Author Topic: The Great $55,000 Triplex Saga  (Read 8818 times)

Valley of Plenty

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The Great $55,000 Triplex Saga
« on: October 14, 2020, 01:22:29 AM »
I'm not sure if this would be better to place in the journals section, but given the nature of the project and my desire for feedback and suggestions, I'm going to post it here in order to hopefully get the most visibility. I've made a couple vague posts about this, but now that the appraisal has gone through and I'm nearing a closing date I feel like things are finally "real" and "happening" enough to start posting about it here. So far everyone I have told about this deal has seemed quite eager to follow my progress, so I'll do my best to keep posting updates here as things develop. Settle in for what is sure to be a lengthy and riveting tale of my adventure acquiring a move-in ready Triplex for $55,000. (If you want to skip the backstory and get straight to the numbers, skip to the end)

Let me start by saying that this is my first real estate purchase. I am 25 years old living in central PA and have never owned a home before. I found this blog and the financial independence move a little over a year ago, and soon after decided that I wanted to execute a house hack to reduce my living expenses (and possibly even turn a little cash flow) and gain some experience as a landlord to decide if real estate is something I wish to pursue as a serious side hustle.

In early June of this year I reached out to a local friend who I know owns a couple rental properties, and asked if he could recommend any real estate agents in the area who work well with investors and could help me find a house hack. He referred me to an agent, and that agent referred me to a different agent who owns and manages about a dozen rental properties in my area. When I told this agent what I was looking for, they told me that they knew of a triplex that sounded like exactly what I was looking for. The property had not yet been listed on the market, but the agent knew the owner and knew that he was looking to sell and willing to sell cheap, as he's getting older/acquiring some health problems, and wants to get out of the real estate game. They gave me his number and the address of the property, and told me a bit about the seller. They told me that he at one point owned and managed many properties in the area, and evidently did an excellent job at it. He kept his properties well maintained and was well liked by his tenants. Evidently seller's only shortcoming is that he is often "too nice of a guy", and let his tenants get away with more than he should have (I mention this because it becomes very important to the story, more on that later.) I called up the seller and asked about the triplex, and he said that yes indeed he was looking to sell it, but unfortunately it was already pending sale to another buyer. He apologized and said that he would give me a call if things fell through.

I spent the next 2 months searching for good deals in the area, but wasn't finding anything solid. Everything was either far overpriced or required more rehabilitation than I was willing to take on (I want to learn to DIY but I'm staying away from big projects for the time being). Halfway through July I grew impatient and decided to expand my search to single family homes, since I wasn't finding any good deals on multi-unit properties and I really didn't want to spend another winter in my apartment. I did a couple showings on some unimpressive and overpriced homes, and was still coming up dry. I had almost given up hope, but then near the end of july, my phone rang. It was the seller from before! He said that the other buyer had backed out of the sale, and that if I was still interested he would like to talk business. I told him that I definitely was, and out of curiosity asked how much he was looking to sell for. He told me $55,000. At this point I already knew that he had acquired the property in 2005 for $75,000, so if the property was in as good of shape as he and the agent claimed, I knew I had to jump on this deal. This was on the same day that I left home to attend CampFI in Colorado (where I had the pleasure of meeting MMM). I told the seller that I was definitely interested, and asked if he would be willing to keep the property off the market until I returned home to go see it. He agreed and I went to inspect the property the morning after my flight home.

The building is a three story 1940s victorian style brick duplex converted into a triplex. One side is a 3br/1.5ba, and the other is a 1br/1ba on the 1st floor, and a 2br/1ba on the second floor. Both sides have finished attics and full basements with no signs of leakage. The total property size of 16,770sf includes 3,400sf of GBA, as well as a fair sized yard, wrap-around driveway/off street parking, and single car garage. From the exterior, it is apparent that the roof will need replaced within the next year or two, though as of now it shows no signs of leakage. Part of the stone foundation will need some simple patchwork (though the interior and exterior structure are solid and sound and the basement has no leakage).

The two smaller units are presently unoccupied and both in relatively good shape. Both could probably rent as is, though I plan to re-floor the upstairs kitchen as it has some serious damage from a previous tenant's dog. There's also some atrociously hideous green carpeting that I want to replace with laminate hardwood, as a general act of kindness towards my future tenants. Otherwise than that, everything is in proper shape for the C class neighborhood that the property resides in.

The third and largest of the units is where things get interesting. The good news is that it is in excellent shape, easily the nicest of the three units.  It needs absolutely no work of any kind; in fact it is actually in better shape than the apartment I'm currently renting. Natural hardwood floors that look like new, fresh paint, and an overall great layout (there's a closed porch that wraps around most of the unit, creating an excellent temperature barrier that I can only imagine is great for heating and cooling efficiency.) This is the unit I intend to move into, with my girlfriend and a friend of mine who currently shares my apartment and wants to rent a single room out of this new place. This arrangement is ideal, as it allows me to pull rent out of all three units, even as I live in one of them.

Now on to the bad news. Great as the third unit is, it is also currently occupied by an existing "tenant". I put that word in quotations because this individual has not paid a single cent of rent in over a year (remember earlier when I said about how Seller's fatal flaw is that he's too nice of a guy? This is where that comes into play.) Apparently at some point this guy missed a rent payment, and the seller let it slide. So he missed another, and another, and another, and you get the idea. When I asked the seller about this, he said that he let it slide because A) he didn't want the hassle of evicting the guy, B) he didn't want the hassle of keeping up with the yard work, and C) he was already planning to sell the property and the "tenant" said that he would leave once the building was sold. So basically, the best of the three units, which is the one I plan to move into, is occupied by a squatter who is still protected by tenant rights because the seller never made a move to evict him this entire time, which my attorney tells me constitutes a verbal month to month lease, the terms of which are "You can live here and pay $0 in rent". What's more is that because of COVID, evictions are very difficult to get. I later found out that this tenant/squatter is the reason that the last buyer backed out of the deal. I can't say I blame him, but I'm not about to give up so easily.

My agent has been in contact with the "tenant", and seems to be successfully bluffing him into leaving. She has told him that we'll be changing the locks after closing, so if he doesn't want locked out he has to be out before then. Legally we absolutely *can not* do that, but he seems to be buying it. If he doesn't leave, my plan B is to offer cash for keys. Seller has admitted that he can't really trust the guy's word that he'll leave by closing, and has offered me an extra $1,000 as an incentive for me to handle it. I figure I'll take that money and offer cash for keys. If that doesn't work, I guess I'll have to press for eviction, though I'm not sure how successful that will be. Mostly though I just want this guy to leave peacefully and not trash the place on his way out. As I said, it is the nicest of the three units. If he punches holes in every wall on his way out, that's going to really alter my expense budget.

