Aside from the snoring, his sister’s issues, and lack of sleep due to watching a shitload of Netflix, Brooklyn Mike’s Shangri-La was awesome this month. Before going on the trip, something pretty cool happened... I found Property 5.
I honestly had no intention of buying Property 5 so early in the year. But one day, realtor.com gave me my daily listing, and I saw a property that I had seen a long time ago.
Back in 2008, I saw this property on sale for $90,000. I didn’t have the money to buy it then, and figured that it would never be on sale again. So when I saw this property pop up nine years later, I was intrigued. And for good reason…
I wanted a property to have at least 4 units, and Property 5 has 4 units. Two are 2-bedroom, while the other two are 1-bedrooms. I wanted a property with a garage, and this one has a great two-car garage with a workshop AND an upstairs for more storage. But the clincher was the property's attic:
I mean, this is it. While I would have loved a finished attic apartment, a massive attic with enough room to build a big 2 bedroom apartment is good enough. With most of my requirements met, I made the decision to start looking for financing. Since Ed only deals with commercial loans (stores or buildings with more than 5 units), he hooked me up with a residential mortgage company. The loan officer, Chuck, asked me questions about my assets. With an estimated closing cost of around $36,000, my plan was to use the $25,000 LOC and cash in my bank account for the remainder. The problem with this plan was two-fold: 1) It would leave me with no money for reserves and; 2) I would have an added debt to pay along with the mortgage payment, which would leave me with very little monthly income. A couple days later, Chuck calls me while I’m at work:
Chuck: Hey, you know, I was going through your assets and had a question for you. Instead of using money, what do you think about refinancing Property 4 since you own it outright? I mean, you won’t have to pay for anything out of pocket, and would get at least $10,000 in cash after the down-payment and closing costs. What do you think?
Me: Um… yeah. Sure!
Sweet... just sweet! With the financing set to proceed, it was time to check out the property and negotiate a price. I was able to see all except one of the apartments, but I made sure my lawyer Marvin Wassle put it in the contract that I see the apartment before closing. Most of the apartments looked good but will need work to get it “easy turnover” ready.
The issue of price was the last hurdle. The place was listed for $125,000 which was a joke to me. The apartments needed work and the roof will need to be redone. So my offer was $105,000. That was rejected, but then the real estate agent had an idea. He said:
“One thing you can do is to purchase the property for $125,000 with an addendum to take off $20,000 for the roof repair. So you would pay the same $105,000 but with a $125,000 price tag.”
Now why the hell would I want that? Thinking about it, I realized that he was a dual agent who gets 3% of the purchase price. So, if the property “sells” for $125,000, this jerk gets an extra $600 in commissions while I’ll be stuck with higher taxes based on the higher sales price. So I told him no. Then he said that the owner has another offer that is higher than mine. So I told him that my final offer will be $109,000 and I’ll waive the home inspection. This would mean that the seller won’t have to deal with any hurdles regarding roof repair concessions. I felt confident because I had Handyman Alfonso walkthrough the place with me, and we both agreed the roof will last another 2-3 years before it’ll need a full repair. So I waited for the agent to call back with the final decision. And waited. And waited. I swear, in that time my mind was going crazy:
“Should I have offered more for the final offer?”
“What if I lose this property over a difference of a thousand dollars?”
“I should have gotten my own agent. I may have gotten a better view of what’s going on.”
After a full day went by with no response, I cracked. But instead of calling to state that I want to up the offer, I texted him this:
“Quick question. What’s the price that you’re reasonably sure would get the offer accepted? I found another property whose numbers work as good as this one at the same price, so I’ll have to go for that one if this one doesn’t work out. I personally know the owner so I won’t have to wait to get an accepted offer.”
Rather than cracking under pressure, I decided to put the pressure on them. I knew that my offer was good, and I didn’t want them taking time to field other offers and make me wait longer. 3 minutes later, he responded:
“Can you call me? I got a verbal that they are accepting your offer but don’t have it back signed yet.”
And that was that. An hour later, I got the written approval, and that’s how I got my offer accepted for Property 5.
Once I close on the property, I’ll write a post about the closing process and how much hassle I had to go through. The moral of this story is that I definitely got better at buying properties. I was able to see through the real estate agent’s bullshit and stick to my offer for the property. There was pressure to up my offer, but my experience allowed me to calm down and turn the pressure onto the seller and his agent. This experience will come in handy during the rest of the process.
