All Forum Posts by: Padric Lynch

I am currently purchasing a condo that has a studio unit and a 2bd 2bth unit, not metered separately. I’d like to bill the tenants back by number of people in each unit for water, and sqft for electric. The reasoning behind this: water usage is pretty much going to be an average amount per person, regardless of unit size, whereas with electricity, a larger unit typically uses more electricity: more outlets, gadgets, lighting, heat/air. This would be the breakdown:

Water

2bd 2bth unit (2 tenants) = ⅔ of the bill 

Studio (1 tenant) = ⅓ of the bill

Electric

2bd 2bth unit (1,000 Sqft) = 1000/1350 or 74% of the bill 

Studio (350 Sqft) = 26% of the bill

Here’s what's tripping me up. The current property management has warned me not to bill tenants back in this manner. They said that  they “cannot legally” do this because of landlord-tenant laws and the liability of tenants complaining, then suing due to paying an unfair amount of utilities because another tenant over consumed. However, I have heard other management companies using this method. Property is located in Eastern North Carolina in New Bern. Is this an atypical, legally loose way to bill back tenants? Or is the property management being overly cautious in their advice?

@Chad W. I was under contract when the condition changed. Vacant to rented.

@Max T. The contract did not have a Tenant Occupied Addendum, which was an oversight by all parties including myself. I'm not sure if the tenant has to abide by a request to leave, and I dont think the sellers have the right to remove him.

@Michael Noto What would be the specific contract breach that would allow me to walk while keeping my EMD? Just knowing that I CAN walk would help with renegotiating.

@Adam Schneider Thank you for the insights Adam!

@Max T.

I am currently purchasing a 2-unit condo, that includes a studio and a 2bd 2bth unit. Closing will be mid-February. The studio became vacant in December. My plan was to raise rents and have the tenants start paying for utilities. Unbeknownst to me, the sellers/property managers placed a new tenant in the studio in mid-January without my approval, locking in a year lease, with the same rent, having the landlord pay utilities. Is this grounds to terminate the contract? Now I'm stuck with a tenant that I know nothing about who is paying less than I had factored into my cash flow analysis. Additionally, the tenants of the larger unit will most likely view the rent raise and the utility payment as unfair since the studio will not be getting the same treatment. What can I do in this situation? Can I make the seller/property management rescind their lease? Maybe a hefty seller concession to offset the cost?

This is a property located in New Bern, North Carolina. If any one knows of any state specific laws regarding this please let me know. Thanks!

Has anyone attended? What did you ultimately take away from it?

Looking for MBA programs that are specific to building a business around real estate, such as property management, sales, development, etc. I would be utilizing my GI Bill benefits so the cost is negligible. With everything considered, would a general MBA or lets say an MBA specific to human resources (its a people business) be better than an MBA in real estate?

Miscellaneous expenses act as the "catch all". This includes aiding an insufficient CAPEX fund. Our big ticket items in the property are in good shape. Perhaps we need to plan a larger budget for the CAPEX, just to be conservative. Thank you for that observation @Caleb Heimsoth

When I first moved to Havelock, NC, I was eager to get my feet wet with my first investment property, after purchasing my primary residence. It was April, and I had remembered seeing a quaint, 830 sqft, 2bd/1bth townhome, while house hunting back in February. My real estate agent had told me that I was the only person to see the house, because the tenants only allowed showings on Tuesdays, every other week, from 11am to 1pm... I figured that with the "unfair advantage" I might as well make an offer. I had started low. The numbers would not have worked with any offer over $29,000. It was listed at $49,900. After a back and forth, the seller and I stalled out at $41,000. I was bummed, but started looking into off-market leads. At this time I found an awesome 1335 sqft, 3bd/2bth SFH, in a great location, that I have written about here. It was now the end of July, and my business partner and I were looking for a property. I had recently listened to a BP podcast that had mentioned a great tidbit on negotiating MLS deals. Brandon Turner had mentioned, that when a negotiation had stalled and the seller and he went their separate ways, he would make an offer again, several months later, if the property was still listed. I called my real estate agent and did just that. I re-offered at $28,500 and, after a brief back and forth, I was able to get the property under contract for that amount. Twenty days later, I was at the closing table, as we purchased it with all cash.