The financing process with the bank has been gruellingly slow. I've been under contract since early August, and the appraisal *just* came back a few days ago. I'll be speaking to my representative at the bank in the morning, and hopefully getting a closing date.


So that's the story up to present. We aren't out of the woods yet, but I'm very hopeful that everything will fall together and I will be able to say that I successfully acquired a move in ready triplex for $55,000. Below are the juicy numbers. I accounted for 10% vacancy, and set aside 10% for routine maintenance costs and 10% for large capital expenditures, as well as $40/mo per unit for trash pickup. I'm also allowing a $15,000 renovation budget, which includes $10k for a new roof, $2k for a new furnace (switching the largest unit from oil to natural gas), $2k for replacement flooring, and an extra $1k for anything minor.

Purchase Price: $55,000
Down Payment: $5,500 (10%)
Interest Rate: 4% (30 years)
Estimated mortgage payment (PMI, taxes, insurance included): $470

Closing Costs: ~$2,000
Renovation Budget: $15,000

Total (Purchase Price + Renovation): $72,000
Estimated After Repair Value: $80,000 (this is the low end among comparable properties that I've seen in the area, but many go for excess of $100k)

Expected Rental Income: $1,600/mo

2% rule: 2.27%

ROI: 27.02%

Pro Forma Cap Rate: 10.70%

Year 1 Cash Flow: $490/mo


I guess that about sums it up. Sorry if this is poorly formatted, there's a lot of information and I'm still pretty new to all of this. Anyway, I'd appreciate any feedback or suggestions you guys have. I really value the experience and knowledge that so many of you have, and I'd love to hear your thoughts on this. I'd also be happy to answer any questions, or edit this with any missing information.



« Last Edit: December 08, 2020, 04:37:03 AM by Valley of Plenty »

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Re: The Great $55,000 Triplex Saga
« Reply #1 on: October 14, 2020, 03:20:34 AM »
I know someone who bought a house in London that had a protected tenant in one of the rooms that couldn't be evicted.  The tenant was elderly, and my friend just worked around her presence until she moved into a nursing home.  It meant that for the inconvenience (which did last several years) she ended up with a very valuable property that she couldn't possibly have afforded any other way.

In your case you have time to deal with your "tenant" because if necessary you can move into one of the other units while working on the eviction - and you would still have one other unit to rent out.

I'm looking forward to see how it all works out.

sammybiker

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Re: The Great $55,000 Triplex Saga
« Reply #2 on: October 14, 2020, 03:40:06 AM »
Glad you decided to post up your own journal on this @Valley of Plenty

Now more pics and less text.

Sorry if I missed it but what did the appraisal come back at?

For the renovations, you're doing the work yourself?

Are you going to hack/rent out the bedrooms in your unit to a roommate or just keep it all yourself?

Any Airbnb/short term rental options vs long term lease for the other units?  Not sure if you have temp workers in your area, where a simply furnished unit may be in demand?

SunnyDays

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Re: The Great $55,000 Triplex Saga
« Reply #3 on: October 14, 2020, 11:09:27 AM »
Since this isn't a case of the tenant not being able to pay rent due to Covid, where I would have some sympathy, I would definitely pursue an eviction.  He's taken huge advantage and deserves the boot.  If you do nothing and just continue to let him live there rent-free, he might stay forever.  And what if the other tenants get wind of this?  Are they going to stop paying too?  So I would make a list of all possible actions you can take (legal or not) and work my way down them.  The harassment factor alone might make him leave.  I know this is a good deal, but do you really want to take on this problem?  You're young and have lots of time to find something - maybe better to start with a property where you have a better chance of success?

BabyShark

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Re: The Great $55,000 Triplex Saga
« Reply #4 on: October 14, 2020, 12:19:28 PM »
Posting to follow.  Have you connected with the "tenant" at all?  I know you said you saw the unit, but I assume the "tenant" wasn't there?

Valley of Plenty

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Re: The Great $55,000 Triplex Saga
« Reply #5 on: October 14, 2020, 03:16:14 PM »
Glad you decided to post up your own journal on this @Valley of Plenty

Now more pics and less text.

Sorry if I missed it but what did the appraisal come back at?

For the renovations, you're doing the work yourself?

Are you going to hack/rent out the bedrooms in your unit to a roommate or just keep it all yourself?

Any Airbnb/short term rental options vs long term lease for the other units?  Not sure if you have temp workers in your area, where a simply furnished unit may be in demand?

Appraisal came in at $60,000, with all parties involved understanding that the appraiser lowballed the number so it would appear as an "arm's length sale". I intend to have a separate appraisal done, after I've done the renovations. I'd be shocked if it comes in any lower than $80k.

I am doing *some* of the renovations myself. The flooring for sure, and probably also the furnace if I can find someone who knows what they're doing to lend a hand. The roof I am outsourcing, because it is three stories with a steep incline. I've never replaced a roof before, and this doesn't seem like one to learn on.

I am going to be renting one bedroom in my unit to a roommate who already shares the apartment I'm currently living in.

There isn't much demand for short term rentals in my area, unfortunately. That may change in a few years if jobs keep coming in and the area keeps improving, but for now the plan is strictly long term rentals.

Oh and I'll try to get some pictures added. Just haven't taken the time to upload to them yet.
« Last Edit: October 14, 2020, 03:18:02 PM by Valley of Plenty »

Valley of Plenty

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Re: The Great $55,000 Triplex Saga
« Reply #6 on: October 14, 2020, 03:24:11 PM »
Since this isn't a case of the tenant not being able to pay rent due to Covid, where I would have some sympathy, I would definitely pursue an eviction.  He's taken huge advantage and deserves the boot.  If you do nothing and just continue to let him live there rent-free, he might stay forever.  And what if the other tenants get wind of this?  Are they going to stop paying too?  So I would make a list of all possible actions you can take (legal or not) and work my way down them.  The harassment factor alone might make him leave.  I know this is a good deal, but do you really want to take on this problem?  You're young and have lots of time to find something - maybe better to start with a property where you have a better chance of success?

Posting to follow.  Have you connected with the "tenant" at all?  I know you said you saw the unit, but I assume the "tenant" wasn't there?

Oh I definitely won't be letting him stay. I spoke to him very briefly while inspecting his unit, but mostly it's been my agent hounding him to get out. She's been a landlord for many years so she has experience with deadbeat tenants. She told him that we'll be changing the locks at close, which we can't legally do, but he seems to have bought it and is looking for a place. Failing that, I'll offer cash for keys. Failing that, I'll set up boomboxes in both other units and blast death metal all hours of the day and night. I hope it doesn't progress past option 2, because the more I have to force him out, the more likely he is to trash the place out of spite.

This is better than a good deal, in my opinion. This is a *great* deal, and I am extremely unlikely to find another like it in the near future. Plus, my current apartment is a nightmare to heat in the winter. I need to get out of here before winter arrives in earnest, or i'll be dishing out $500 a month for the electric bill just to keep the place 65 degrees.

