All Forum Posts by: Zachary H.

Welcome to the community. 

Lot's of great people that are eager to help, so you came to the right place.

Sounds sketchy to me. Seems like he was having some remorse and when confronted with a viable solution came up with an excuse.

You are definitely asking the right questions. I am currently in the process of buying a property using an FHA loan and can answer a couple of your questions. Typically the cost of starting and maintaining an LLC are minimal, however this varies state-to-state. Go to Nebraska's secretary of state website and you should be able to find a fee schedule for the associated costs.

For an FHA loan you do have to live in the property as an owner-occupant for at least one year and in some cases more. Consult with your lender on this as they can give you better direction. In some instances you can get around this, however I would not count on it as it is typically due to hardship or other extenuating circumstances.

Your question about the business partner is one that nobody can really answer other than you. How much do you trust this other person, are you willing to give up half the equity and decision making process to someone else? With your father being a businessman I'm sure he has some experience with partnerships and can give you his two cents. Additionally when you purchase a property using an FHA loan the property is in the individuals name and I don't see how that would work out with a partnership.

Keep asking questions and you are certainly ahead of the curve by starting at this age. I hope I was able to help clear some things up.

@William Busch You've chosen an exceptional market to start investing in and taken great first steps by joining BP and letting your goals be known. Let me know if I can assist you with anything or if you have any questions about the area.

Welcome to BP!

@Mary Ann

To answer your questions I think it depends on what your needs are at the moment. If you're needing a place to move into and are able to obtain FHA financing the first option you mentioned of moving into one of the units is a great way to get into a property for little down and lock in financing long term. You mentioned that you started a new job and have "non traditional income" therefore finding a lender may be a bit of a challenge, but there are ways to get creative.

A couple of other things to consider are whether or not the income from the other unit will cover your mortgage. Even if your mortgage is less than the $650/mo rent from the other unit you will always have repairs, taxes, turnover and other issues to deal with that will eat into your cash flow.

The important thing is to not rush into any property. You have a little time so vet some additional properties and compare cash flows, rates of return and other economic factors such as financing you are able to obtain and the location of the property. Also see if you can find an investor friendly agent to help you in your search and represent you. I don't know how your area is, but in mine Buyer agents typically don't charge their clients a fee as the commission comes from the Seller, if that's the case it might behoove you to have someone represent your interests in the transaction. If you can get it under contract speak with some professionals or fellow investors and see what their thoughts are and as always speak with an attorney and/or your CPA to see how this would affect your tax situation.

@Nick Versetto

 Fortunately for me being in commercial real estate as an agent I was able to witness this firsthand before I had a chance to make that mistake myself. As a rule of thumb (or in client cases as a rule of fiduciary duty) whether working on a property for myself or a client, never disclose any details of a deal to anyone who is not a party to the transaction until the deal has closed. I learned early on that loose lips sink ships and you have nothing to gain from relaying information unless you or your client have the property under control or closed.

Its a terrible lesson to learn the hard way, but I'm sure that you won't make the same mistake. Just always remember the past is the past, move on and learn from what happened. Mistakes aren't always really mistakes, just lessons in disguise. 

Hello Biggerpockets community, 

I have recently put a triplex under contract that very well may be my first persona property. The property is a 2,400 sf Triplex located in Springfield, MO. The site is in a phenomenal location being within short walking distance to a Public University with over 20,000 students and pretty much in the center of town. each unit is +/- 800 sf 2BR/1Bath and each unit only needs some minor renovations to bring it up to snuff (carpet and paint). I personally believe the rents are below market, however some additional improvements may need to be made in order to realize the potential market rents. The details of the deal will be included below and I will add some comments as I see fit. Roof is newer and in good shape, HVAC appears to be in good shape. The Seller has agreed to make some exterior repairs with an allowance for additional repairs after the home inspection. Property includes street parking, 3 designated parking spots and a car port with 3 slips and lockable storage for each slip. I will live in the property for the first several years according to FHA standards and therefore cash flows may not appear as great during the early years.

Purchase: $165,000

Rent: A-$200 (I will be living in this unit with a roommate paying me $200-$250/mo, for tax purposes I may or may not pay myself rent), B-$450, C-$475 [$1,125/mo or $13,500/yr]

      I believe potential market rent is in the $500-$550 range depending on updates

FHA Loan: 3.5% down, 30 year am, 30 year note, no points (+/- $900/mo PITI)

Tenants pay electric, gas, water & sewer all separately metered

Taxes: $1,400/yr

After doing a few initial calculations this looks to be a fairly solid deal. While not a home run I believe this one is at least a single. Although essentially buying at a 6% cap, my CoC returns in years 3 on are about 56% and it would lower my effective tax rate significantly. So now I'll turn this over to the pros in the bigger pockets community. I value and respect all of your opinions and look forward to learning what you have to say about the prospect. Thanks for all of your time in advance.

Best,

Hello Biggerpockets, 

I hope everyone is having a fantastic Thursday and ready for the weekend. I am currently in the process of purchasing my first multifamily property and recently discovered that the current leases are verbal month-to-month leases. To help with my financing and for my own personal risk tolerance I have decided that I would like to switch the tenants over to a year long lease in writing. Two of the tenants have been in the property for around a year and have not indicated any intentions of leaving, however I realize asking them to switch to a yearly commitment may scare them off. 

Does anyone have any advice or personal experience in structuring how they switch tenants over to long term leases including the notice they give, any incentives that you may give or any other general advice about the process. Has anyone dealt with switching tenants over to yearly leases while going through due diligence on a property and if so how did you get the landlord to work with you throughout the process?

Any advice would be great, I have done many commercial deals and worked with commercial leases extensively, however I am new to multifamily and residential leases. 

Best,

Zachary S. Harrell

To everyone that replied, thank you very much for all of the feedback.

It looks like I will certainly include that in my application and use it as an additional pre-screening technique. I appreciate everyone's views and ideas on how to structure the criteria as well. You guys are great!

Best,

Zachary S. Harrell

I am in the process of buying my first multifamily property and have began to investigate screening techniques, applications and the like. One question that came to mind when dealing with potential tenants and discrimination issues would be if there is any benefit to outlining the reasons a tenant will not be approved on the application? By example would it benefit Landlord's to include a list of reasons an application will be denied without exception so long as all of those reasons conform to Fair Housing? 

Example:

"Applicants WILL be denied for any of the following reasons without exception:

Past Evictions

Any Felonies or Criminal Record

Credit Score Below ____

No Rental History

No or Bad Landlord References

etc..."

Just curious, has anyone else had any experience in doing this? Can anyone think of reasons that this is a bad idea or may be unlawful in some jurisdictions?

Best,

Zachary S. Harrell