The same tenants that had made the property inaccessible were the ones we inherited. Although they were not at all abrasive during the purchase, we have decided to keep a close eye on their behavior as tenants. We are currently conducting turnover of the property management and stabilizing the investment. 

Financing for follow-on properties was a big deciding factor in purchasing the property with all cash. We will either refinance or open a HELOC to facilitate future deals. The cash flow will be subject to change because of the plans to tap into equity, but our criteria for performance will still be met.

I really enjoyed this deal from start to finish. The property was pretty much turn key ready, discounted, and my agent did much of the leg work. I wish it was always that easy! Additionally, it was an epic moment using the knowledge of an iconic BP figure, like Brandon, to jump start a negotiation back up and ultimately close on a deal. It just makes me more eager to learn and get after it!

The numbers:

Purchase Price: $28,500

Equity: $49,000 (No Appaisal) Comparables are 45k and 53k

Financed: $0

Improvement Costs: Projected $2,500 on tenant turnover

Property Taxes: $700

Insurance: $900 yr

Property Management: $58.33 monthly

Vacancy Rate (7%): $42 monthly

Repairs: $360 yr

HOA: $420 yr

CAPEX: $144 yr

Misc/Legal: $349 yr

Cash Flow:  $204 monthly 

Rent: $600

Cash-On-Cash ROI: 9%

Shoot me a pm or leave a comment if you have any questions or remarks! Thank you for reading!

-Paddy

After 3 months of marketing I received a lead from one of my bandit signs.  The call came from the sellers boyfriend, stating that the seller's house was full of "bad memories" from a previous marriage and that she was motivated to sell. I got in my car and drove to her house and we spoke about how I could help her move to Florida by purchasing the house. She owned the home free and clear so her price point seemed flexible. I gave a ballpark offer of 115k as I started my due diligence. After a couple of walk throughs, I determined that the house would need all new flooring along with paint to make it rent ready. I asked if 106k was reasonable. The sellers boyfriend didnt think so and wanted a better price in return for putting the new floors down. I denied. After an altercation and a couple of tough conversations, she agreed on 106k. A week after the contract was signed, the seller called and tried to get out of the deal. I suspected that a better offer was submitted and she wanted to take it. I ran my contract through an attorney to double check its validity, since I had done all of the negotiation and forms myself. It was a 100% valid contract and they had no right to exit. Luckily, they had a change of heart and were pleasant to deal with leading up to closing. The boyfriend started smoking in the house a week before closing, but besides that... they didn't make any more trouble. Overall this was a great first experience for me. The property is only five years old and in a great location. 

I financed the property with a conventional 30 yr mortgage at a 5.75 interest rate, 20% down. This was an awesome time to come across the deal because my debt to income was still in good standing. Moving forward, I will have to get more creative with my financing. I was expecting 7k in repairs and improvements. After deciding that the flooring could handle a bit more abuse, that number became 4k. After some landscaping, carpet and paint, handyman work, professional cleaning, and photographs, it cost me 3.7k. The financials and yearly expenses:

Purchase Price: 106k

ARV: 146k

Financed: 84.8k

Down Payment: 21.2k

Improvement Costs: 3.7k

Mortgage: 495

Property Taxes: 910

Insurance: 1300

Property Management: 1535

Vacancy Rate (7%): 1050

Repairs: 450

CAPEX: 720

Cash Flow: 258 per month

Rent: 1250

Cash-On-Cash ROI: 12.29%

ROI: 16.61%

The appraisal came back at 146k. My plan is to use the property as a financing source for another property. A BRRRR is the train of thought, but instead of the refinance I will be going with a HELOC. The HELOC appraisal came back at 156k and I was approved for a 40.8k line of credit. I'll be closing on the HELOC next week and September 1st is when the tenants will move in.

Thanks,

-Paddy

This would be EPIC! 

Wax seal is oozing. Looks to be still sealing. I'd like to clean it up and caulk.