Dicey

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Re: The Great $55,000 Triplex Saga
« Reply #7 on: October 16, 2020, 11:35:30 AM »
Whew! PTF. I've come over from the other thread, but that is a huge wall of text, so I'll have to come back later.

SndcxxJ

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Re: The Great $55,000 Triplex Saga
« Reply #8 on: October 17, 2020, 10:56:28 AM »
Is there a written contract for this tenant?  I understand that he hasn't paid for a while, but if there was a written contract in place I don't see how that isn't enforceable.
Here is my reasoning.  If I buy a property it is subject to the existing agreements.  If a tenant says, "Hey but the last owner let me slide on paying some rent! That written contract doesn't apply!" How could I know if that is true or a story?  I would be happy to enforce the written agreement and start collecting rent at close of escrow, and if he got away with free rent for a while with the last guy good for him, but that wouldn't be the case with me.
I have never offered cash for keys, but I have successfully negotiated a lot of tenants out with the offer of their full deposit back (with a quick post move out walk through looking for only substantial damage), and I have evicted those that couldn't see their way clear of agreeing on moving on their own.
I would expect the rent from this guy on time, and if it doesn't come I would pursue my options on evictions and let him know it. 

waltworks

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Re: The Great $55,000 Triplex Saga
« Reply #9 on: October 17, 2020, 01:06:46 PM »
The thing is, it really varies by jurisdiction. There are places where evicting in this situation is next to impossible and/or will take years. There are places where you could have the sheriff watching him stack his stuff on the sidewalk in 30 days (maybe an exaggeration). It just depends. There are federal (especially since Covid), state, and local rules (some of them specific to certain areas/neighborhoods/etc) about this. Your experience where you have rentals isn't necessarily relevant to the OP's.

I doubt that the previous owner's failure to collect rent constitutes a verbal contract for no rent forever, though. It does mean that the OP will at the least (if pursuing a legal eviction) have to attempt to collect rent and then follow the steps laid out by local laws.

Bluffing/bribing the tenant out is almost certainly better.

-W

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Re: The Great $55,000 Triplex Saga
« Reply #10 on: October 18, 2020, 12:34:02 PM »
Sounds good @Valley of Plenty

Looking forward to more progress and photos. Good luck!

Glad you decided to post up your own journal on this @Valley of Plenty

Now more pics and less text.

Sorry if I missed it but what did the appraisal come back at?

For the renovations, you're doing the work yourself?

Are you going to hack/rent out the bedrooms in your unit to a roommate or just keep it all yourself?

Any Airbnb/short term rental options vs long term lease for the other units?  Not sure if you have temp workers in your area, where a simply furnished unit may be in demand?

Appraisal came in at $60,000, with all parties involved understanding that the appraiser lowballed the number so it would appear as an "arm's length sale". I intend to have a separate appraisal done, after I've done the renovations. I'd be shocked if it comes in any lower than $80k.

I am doing *some* of the renovations myself. The flooring for sure, and probably also the furnace if I can find someone who knows what they're doing to lend a hand. The roof I am outsourcing, because it is three stories with a steep incline. I've never replaced a roof before, and this doesn't seem like one to learn on.

I am going to be renting one bedroom in my unit to a roommate who already shares the apartment I'm currently living in.

There isn't much demand for short term rentals in my area, unfortunately. That may change in a few years if jobs keep coming in and the area keeps improving, but for now the plan is strictly long term rentals.

Oh and I'll try to get some pictures added. Just haven't taken the time to upload to them yet.

PMJL34

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Re: The Great $55,000 Triplex Saga
« Reply #11 on: October 19, 2020, 10:29:53 AM »
Hello OP,

Thanks for the details and the property sounds promising. Not to be a downer, but here are my concerns:

1. Shouldn't you deal with getting the tenant out before closing? I would hate to close and find out that he won't leave. I prefer to have a "I'll close when he leaves." We also need more details about the tenant. Is he a member of a protected class? Is he employed or unemployed? For example, what if he starts paying rent the second you close and continues to pay? I don't think you can collect missed rent as the new owner if the old owner "forgave it." It will also be very difficult to a do formal eviction if he is paying + COVID.

2. How are you computing $1600 in rent while living in the main 3bed? Are you claiming that a 55k property of a 2bed + 1bed + 1 roommate fetches $1600? If so, that is beyond amazing. Are there tenants lining up to rent this place or will it take some time to fill?

3. I'm going to bet you big money that there are many other problems with a tenant occupied/vacant 1940's rental than just a roof and some minor flooring updates. Sounds like the current owner has not done any recent maintenance and there is a reason why it's been on the market for a long time.

With that said, you are young, who cares if you have to live in one of the other units until you figure out the eviction process? You also don't need $1600 (even half of that makes this free housing) to make this cash flow positive. You can also learn some DIY skills to start fixing some of the deferred maintenance items. I can only dream of 55k housing here in the bay area. You seem to be very positive and on the right path, I am confidant you will make this work!

EDIT: I agree with Sammybiker. We need pictures because it will give us so much more details/condition.

Best of luck!


« Last Edit: October 19, 2020, 10:31:31 AM by lilbenny34 »

theoverlook

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Re: The Great $55,000 Triplex Saga
« Reply #12 on: October 19, 2020, 11:19:12 AM »
Here's an interesting idea. What if the current owner writes up a statement of owed rents, and sells the debt to you, either as part of the property purchase or a separate transaction for $1 or some other token sum? That way you have a little more leverage to get the tenant out, a debt that you can forgive if they move out right away.

Valley of Plenty

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Re: The Great $55,000 Triplex Saga
« Reply #13 on: October 19, 2020, 10:40:40 PM »
Hello OP,

Thanks for the details and the property sounds promising. Not to be a downer, but here are my concerns:

1. Shouldn't you deal with getting the tenant out before closing? I would hate to close and find out that he won't leave. I prefer to have a "I'll close when he leaves." We also need more details about the tenant. Is he a member of a protected class? Is he employed or unemployed? For example, what if he starts paying rent the second you close and continues to pay? I don't think you can collect missed rent as the new owner if the old owner "forgave it." It will also be very difficult to a do formal eviction if he is paying + COVID.

2. How are you computing $1600 in rent while living in the main 3bed? Are you claiming that a 55k property of a 2bed + 1bed + 1 roommate fetches $1600? If so, that is beyond amazing. Are there tenants lining up to rent this place or will it take some time to fill?

3. I'm going to bet you big money that there are many other problems with a tenant occupied/vacant 1940's rental than just a roof and some minor flooring updates. Sounds like the current owner has not done any recent maintenance and there is a reason why it's been on the market for a long time.

