All Forum Posts by: Steve Morris

The sImplest way would be to find a 1031 accommodator in your town.  They handle the money and can explain to you the implications Fed/local since most have attys on staff.

Well, you can make it a condition of close the units be vacant.  However, if I was a seller, I'd do that in exchange for some non-refundable money.

In seller's defense, what happens if you change your mind, don't close and have two vacants (= ZERO income) now?

"they also charge a percent of any maintenance that is done on the property."

Not defending them, but charging you x% of income means they're the same as any other mgmt company with the same fee.  Unfortunately, maintenance becomes a profit center since I've seen guys charge $75/hour for their maint guy.  I find it hard to believe the avg maintenance guy is making $150K/year at these places.

Other suggestion, put a price limit on repairs (say $500) that they can do without your approval and/or multiple bids.  Sad to say, kickback from contractors to the prop mgmt company does happen.

In OR - THere are very few things you can charge for and keep if they don't lease.  One is the app fee and cost of credit report.  I don't think you'd win if the guy went to court if it was expressly understood that the deposit was to apply to rent or a refundable security deposit.

However, as you noted, YOU NEED A SIGNED AGREEMENT ANYTIME MONEY CHANGES HANDS.

Am a broker, if I send over a sales agreement, if I do NOT have a listing, I outline the commission amount.  

I don't do wholesales or assignments at closing, but you want money you need to get it written and mutually accepted AS SOON AS OR BEFORE YOU SIGN ANY AGREEMENT WITH THE ASSIGNEE.

"The issue is, we don't actually know what steps need to be taken as I am not a member of their LLC."

Have your friend talk to the escrow officer. They'll need the operating agreement of the LLC to see who can normally sign. You may need to get a limited pwr of atty to sign on their behalf, but that is up to title company.

"The only one way no one mentioned to start with condo or apartment. Is there anyone who did so? "

To me it's a strict numbers game and if you can get the return, great. Only issues with condos is to include the HOA in expenses (they can be expensive) and if the HOA allows non-owner occupied units.

Having too many rentals in a project can screw up financing on sales since some banks don't like that. So understand what the HOA allows first.

"I am planning to buy a single tenant commercial property"

Can you say what type?  I'm an apt guy, but I've helped clients with STNL deals.

If you're looking for this type, realize you are paying for:

1) Building with some inherent resale value - The more application-specific the use (i.e. drive-thru burger place) the harder it may be to move if your tenant moves

2) Cash-flows from a long-term lease - You need to READ AND UNDERSTAND the lease.  You're looking for "outs" for the tenant, things like rent holidays in years 7 and 13 on 15 year lease, re-up opportunities and other exits.  Problem with single-tenant deals is it either all-or-none (they leave).  You also have a two-edged knife - They do poorly, they may close, shrink or ask for a re-adjust.  They do well, they may want to move someplace bigger than what you can offer.

"Would you try a collections agency to try to recoup a portion of the monies owed?"

Once they leave, your odds of collecting are small.  You can get a judgment, but most Sec 8 tenants are judgment-proof. Unfortunately, you need to learn with tenants, you let them cross the line on stuff, it never gets better until you put your foot down.

If they were Sec 8, did their case-worker know the tenant is supposed to pay for utilities?  On income-qual properties, whether the tenant does/doesn't pay for utilities makes a difference in their rent (cf. utility allowances) calculations

"How many units/doors roughly should I expect out of a $1.5M or separately a $2.5M property?"

I'd recommend you contact a broker that knows rental housing in your market.  Pricing can vary all over the place based on location (good/bad neighborhoods). rents you're getting and condition of the apartment.

Decent broker should be able to show you what $1.5M buys you where you want' to be, then you can decide what to go after.