All Forum Posts by: Shaun Collins

Quick update and I appreciate all your advice, I've been working with the seller to meet somewhere in the middle because the current numbers I showed him cash flowed but did not have a worthwhile return with current rents or even after the next 3 years, so they'll cut me a check for the bid price of the work to do all of the repairs needed to turn Unit D plus any necessary repairs to the other 3 Units.  That's the verbal agreement, working on an acceptable bid to both of us will be the tougher part, but the full inspection has been ordered and we'll see how that turns out.  

I currently pay $650/m for a studio which in California is about as low as you can get. As for the rent increases, current state law dictates a 5% increase plus inflation (2-3% usually) so yes it will take a couple years to get the middle units to market value.  @MarieChele Porter the proposition you are referring to is Prop 21 on the upcoming ballot and it aims to give City's opportunity to enforce more stringent rent control ie. limiting how much you can increase rent after turnover.  This doesn't change the current law but if City's, like Fresno, choose to move forward with everything it describes, it will definitely drive rental property values down unfortunately as buyers will not want to pay nearly as much for a property without having a way to raise rent sufficiently to cash flow. So this could affect my exit strategy but until then I'll have to move forward with current state law in mind. 

@Rowan Hallahan I asked about this about a month ago as it relates to California state law, which got even more strict at the beginning of 2020, and did some more research. With the passing of the new CA tenant protection bill, you must have "just cause" to evict a tenant. Not sure about Connecticut but "just cause" here would include the landlord (or landlords family/spouse) trying to move into the unit. The problem is that if the tenants on a year long lease, that takes precedence and I cannot serve them notice until end of the lease. If they are on a MtM, here in CA you have to serve them a 60 day notice (if they've been there longer than a yr, usually the case) but FHA requires you to be in within 60 days. So there could be some overlap of the tenant uses the whole 60 days and your lender may be unwilling to lend based on that alone. I've put in contingencies where the seller has to have a unit open by COE but that is always dicey for them because if the deal falls through at the last second, they're stuck with a vacant unit. The best method will always be cash-for-keys and can be written into the offer such that if you absolutely need the tenant out and you cant talk to the tenant directly, you can write in additional down payment to the seller to cover what you think would be an appropriate amount to buy the tenant out, get that agreement in writing and present that to your lender (if they ask). Hope this helps.

Hey all,

Would love to hear everyone's advice on my current situation. I recently went under contract for a 4-unit multifamily property in Fresno, CA (C-Class neighborhood, 93726 AC for those familiar) for 385k with the intention of house hacking. Each unit is an identical side-by-side 2br/1ba w/ 1 car garages, surrounding market rents going at 900-950 or so for nicer units. Loan is an FHA 3.5 down. I'll give a brief summary of each of the units "A-D":

Unit A: Prior tenant got bought out with cash for keys and left pretty much everything, place is a total dump and could use a good amount of work on the inside. Old hardwood needs to be sanded or replaced, walls need patching, swamp cooler and venting needs fixing, kitchen and bathroom brought up to livable standards. This was the unit I was planning on living in, and was going to use a month or so of the 60 allowable days the FHA gives you to get this work done before moving in. I'm a DIY'er for most stuff but I want the flooring and any air vent related work done professionally.

Unit B: Rent is 750, tenants keep good care of the place and are MtM, could still use some normal updating and minor value-adds.

Unit C: Rent is 700, very elderly tenants have been around for 5+ years, are MtM and kept pretty good care of it sans the chain smoking and buds everywhere.  Unit doesn't need much work done, mostly repainting and maybe some new finishing on the old tile countertops.

Unit D: Rent was 750 but tenant is moving out (5 months before lease ends) at the end of september. Only unit with carpet throughout but kept in good condition. Unit has had new stoves, fridge, paint and bathroom work done. Only work still needed is to check some noise coming from the swamp cooler which will happen during inspection and maybe re-paint cabinets in the kitchen (all units could use this honestly). Its basically rent-ready after a good cleaning and can probably put it on the market for 850 min, plus I could screen the new tenants myself.

I have not gone through an inspection yet but 2 of the tenants reported a roach problem and sure enough the repair history shows pest removal at about 120 a month for the last 8 months or so, which worries me.  The repair history does show maintenance tickets for plumbing, electric etc. as well every 2 months or so. There's a dumpster in the alley behind the property that is currently overflowing with junk and looks like its being used by adjacent properties and homeless too. 