With that said, you are young, who cares if you have to live in one of the other units until you figure out the eviction process? You also don't need $1600 (even half of that makes this free housing) to make this cash flow positive. You can also learn some DIY skills to start fixing some of the deferred maintenance items. I can only dream of 55k housing here in the bay area. You seem to be very positive and on the right path, I am confidant you will make this work!

EDIT: I agree with Sammybiker. We need pictures because it will give us so much more details/condition.

Best of luck!

1. It has already been made clear to me that the seller is under no circumstances going to take the responsibility for getting this guy out. Whoever buys the property is going to have to be the one to do it; it's a package deal. Him offering me an extra $1,000 was the best incentive he was willing to do; he's not going to handle the eviction or try to force the guy out by other means. To a degree I can't blame him, the guy is older with compromised health and has been pretty much quarantining for his own safety since COVID started back in March. He doesn't want to leave his house unless he has to. And he and I both know that if he listed this property on the open market it would sell extremely quickly, squatter or no squatter.

2. I calculated the rent assuming tenancy in all three units, just to get an idea for the property's viability as a long term rental. Actual numbers may end up being lower since I'm going to be living in one of the units, though not considerably so as I'll be renting a room in my unit out, so it won't be a total loss. Also I expect that the projected rents are lower than what I'll actually be able to get, based on the research I have done. Typical rents for the area are about 500/600/700 for 1/2/3 bedrooms respectively. If this seems like an amazing deal it's because it absolutely is, and that's why I'm determined to close on it no matter what.

3. I will take you up on that bet if you're serious. Myself, the appraiser, and the inspector I brought through all found nothing major needing addressed besides the things I listed (roof, furnace, floors). The squatter + covid is the reason the property hasn't sold yet, along with the fact that is hasn't been listed on the market all this time. It wasn't on the open market when it was pending sale back in May, and it hasn't been posted to the open market since, because as soon as that sale fell through I stepped in and entered into contract. As I said, if the seller did a public listing, it would sell in a heartbeat.

I do appreciate the vote of confidence. I certainly am remaining outrageously optimistic and determined to overcome any obstacles between me and this amazing deal. And I know I need to upload pictures, I've been putting it off because right now all I have are videos, so my options are to either take screenshots from the videos or get back inside the property to take pictures. Neither one would be terribly difficult I just haven't bothered to do it yet :P 

Valley of Plenty

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Re: The Great $55,000 Triplex Saga
« Reply #14 on: October 19, 2020, 10:44:14 PM »
Here's an interesting idea. What if the current owner writes up a statement of owed rents, and sells the debt to you, either as part of the property purchase or a separate transaction for $1 or some other token sum? That way you have a little more leverage to get the tenant out, a debt that you can forgive if they move out right away.

A neat idea, but there are no owed rents because the owner has been letting the guy squat there rent free for more than a year. From what I understand he had a written lease at one point, but it has long since expired. I have no idea what he was supposed to be paying, but the owner basically told him that he could continue living there rent free so long as he took care of the place (which to his credit, he has done).

waltworks

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Re: The Great $55,000 Triplex Saga
« Reply #15 on: October 20, 2020, 06:49:42 AM »
Eesh. Yeah, that might be enough to constitute a verbal lease. Which in most places the new owner has to honor, legally.

I actually feel a little bad for the "squatter" (he's really not, if the owner told him that, since he's performing the service he promised to) here. He legally probably has the right to stay. I'm honestly not sure if I would do this deal and try to bluff him out, just for ethical reasons. But it's certainly a grey area.

-W

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Re: The Great $55,000 Triplex Saga
« Reply #16 on: October 20, 2020, 07:28:06 AM »
It does seem like the tenant is at least being reasonable to deal with and is on his way out, so that's probably a relief.  I just hope it stays that way.

theoverlook

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Re: The Great $55,000 Triplex Saga
« Reply #17 on: October 20, 2020, 07:52:08 AM »
A neat idea, but there are no owed rents because the owner has been letting the guy squat there rent free for more than a year. From what I understand he had a written lease at one point, but it has long since expired. I have no idea what he was supposed to be paying, but the owner basically told him that he could continue living there rent free so long as he took care of the place (which to his credit, he has done).
Ahh, yes if he told the tenant they could stay rent free for a time then that changes things.

Still, I think you're on the right track and my gut says you should definitely not let this deal get away. I'm sure there will be difficult times but long term it sounds like a great start to building some wealth.

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Re: The Great $55,000 Triplex Saga
« Reply #18 on: October 20, 2020, 04:01:01 PM »
It would be a good idea to find a real estate lawyer and figure out exactly what it would take to legally evict that guy, or to get him to sign a new lease and become a paying tenant.

Frankly - you're talking about forcing out an older individual with compromised health DURING A GLOBAL PANDEMIC. This falls under the definition of sleezy to me. There are two other units in the building, in which you + GF + friend could inhabit in whatever configuration you like.

waltworks

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Re: The Great $55,000 Triplex Saga
« Reply #19 on: October 20, 2020, 04:12:19 PM »
Oh, jeez, I missed that somehow.

There is no way I could in good conscience evict an elderly person in poor health during Covid. It's just... not ok. And in this case it's most likely not even *legal*.

If I were you, OP, I would walk away. Or else plan to occupy a different unit and work with the tenant to find him new housing.

There are more important things in life than money.

-W
« Last Edit: October 20, 2020, 04:14:53 PM by waltworks »

Valley of Plenty

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Re: The Great $55,000 Triplex Saga
« Reply #20 on: October 20, 2020, 07:36:15 PM »
Oh, jeez, I missed that somehow.

There is no way I could in good conscience evict an elderly person in poor health during Covid. It's just... not ok. And in this case it's most likely not even *legal*.

If I were you, OP, I would walk away. Or else plan to occupy a different unit and work with the tenant to find him new housing.

There are more important things in life than money.

-W

There appears to be a big misconception going on here. The older guy with compromised health issues is the seller, not the tenant.

Tenant/Squatter is a perfectly healthy dude in his 30s who has a full time job and has been taking advantage of the generosity of the seller. It wasn't as if the seller and tenant sat down and decided that the current arrangement is ideal for both parties. It was literally just that the tenant stopped paying one day, and got lucky in that the owner was too nice of a guy and too troubled by worsening health to bother pushing for eviction. Owner decided that eating the loss was better than having to try to evict, find new tenants, and keep up with the yard work while the place sat vacant.
« Last Edit: October 20, 2020, 07:45:15 PM by Valley of Plenty »

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Re: The Great $55,000 Triplex Saga
« Reply #21 on: October 21, 2020, 12:42:46 AM »
I think I'll go make some popcorn, this is getting interesting...

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Re: The Great $55,000 Triplex Saga
« Reply #22 on: October 21, 2020, 07:01:45 AM »
Ah, got it. Objection withdrawn.

