All Forum Posts by: Matt Lefebvre

@Casity Kao - That's not exactly true.  Unless your contract specifically has a clause based on numbers, "standard contingencies" you can't just back out and cite that.  Its never that cut and dry.  Escrow monies can still get tied up for months even if there's a little ambiguity in a clause in a contract.  Determining if something was misrepresented or just not all of the information was initially provided is not always easy.  It needs to be spelt out in black and white or you can land in a tough situation

@Eran G. I write contracts with a clause stating something involving:

Seller provides three years of tax returns, YTD income and expenses, copies of all agreements relevant to the sale of this property, and a certified rent roll

And then a generic "Buyer has seven days to review all financial information provided, if they are dissatisfied they may withdraw based on X" where "X" refers to the part of the contract that handles release of escrow.  

This is a loose example of what I typically write... please don't take this as legal advice :).  I keep it generic enough to allow for flexibility, but clear enough that the seller is required to provide this information and not doing so is grounds for cancellation.  

Hazards and Disasters in Real Estate:
How to Handle and How to Prevent

6:30PM - 01/10/2018 @ Best Western Plus Executive Conference Center

Jeff Brown, Manager of Consulting Services for the Lawson Group, will discuss asbestos, lead paint, radon and mold.

Jeff will cover:
The types of materials that have asbestos and the process on testing for it. Asbestos is found in over 3,000 building products! Even new construction needs to show proof by sampling that there is no asbestos in their buildings if they are going to renovate or demolish.
The importance in testing for lead paint and radon
Extreme mold cases he has seen and how important it is fix the cause of the mold or it will just keep coming back
Jeff Brown has been with the Lawson Group for 12 years and is a certified asbestos inspector for NH and Maine. Throughout his tenure at the Lawson group he is done everything from indoor air quality testing including mold, lead, radon, and asbestos. Duties also include noise exposure assessments and demolition over sight.

Then, Bob Eldredge, Home Energy Advisor for ABC Energy Services, LLC will discuss preventative measures and best practices for mold, as well as for replacing insulation. He'll cover the Home Performance with Energy Star program, where if the home qualifies - the utility company will pay for 50% of the work (up to $4,000) and a full comprehensive BPI home energy audit for $100 (which is credited towards the work).

Bob Eldredge is a certified home energy advisor who works with home owners to reduce their energy usage through energy efficiency improvements, reduce annual energy operational cost, reduce primary cause of ice dams, and have a more comfortable and safe home.

Bob is both a Building Performance Institute (BPI) certified Building Analyst and a US DOE Home Energy Score Qualified Assessor. He is a member of the NH Sustainable Energy Association and Woman’s Council of Realtors.

Keywords:  nh, new hampshire, lead, asbestos, mold, radon, manchester, ma, massachusetts, nhreia

@Patrick Gerrity the numbers provided look like they took out taxes and insurance and called that the total "expenses" for the property.  On almost every residential apartment building that I've seen in my market (mixed-use can affect the amount you spend on maintenance, but it boils down to whose responsible for what in the commercial units) operating expenses run somewhere between 45% and 60% of the gross income... but usually if utilities are paid for by the tenant, I see 50% operating expenses.  

So $170K x 50% = $85,000 NOI

$85,000 / $1M = 8.5% cap rate

That's a pretty good deal for something in my market, but ultimately it boils down to the condition of the building, stability of the tenants (because the vacancy factor for a storefront could be a lot longer than an apartment) and how this cap rate compares to other "true" cap rates in the area.  

@Mark McDonnell holding properties in multiple LLCs or one LLC is going to depend on your circumstance. There are pros and cons to each. As a multi-member LLC, just remember that every time you buy a property, if you have to create a new entity every time, you're going to be dealing with a boatload more paperwork and legal fees to be constantly setting up and shutting down entities... and don't forget who the rent checks will be made out to. "Was the tenant at 123 Main St supposed to pay rent to ABC, LLC or 123, LLC?" After a while, there's going to be a lot of challenges with having a lot of different entities.

Weigh that against the liability of holding multiple properties in one LLC. I have clients that do both and it really depends on your circumstance. Would recommend talking to a CPA here in NH.

@Dave Carella you could pull equity out of your house as a downpayment and then go to a bank to get a loan.  I've had clients do that before so they in essence didn't put any cash down.

One thing I'd like to point out though, unless you think there's significant value-add, $900/mo gross income for $150K purchase price?  I can't see that purchase being cash flow positive, let alone a good deal.  The mortgage alone (assuming 25% down) will be $550/mo+.  

@Wougi Heap of Birds due diligence at that scale becomes more than one type of inspection.  Once you start scaling up, I'd recommend running separate due diligence periods for title, financials, lease agreements, physical structure, financing, consecutively.  I think 60 days if you're just talking about a building inspection is waaaaay too long.  There's no reason that you can't inspect a 25 unit apartment building in two to three weeks.  It should take half a day to get it done with a team or a full day with one person if you're really looking in every nook and cranny.  

Usually I structure my due diligence periods in phases that only conclude after the requirements of the previous one have been satisfied (i.e. all financials requested are received + 7 days to review documents).

Contract to close, most multifamily deals, unless there's some significant changes or external approvals needed (i.e. city permits needed to rehab a rundown apartment complex), shouldn't take more than 90 days, and see many close in 60 or less.  More complex deals can certainly take longer, but the cut and dry ones where its just multifamily sales are fairly straightforward if the seller is adequately prepared and has the information readily available.  

@Sam Marriott depends on whose name is the primary person on the lease agreement.  If its only verbal, it can get a little more slippery.  You should collect the full balance from that individual that is named and pay out the security deposit to that individual.  If the full balance is not collected from whoever is named on the lease, depending on your state law, you may be able to deduct that from the security deposit.  

Though I find it amusing how "one couple getting assaulted by the other" is justification for the tenant to not pay you (the innocent third party) rent.  

@Trace Garretson while I don't operate in a state where it is illegal to practice dual agency, I have previously (and plan on doing so in the future) represented one party as a client and then facilitated a transaction for the other party.  Meaning that I was representing one individual's best interests as a real estate agent, and the other individual I simply dealt with paperwork, coordinating appointments, etc.  For doing so I charged 1.5x the commission.  So instead of charging what I would consider my full fee on both sides, I charged the client my normal fee on their side, and the party I facilitated for half of my normal fee.  I felt it was fair, they felt it was fair, and it got the job done smoothly.  

When practicing this way, make it very clear which party you are representing as a fiduciary and which you are facilitating for.  In my state, they require a disclosure to be signed outlining the difference, so make sure you explain and get it in writing that both parties are okay with this.  

@Gregory Almy make sure you get information on additional expenses including annual utility costs (heat, electric, hot water, water, sewer) and if the landlord is paying them or not.  $40K/yr is great for income, but if you're shelling out $5K/yr in heat and $5K/yr in electric costs (which breaks down to $105/unit/mo), you've just eaten up almost all of your profitability or you might be cashflow negative.

Additionally, look into the costs for snow removal, lawn maintenance, trash removal, insurance, and what the annual taxes are for the property.  It is a four unit building which comes with the plus side of being able to use a residential loan (longer term, lower rates), but make sure you're not overpaying based on other 4 units in the area.

Lastly, I'd make sure the building is professionally inspected so you know if there's any deferred maintenance or any large capital expenditures that are looming on the horizon.  

Best of luck!