After running the numbers multiple times and not trying to sugar coat them at market rent, units B-D would cover my PITI, but I would basically be on the hook for everything else which includes future pest removal, the 230 avg water bill, 80 avg trash pickup.This is my first home/house hack and I'm eager to jump into the business to get experience but dont want to set myself up for massive regret. Im not worried about living in a C-class neighborhood with plenty of homeless and trash strewn about, nor living next to tenants or doing maintenance work/landscaping myself, what I am worried about is that when I move out (2 yrs at most) and have to hire a management company that any cashflow I am making while living there could be reduced to hardly anything worth the hassle. Not to mention coronavirus has forced extended anti-eviction laws until at least April here in California so a rent increase most likely wouldnt come until the pandemic is over.

I could probably throw in some more contingencies into the deal that the seller has to handle like new roofs, swamp cooler repair etc. based on inspection as the seller seems eager to get this property off their hands.  I've been looking around Fresno for house hack potential for a long time now and hardly any have popped up with a unit being vacant or the seller willing to vacate one.  That all being said, I would love any and all advice you guys have for me about whether I should move forward with it or keep my chips while I have em, I'm all ears. Much appreciated!

@MarieChele Porter after asking around and doing some more research into the actual text of AB 1482 (California Tenant Protection Act of 2019) it would seem that 

1) the seller does NOT have just cause to serve notice as a contingency of the sale alone. The tenant would need to be at-fault for something (delinquent payments, violation of lease terms etc.) and even then the seller would need to give 3 day notice to the tenant to correct it before serving notice. This is eye opening to me as I've made offers before with this notice as the contingency and it has not been brought up by any agent or the seller.

2) the buyer DOES have just cause to serve notice to a current tenant after COE if the buyer or the buyer's family intend to occupy the unit as a primary residence or do major renovation work as part of a "no-fault" just cause. This is where it gets tricky because if the tenant has been in the unit longer than a year you must serve a 60 day minimum notice, less than a year its 30 (this all assumes MTM leases). So 60 days would put you at risk of going over the FHA threshold and if there's not something set in place or agreed to by the tenant saying they'll be out by 60 days after COE, my lender said some banks may not finance the property since they cant be sure I'll meet FHA requirements. On top of that, with eviction courts being closed right now and police not enforcing evictions in CA even if you could serve a 30 day notice and they squat past the 60 days you're still not meeting the FHA requirements.

The formal text is here:  https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200AB1482
Summary is here: https://sfrb.org/article/summary-ab-1482-california-tenant-protection-act-2019

I suppose the seller could take the property off the rental market before selling to have no-fault just cause and serve notice but I highly doubt they'd do that as they would owe each of the tenants one month or the last month's rent and there's always the possibility of the deal falling through and now they have no income. Really at the end of the day cash-for-keys is still the best bet. I've gotten mostly positive feedback on that method, you'd just have to state that the tenant must be out by COE as a contingency and after the offer is accepted reach out to the tenant to buy them out. Hope this helps!

Hey everyone! First time posting in the forums and I'm sure this has been asked but was unable to find solid answers with an initial search, and I know with COVID eviction laws have been continually changing so I felt a more current post was needed. I'm looking to house hack (FHA) an SMF in Fresno, CA and while I see a variety of properties pop up within my budget, many have all the units occupied with month to month leases. On top of that many of these rents are well under market (in general, not because COVID) but if raised to match over time would be provide great returns. I'm no lawyer so hopefully you all can help me out with not only the questions I have below but advice in general for my situation at this current time. This all goes with saying that I really don't like the idea of "forcing" people out of their homes especially during times like these and cash-for-keys is always a great option to keep them on their feet and into a new home, I'm just genuinely curious about the laws here in California..

-If the seller refuses to serve notice as part of the sale, I would need to serve the 60 day notice myself right after close but that would still risk having me move in after the 60 day FHA window, and I would need a valid reason for notice correct? Is the requirement of an FHA loan to move in within 60 days valid enough a reason to serve notice or not renew a month to month lease?

-Besides cash for keys what would be some of my other options that could get myself in one of the units within 60 days of close?

-What is everyone's experience with cash-for-keys? I wouldn't want to bank on that option only to close and none of the tenants are open to moving out even for a chest of cash.

-IF I do get in one of the units of a duplex for example and would like to renovate the other unit and get that rent up to market, do I have the opportunity to not renew the other lease so I can perform the work and put it back on the market for a new tenant or do I have do the work with the tenant still under lease, start raising the rent per California's limits and hope they move out on their own?

Appreciate the help all!