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Re: The Great $55,000 Triplex Saga
« Reply #23 on: October 22, 2020, 11:34:05 AM »
Hello OP,

Thanks for the details and the property sounds promising. Not to be a downer, but here are my concerns:

1. Shouldn't you deal with getting the tenant out before closing? I would hate to close and find out that he won't leave. I prefer to have a "I'll close when he leaves." We also need more details about the tenant. Is he a member of a protected class? Is he employed or unemployed? For example, what if he starts paying rent the second you close and continues to pay? I don't think you can collect missed rent as the new owner if the old owner "forgave it." It will also be very difficult to a do formal eviction if he is paying + COVID.

2. How are you computing $1600 in rent while living in the main 3bed? Are you claiming that a 55k property of a 2bed + 1bed + 1 roommate fetches $1600? If so, that is beyond amazing. Are there tenants lining up to rent this place or will it take some time to fill?

3. I'm going to bet you big money that there are many other problems with a tenant occupied/vacant 1940's rental than just a roof and some minor flooring updates. Sounds like the current owner has not done any recent maintenance and there is a reason why it's been on the market for a long time.

With that said, you are young, who cares if you have to live in one of the other units until you figure out the eviction process? You also don't need $1600 (even half of that makes this free housing) to make this cash flow positive. You can also learn some DIY skills to start fixing some of the deferred maintenance items. I can only dream of 55k housing here in the bay area. You seem to be very positive and on the right path, I am confidant you will make this work!

EDIT: I agree with Sammybiker. We need pictures because it will give us so much more details/condition.

Best of luck!

1. It has already been made clear to me that the seller is under no circumstances going to take the responsibility for getting this guy out. Whoever buys the property is going to have to be the one to do it; it's a package deal. Him offering me an extra $1,000 was the best incentive he was willing to do; he's not going to handle the eviction or try to force the guy out by other means. To a degree I can't blame him, the guy is older with compromised health and has been pretty much quarantining for his own safety since COVID started back in March. He doesn't want to leave his house unless he has to. And he and I both know that if he listed this property on the open market it would sell extremely quickly, squatter or no squatter.

2. I calculated the rent assuming tenancy in all three units, just to get an idea for the property's viability as a long term rental. Actual numbers may end up being lower since I'm going to be living in one of the units, though not considerably so as I'll be renting a room in my unit out, so it won't be a total loss. Also I expect that the projected rents are lower than what I'll actually be able to get, based on the research I have done. Typical rents for the area are about 500/600/700 for 1/2/3 bedrooms respectively. If this seems like an amazing deal it's because it absolutely is, and that's why I'm determined to close on it no matter what.

3. I will take you up on that bet if you're serious. Myself, the appraiser, and the inspector I brought through all found nothing major needing addressed besides the things I listed (roof, furnace, floors). The squatter + covid is the reason the property hasn't sold yet, along with the fact that is hasn't been listed on the market all this time. It wasn't on the open market when it was pending sale back in May, and it hasn't been posted to the open market since, because as soon as that sale fell through I stepped in and entered into contract. As I said, if the seller did a public listing, it would sell in a heartbeat.

I do appreciate the vote of confidence. I certainly am remaining outrageously optimistic and determined to overcome any obstacles between me and this amazing deal. And I know I need to upload pictures, I've been putting it off because right now all I have are videos, so my options are to either take screenshots from the videos or get back inside the property to take pictures. Neither one would be terribly difficult I just haven't bothered to do it yet :P

Thank you OP for the detailed responses. Clearly you are very excited about this deal and I am excited for you! For the record, I support your purchase, I just wanted to provide my quick thoughts about the property from what you described.

1. Good to know the tenant is in his 30s, healthy, and employed. It's just a single 30's male? No girlfriend, kids, roommates? I wonder why he has a 3bed? As long as it is just him, the eviction process should be smoother. However, I'm still not sure what the best steps are going forward. I have a feeling he has no intent to move. After all, why would he? He has free housing and clearly mean enough to stiff an old man (current owner) for what sounds like no valid reason. He really has nothing to lose so I'm just going to believe he will fight it. Like others, I would bluff as hard as I can, but it's not that hard to google tenant rights. Regardless, I think we are all just warning you that this may be a bigger challenge than you think and for you to prepare accordingly.

2. Thanks for the clarification. Sounds like an awesome deal should those numbers hold up.

3. Without pictures, I can't confirm or deny the home's condition. Keep in mind, I'm in the bay area and may have different expectations from you. When I  imagine a 1940's home, I'm imagining possible asbestos material, lead paint, lack of insulation, outdated plumbing/electrical/water line sizing, sagging, etc. etc. not to mention the conversion of SFH to duplex to triplex. Were these done legit by a skilled tradesman or on the cheap. After all the house is going for 55k, it's going to need some work. BUT I could be completely wrong so I will have to take your word for it without pictures and an inspection done by me. Again, adjust your expectations accordingly  :)

With all that said, we are rooting for you and best of luck! Please keep us updated.

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Re: The Great $55,000 Triplex Saga
« Reply #24 on: October 22, 2020, 04:44:10 PM »
If youíre determined to buy this property in spite of the deadbeat tenant, would it be worth a preparatory conversation with him?  Something along the lines of ďI plan to make an offer on this property and want to let you know that Iím aware of your non-payment of a yearís worth of rent.  Apart from that, you seem like a good tenant and I would prefer to have you stay, but I would not tolerate a lack of rental payments.  So just letting you know that if that continues should I take ownership, I would begin eviction proceedings.  Iím giving you notice so you can decide what you want to do.Ē  I donít think this approach would put you in any worse a position than you would be otherwise and will give the guy a chance to do the right thing.  Itís easier to be dishonest when thereís no confrontation about it, but when directly faced with his behaviour, he may fall back into line

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Re: The Great $55,000 Triplex Saga
« Reply #25 on: October 22, 2020, 05:08:59 PM »
In many states the rules and processes for an eviction are much simpler when the new owner intends to reside in the unit themselves.

Why not just spend a few hundred bucks to get a good attorney who has handled such issues to advise and/or represent you?

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Re: The Great $55,000 Triplex Saga
« Reply #26 on: October 22, 2020, 06:27:40 PM »
1. Good to know the tenant is in his 30s, healthy, and employed. It's just a single 30's male? No girlfriend, kids, roommates? I wonder why he has a 3bed? As long as it is just him, the eviction process should be smoother. However, I'm still not sure what the best steps are going forward. I have a feeling he has no intent to move. After all, why would he? He has free housing and clearly mean enough to stiff an old man (current owner) for what sounds like no valid reason. He really has nothing to lose so I'm just going to believe he will fight it. Like others, I would bluff as hard as I can, but it's not that hard to google tenant rights. Regardless, I think we are all just warning you that this may be a bigger challenge than you think and for you to prepare accordingly.

