't believe that it is 'common' and I certainly would not accept this from my PM. Service companies work long and hard to land clients so, assuming they pocket 10% ($100), is that worth potentially losing a client and a long term relationship?

Having said that, I do need to push back a bit and ask how did you not know? My understanding is that the VAST majority of PM's send monthly reports. On one of the reports (e.g. Rent Roll, Tenant Ledger, Even Bank Statement) it would show that there is a growing balance (the late fees) or the deposit being made after the due date which should have raised a flag.

Unless no reports were sent (unacceptable) or there were not reviewed (also unacceptable), warning signs were visable after 2 or 3 months.

Oren

Kelly,

Welcome to the club of non-resident foreign nationals (NRFN)!

Yes all the problems you listed exist and more. The terms you were quoted are quite good from other stuff I have seen. What I found most frustrating was telling them upfront, in no uncertain terms, explicitly my status. They say no problem and request all kinds of info, you go through the song and dance and then... Oh you are a NRFN, we can't lend to you.... Ugggh.

Sorry to be the bearer of bad news but buildng a US credit rating; good luck with that. All the agencies work off of an Social Security Number (SSN). When you go to file your first US return (assuming you have not yet), you will be issued an Individual Tax Identifier Number (ITIN) which is not the same thing. To the best of my knowledge, the credit agencies do not provide scores for people with ITINs. If anyone has a solution to this, please please pipe in!!

Also, assuming you do NOT (many threads on BP on this) purchase the property in your own name (highly recommended), it will be the holding entity (LLC, C-Corp, whatever, etc.) that will be making the payments; NOT you. Even if the agencies tracked people with ITIN's, these payments would not show up under your name to build your credit.

Oren

Tony,

A lot of deals are priced as 'market' or 'unpriced'. IF they are a serious seller (big assumption), they should be providing you with all the info to do your own underwriting. In addition to the financials, you also need local area occpancy rates, local CAP rates, etc.

Are they giving you any information (e.g. Rent Roll, P&L, etc.). If they also are NOT giving you this information then there is not much to go on to determine an offering price.

Alternatively as I have seen others suggest, give them whatever number they want and during the DD period figure it out. Once you have the right value, re-negotiate. It is an investment of time and as long as your $ are not at risk, thats OK. You have to be somewhat 'seasoned' to do this as you are on a deadline to decide and if you miss something and go firm, you open yourself up to a world of problems.

I personally don't do this but there those that do.

Good luck,

Oren

George - So you will manage Retail, Office, Warehouse in a war zone ;)?