Far as I can tell, he's divorced and has split custody of his kids (unsure how many there are, maybe 2?). He may also have a girlfriend, or friends of some kind that sometimes stay with him. I've seen 3 or 4 different vehicles parked there (all rather nice, newer vehicles).

I'm mentally preparing myself for this to be challenging. I know that if he doesn't buy the bluff I'm going to have to get creative. Offering cash for keys is my plan B, eviction/psychological warfare is my plan C. Hopefully things don't make it to C, because at that point the odds of him trashing the place out of spite start to go up. I'll move into one or both of the other units if I have to in the meantime. I'm not planning to place tenants until spring anyways.

If you’re determined to buy this property in spite of the deadbeat tenant, would it be worth a preparatory conversation with him?  Something along the lines of “I plan to make an offer on this property and want to let you know that I’m aware of your non-payment of a year’s worth of rent.  Apart from that, you seem like a good tenant and I would prefer to have you stay, but I would not tolerate a lack of rental payments.  So just letting you know that if that continues should I take ownership, I would begin eviction proceedings.  I’m giving you notice so you can decide what you want to do.”  I don’t think this approach would put you in any worse a position than you would be otherwise and will give the guy a chance to do the right thing.  It’s easier to be dishonest when there’s no confrontation about it, but when directly faced with his behaviour, he may fall back into line

So far I've been letting my agent handle all the talking with the deadbeat. She's got years of experience and is more confident at bluffing than I would likely be. If he isn't out by closing, I'll definitely talk to him. Probably to offer him cash for keys contingent upon him being out within 1 month and leaving the place in good condition. I'm not taking him on as a tenant no matter what he says/does. His word means nothing to me and after what he did to the current owner I have no interest in having him in one of my properties. I also know this guy as recently as last month spent a night in jail for not paying child support. I'd wager that if I threaten this guy with a visit from the local sherriff, he'll become more compliant.

In many states the rules and processes for an eviction are much simpler when the new owner intends to reside in the unit themselves.

Why not just spend a few hundred bucks to get a good attorney who has handled such issues to advise and/or represent you?

I already spoke to an attorney. His advice was that in the eyes of the law this guy is a tenant, and has all the rights of one. He encouraged me to try cash for keys, and failing that he told me to expect a long and drawn out eviction process.


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Re: The Great $55,000 Triplex Saga
« Reply #27 on: November 02, 2020, 05:54:23 PM »
He might take cash for keys. Speaking as someone who closed on a triplex in May and the then tenants decided to not pay rent. We finally got them out but yes, two units were trashed. I digress, you could negotiate with the seller to start the eviction proceedings during the settlement period. This would not eliminate your issue but it would get the ball rolling sooner. See what the requirements are but an agent of the owner can do the legwork and you can ask him to let you be that agent until closing.

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Re: The Great $55,000 Triplex Saga
« Reply #28 on: November 03, 2020, 08:18:29 AM »
I think it is a great buy if you can get the tenant out.

I would DIY a lot of the changes. Especially the floor. BTW, I would prefer LVP to laminate.

Start building up tools as you do jobs around the house. Harbor Freight is your friend for tools (at least until you start big tasks and you have a lot more houses). Also, YouTube has great DIY channels. I wish I had it when I got my first rental 25 years back.

Looking forward to pictures. Best of luck on your journey!

waltworks

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Re: The Great $55,000 Triplex Saga
« Reply #29 on: November 03, 2020, 11:34:43 AM »
Harbor Freight is your friend for tools.

...said nobody who regularly uses tools, ever.

-W

J Boogie

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Re: The Great $55,000 Triplex Saga
« Reply #30 on: November 03, 2020, 03:35:17 PM »
Harbor Freight is your friend for tools.

...said nobody who regularly uses tools, ever.

-W

Crowbar, sledgehammer, shovel, broom, dustpan, work gloves, knee pads, dolly, utility knife. Tools along those lines aren't bad to buy at HF, but you're far better off going to Menards or something where you won't pay a whole lot more for the base quality stuff but you have plenty of decent quality tools available too.

waltworks

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Re: The Great $55,000 Triplex Saga
« Reply #31 on: November 03, 2020, 05:29:30 PM »
A harbor freight hammer (let along sledge hammer, yeesh) is straight up dangerous. I have seen even basic hand tools from them come apart spectacularly. Busted knuckles is your best case scenario...

They sell to idiots and cheapskates who don't know what they're buying. That's the entire business model. Steer very, very clear.

-W

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Re: The Great $55,000 Triplex Saga
« Reply #32 on: November 05, 2020, 10:11:25 PM »
Sounds promising. You'll certainly learn a lot.

Look at the statute of frauds, while I am not a PA lawyer, in general in most places in the country a transaction involving (a) real estate; or (b) performance over a year, requires a writing and cannot be done orally. Where there is a written lease that later goes month to month, then the discussion can get nuanced. Layer on tenant protections and covid, it's possible what the lawyer is telling you is right, but I'm a bit surprised. I would be curious if that lawyer has actually done an eviction in your jurisdiction.

Also, I am kind of amazed that a reasonable budget to put a roof on a triplex is 10K in your area. Not knowing anything, I would have spitballed 2.5 to 4x that.

Michael in ABQ

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Re: The Great $55,000 Triplex Saga
« Reply #33 on: November 06, 2020, 07:42:13 AM »
Eviction sounds fairly straightforward.

https://www.nolo.com/legal-encyclopedia/how-evictions-work-pennsylvania.html

Serve the tenant (I'd recommend paying someone the $50 or so to serve them so there's a record, not just putting the notice on their door).

They have 10 days for non-payment of rent.

If he doesn't pay you go file the eviction paperwork at the courthouse.

If he still doesn't pay or leave you get the County Sheriff to physically remove them from the premises at which point you can now change the locks, etc.


All told this process may take you a month but you're already getting $1,000 to cover the expenses and in the meantime you could live in one of the other units. Did the now expired lease have any clause about holdover, reverting month-to-month tenancy, etc.? I would use that lease and the day you close on the property let the tenant know in writing that their rent is due. Even in a perfect world you'd probably never have a chance getting any of the back rent. But just because the current owner didn't collect the rent doesn't mean he somehow waived any right for the landlord to ever collect rent.

Valley of Plenty

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Re: The Great $55,000 Triplex Saga
« Reply #34 on: November 12, 2020, 01:05:02 AM »
Hey everyone, sorry for the lack of updates these last couple weeks. I came down with COVID towards the end of October and as a result was stuck in quarantine until yesterday. As such, I didn't have a chance to go take any pictures due to being trapped in my apartment. I'm all better now!

Closing date is set for 11/18. "Tenant" has been notified. My agent and I are following up with him on Friday to see if he's actually getting out; if not, I'll be taking the $1,000 from the seller and using it to offer cash for keys contingent upon him being out of the property and leaving it in good condition by 12/18. I'll be putting my 1 month notice in for my own apartment as soon as the closing is done, so I'll have until the end of the year to move out. I really expect the tenant will take cash for keys (a free $1,000 when weighed against having an eviction on his record should be a no-brainer), but if he doesn't I'm going to move into one of the other units after 12/18 and begin the eviction process.

No matter how this plays out, I'm confident that I'll be able to maneuver myself into an excellent position over the course of the next year. My optimism guns are locked and loaded!

More updates soon to follow.

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Re: The Great $55,000 Triplex Saga
« Reply #35 on: November 12, 2020, 01:40:57 AM »
Good luck.  I am glad you have recovered, I hope it did not hit you too hard.

Locally, we have strong tenant's rights, and one of the only ways to "evict" someone is if the landlord or a close relative (e.g., child) of the landlord is moving into the suite occupied by the tenant.   The landlord needs to give 2 or 3 months notice and to pay out 2 months of rent to compensate.   IDK if that is possible in PA, but look into it. 

Most buyers would not be moving into the triplex, so you may have an advantage on this that others did not have.

Valley of Plenty

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Re: The Great $55,000 Triplex Saga
« Reply #36 on: November 12, 2020, 02:18:03 AM »
Good luck.  I am glad you have recovered, I hope it did not hit you too hard.

Locally, we have strong tenant's rights, and one of the only ways to "evict" someone is if the landlord or a close relative (e.g., child) of the landlord is moving into the suite occupied by the tenant.   The landlord needs to give 2 or 3 months notice and to pay out 2 months of rent to compensate.   IDK if that is possible in PA, but look into it. 

Most buyers would not be moving into the triplex, so you may have an advantage on this that others did not have.

In PA a landlord is required to honor a tenant's existing lease when purchasing a property, but there is no obligation to renew the lease. If the information I received from the attorney is correct, this "tenant" is on a month to month lease. So when I close on the property I just need to tell him that I won't be renewing his lease. He'll have one month, after which his "lease" will be expired and I can serve him with a notice to quit.

Valley of Plenty

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Re: The Great $55,000 Triplex Saga
« Reply #37 on: November 12, 2020, 09:56:48 PM »
Update regarding the tenant/squatter situation:

My agent went out to the property today and spoke to the guy. She tells me that most of his belongings are now packed up in boxes, and the guy says he is trying to find a place but hasn't been able to find a suitable apartment. He is asking if he could be permitted to move into one of the other two units while he continues looking. He says he is willing to sign a lease and pay rent. My agent thinks I should consider the offer, as she believes that the only reason the guy hasn't been paying rent is because the seller is a pushover.

I'm conflicted on how to handle this. On one hand, I really have no desire to enter into a contract with someone who I know is willing to take advantage of people when given the chance. But on the other hand, this seems like an easy way to get him out of the unit that I intend to move into, without the hassle of having to pursue an eviction. It would also allow me to cashflow the property much sooner than expected (seeing as I hadn't intended to place tenants in the other two units until spring), provided he actually pays.

Thoughts on this? Should I be open to signing him on for a month to month lease in one of the smaller units?

PMJL34

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Re: The Great $55,000 Triplex Saga
« Reply #38 on: November 12, 2020, 09:57:57 PM »
Valley of Plenty,

Would it be more leverage or a better cause eviction if you actually move into his unit?

In my city, owner occupy is a reason to evict. Once you move into the other units, you may not get to use that claim. Something to think about.

Also, around here, keys for cash for an inlaw unit is 50K+ (I read about one in the 100K+ due to it being a "protected class"). Again, this is for in law units. I'm glad you the rest of the world is not subject to this insanity. I hope your tenant appreciates your kind $1000 and leaves without a fight.

Thanks for keeping us updated and best of luck!

Edit: you provided an update 10 seconds before my comment lol.

a hard NO from me to let this guy rent another unit, but that's my 2cents.

Valley of Plenty

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Re: The Great $55,000 Triplex Saga
« Reply #39 on: November 12, 2020, 10:09:41 PM »
Valley of Plenty,

Would it be more leverage or a better cause eviction if you actually move into his unit?

In my city, owner occupy is a reason to evict. Once you move into the other units, you may not get to use that claim. Something to think about.



By state law anyone purchasing a property with tenants is required to honor the terms of any existing leases. It doesn't matter if I intend to occupy the unit myself, I still have to honor the existing lease. In this case, that means giving him 1 month to continue living there rent free (as per his verbal agreement with the seller). After the month is up, I can simply state that I am choosing not to renew the lease, and serve him a notice to vacate.

However, this guy doesn't seem to be very familiar with the law, and as a result my agent has successfully convinced him that he has to be out by closing. He seems to be hustling around now trying to find a place before the deadline, which is in 5 days. I'm going to give him a call in the morning and see if we can come to some kind of understanding.

On a positive note, it's looking like I won't need to offer cash for keys after all.
« Last Edit: November 12, 2020, 10:13:49 PM by Valley of Plenty »

former player

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Re: The Great $55,000 Triplex Saga
« Reply #40 on: November 13, 2020, 03:11:23 AM »
If this guy is struggling to find somewhere else it might mean that he is learning the benefit of actually paying rent in order to have somewhere to live.  On the other hand, if he gets desperate he might think about finding out what his rights are and decide to stay in place without paying rent. No way of knowing, really.  If he moves out I would definitely move directly into the unit he is currently in rather than one of the others.   

I would have a candid conversation with the current guy along the lines of "I know you stopped paying rent to the current owner.  If I allow you to move into one of the other units what can you offer me to make sure you don't do the same to me?"  You can always say "it's still no" at the end of the conversation, but on the other hand you might end up with 3 or 6 months' rent in advance.  And have a proper lease signed by him before he gets the keys to the other unit: never make a single verbal agreement with this guy but have everything in writing and signed, always, before anything happens (in fact, do this for all tenants, always).

Dicey

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Re: The Great $55,000 Triplex Saga
« Reply #41 on: November 13, 2020, 03:42:13 AM »
IIRC, in my state, there are restrictions about payin/collecting rent in advance. I'd be inclined to give him the boot, because he has shown you his true colors.

lhamo

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Re: The Great $55,000 Triplex Saga
« Reply #42 on: November 13, 2020, 08:31:28 AM »
Do you have a clear understanding of how Covid has affected the eviction process in your location?  In many cities evictions have been halted entirely.  I would be wary of offering this guy a new lease, even month to month, on one of the other units unless you are SURE you can evict him if he stops paying.

AerynLee

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Re: The Great $55,000 Triplex Saga
« Reply #43 on: November 13, 2020, 08:37:48 AM »
My first instinct is that he doesn't have an adequate amount for security deposit + first months rent which is why he's having problems finding a place. If that's the case then I wouldn't want him moving into another unit in the triplex because how long can he pay rent if he can't even come up with a security deposit after so long of paying no rent? You might still want to offer cash for keys just to get him out quickly

former player

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Re: The Great $55,000 Triplex Saga
« Reply #44 on: November 13, 2020, 08:40:47 AM »
One further thought against offering him a new tenancy: it would look like a kick in the teeth to the man who sold you the property.

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Re: The Great $55,000 Triplex Saga
« Reply #45 on: November 16, 2020, 07:22:55 PM »
He is struggling to find a place, which may be the only reason he ends up causing you problems.... so... can you help?

e.g., give him more money, like another 1/2 month rent?  Rent a van for him on moving day? 

What about renting one of those "pod" storage boxes for him for a couple of months (that arrive for him to load up and are delivered upon request to the next place? -- once he gets his next place, he just arranges for delivery, or starts to pay for storage himself.

A tip I learned was to be the nice guy with a  smile that helps the tenant move out easier. if that means making it easy for him to put stuff in storage while he couch surfs, so be it.

 I would rather put a bit of $$ into it to help a guy (get) out than rent another unit to him.

Valley of Plenty

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Re: The Great $55,000 Triplex Saga
« Reply #46 on: November 17, 2020, 09:43:42 AM »
I am shaking with excitement as I type this most recent update. I am delighted to report that the $55,000 triplex saga is now the $45,000 triplex saga!

On Friday I spoke with the tenant/squatter, who at this point had moved most of his things to his parents' house but was having a hard time finding a suitable place to rent due to needing a garage (evidently he works on cars as his primary source of income). To make a long story short (I can post the full story if people want it but it is quite long) he is quite likely not nearly as much of a deadbeat as I had originally thought. Turns out he was a paying tenant for 3 years who stopped paying because the owner wouldn't pay to fix some pretty serious issues, and also because the owner had him do some repair and renovation work for which he was never compensated (guy has extensive construction experience). His story seems to check out, based on some issues with the property I was not previously aware of that he brought to my attention.

Issue #1 - The roof is worse than I thought. It has been leaking in the attic of the 3 bedroom unit for a long while, and as a result there is a dormer in a serious state of disrepair. This is in an unfinished attic that is mostly for storage, which explains why I didn't look into it too closely when I went through the first time. The tenant showed me clear signs of recent water damage, though the finished portions of the house are so far unaffected.

Issue #2 - The basement of the 3 bedroom unit has water coming into it when it rains. After some investigation, I determined the cause to be terrible gutter placement (the gutters dump all the water directly in front of the house, to then have it seep in under the front porch). Proposed solution is to install a new seamless gutter that loops everything around to the back of the property and dumps it downhill, as nature intended.

Issue #3 - There is a curious pipe sticking out of the floor in the basement. It didn't stick out as anything significant the first time I went through, but I have now been informed that it is an open sewer line connected to the borough waste-water system. Weird right? Worse still, apparently once or twice a year the borough sewage system backs up enough to cause raw septic waste to spew forth from this pipe. I am not pleased that I was not informed of this by the seller, who admitted that he was aware of the problem once I asked him about it (though he tried to downplay the seriousness of it). Fortunately, my roommate is a welder and is 100% confident that he can weld a cap onto the pipe and ensure nothing comes out of it ever again.

Issue #4 - The upstairs bathroom in the 3 bedroom unit is shedding tiles like a christmas tree in January. I missed this the first time because of a cleverly placed rug. The subfloor beneath is water damaged and will need replaced before re-flooring.

In light of all these newfound issues, I called for a hard stop to the closing process until I could have a contractor go through and give me a full estimate for the cost of all repairs needed to get the property to meet my standard, which is structurally sound and ready to rent. I also brought in a roofing contractor to get an estimate for a new roof, which I now believe must be installed before winter in order to prevent any further damage to the structurally compromised dormer. I received both of those estimates today, for a grand total of $20,000 - which is exactly what my original repair budget had been. This estimate was for entirely contracted work as well, which means I'll likely save thousands with the projects I'm able to DIY.

Good news, right? This put me squarely back at my original cost projection, and I would have been comfortable closing at this price. However, I was none too pleased with learning about all these issues from a supposedly "deadbeat tenant" 5 days before the scheduled closing. Also, I knew that the seller had priced the house at $55,000 along with the assurance that very little needed done to fix the place up. Figuring it couldn't hurt to check, I called up the seller today and shared the results of the estimates with him. I told him that in light of all these new issues, I felt it reasonable for us to revisit the sale price. He asked what price I had in mind, and I offered up $45,000, fully expecting him to counter with $50,000 at least. To my surprise and delight, he agreed to $45,000!

As we speak my agent is drafting an updated sales agreement with the new purchase cost. We're hoping to close on Friday. The tenant/squatter has vacated the 3 bedroom unit, and I am working on the terms for a month to month lease to put him in the 2 bedroom unit, while also allowing him continued use of the garage. He knows that he is on a very short leash, and that if he doesn't respect the terms of the lease I will not be renewing it. I had intended to leave the unit vacant until spring, so I have very little to lose here. He has even agreed to help me with renovations, and I have agreed to offset his rent in exchange for good work.

The optimism guns are blazing, my friends.

Edit: Oh, and the roofing company will be installing a metal roof before winter, for the price of $13,650. Surprisingly this is cheaper than shingles, which would have cost me $16,500.
« Last Edit: November 17, 2020, 09:45:45 AM by Valley of Plenty »

couponvan

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Re: The Great $55,000 Triplex Saga
« Reply #47 on: November 17, 2020, 09:55:39 AM »
This is sounding like a win/win/win situation.  I have been lurking along following these posts.

SunnyDays

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Re: The Great $55,000 Triplex Saga
« Reply #48 on: November 17, 2020, 03:53:00 PM »
Wow, talk about luck.  Cha-Ching!

Valley of Plenty

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Re: The Great $55,000 Triplex Saga
« Reply #49 on: November 17, 2020, 06:45:21 PM »
Wow, talk about luck.  Cha-Ching!

I like to think that I've created my own luck. Every win I've had over the course of this (including finding the property in the first place) can be traced to a specific action that I took. I've also pressed on through a few obstacles that would have deterred a less determined and less optimistic investor. Indeed, even many of my investing friends and some mustachians said that they themselves would probably not go through with the purchase of a property with a non-paying tenant in the middle of a global pandemic that complicates evictions. Others urged me to back out as soon as the new issues came to light, saying things like "this is going to cost way too much to fix, maybe even as much as the total purchase price!" before I had even brought in a general contractor to get estimates.

I acknowledge that I'm not out of the woods yet, and there are still ways that this could go sideways. But overall I believe that my persistence and resolve has facilitated slam dunk after slam dunk on top of an already amazing deal.

I can't wait to re-run the numbers and find out what kind of return I'm looking at now.