I honestly had no intention of buying Property 5 so early in the year. But one day, realtor.com gave me my daily listing, and I saw a property that I had seen a long time ago.
 |
| Big Ass Property |
Back in 2008, I saw this property on sale for $90,000. I didn’t have the money to buy it then, and figured that it would never be on sale again. So when I saw this property pop up nine years later, I was intrigued. And for good reason…
I wanted a property to have at least 4 units, and Property 5 has 4 units. Two are 2-bedroom, while the other two are 1-bedrooms. I wanted a property with a garage, and this one has a great two-car garage with a workshop AND an upstairs for more storage. But the clincher was the property's attic:
 |
| Isn't she lovely?! |
I mean, this is it. While I would have loved a finished attic apartment, a massive attic with enough room to build a big 2 bedroom apartment is good enough. With most of my requirements met, I made the decision to start looking for financing. Since Ed only deals with commercial loans (stores or buildings with more than 5 units), he hooked me up with a residential mortgage company. The loan officer, Chuck, asked me questions about my assets. With an estimated closing cost of around $36,000, my plan was to use the $25,000 LOC and cash in my bank account for the remainder. The problem with this plan was two-fold: 1) It would leave me with no money for reserves and; 2) I would have an added debt to pay along with the mortgage payment, which would leave me with very little monthly income. A couple days later, Chuck calls me while I’m at work:
Chuck: Hey, you know, I was going through your assets and had a question for you. Instead of using money, what do you think about refinancing Property 4 since you own it outright? I mean, you won’t have to pay for anything out of pocket, and would get at least $10,000 in cash after the down-payment and closing costs. What do you think?
Me: Um… yeah. Sure!
Sweet... just sweet! With the financing set to proceed, it was time to check out the property and negotiate a price. I was able to see all except one of the apartments, but I made sure my lawyer Marvin Wassle put it in the contract that I see the apartment before closing. Most of the apartments looked good but will need work to get it “easy turnover” ready.
 |
| Tell me... TELL me this doesn't look almost exactly like Thomas' apartment when I first viewed Property 3. Where these hoarders come from, I dunno. But it's a clear sign that the property owner doesn't care. Just get the money and do no inspections. |
 |
| Carpet in the kitchen. Seriously?? Ugh! |
 |
| Carpet in the bathroom. Almost as bad as kitchen carpet |
The issue of price was the last hurdle. The place was listed for $125,000 which was a joke to me. The apartments needed work and the roof will need to be redone. So my offer was $105,000. That was rejected, but then the real estate agent had an idea. He said:
“One thing you can do is to purchase the property for $125,000 with an addendum to take off $20,000 for the roof repair. So you would pay the same $105,000 but with a $125,000 price tag.”
Now why the hell would I want that? Thinking about it, I realized that he was a dual agent who gets 3% of the purchase price. So, if the property “sells” for $125,000, this jerk gets an extra $600 in commissions while I’ll be stuck with higher taxes based on the higher sales price. So I told him no. Then he said that the owner has another offer that is higher than mine. So I told him that my final offer will be $109,000 and I’ll waive the home inspection. This would mean that the seller won’t have to deal with any hurdles regarding roof repair concessions. I felt confident because I had Handyman Alfonso walkthrough the place with me, and we both agreed the roof will last another 2-3 years before it’ll need a full repair. So I waited for the agent to call back with the final decision. And waited. And waited. I swear, in that time my mind was going crazy:
“Should I have offered more for the final offer?”
“What if I lose this property over a difference of a thousand dollars?”
“I should have gotten my own agent. I may have gotten a better view of what’s going on.”
After a full day went by with no response, I cracked. But instead of calling to state that I want to up the offer, I texted him this:
“Quick question. What’s the price that you’re reasonably sure would get the offer accepted? I found another property whose numbers work as good as this one at the same price, so I’ll have to go for that one if this one doesn’t work out. I personally know the owner so I won’t have to wait to get an accepted offer.”
Rather than cracking under pressure, I decided to put the pressure on them. I knew that my offer was good, and I didn’t want them taking time to field other offers and make me wait longer. 3 minutes later, he responded:
“Can you call me? I got a verbal that they are accepting your offer but don’t have it back signed yet.”
And that was that. An hour later, I got the written approval, and that’s how I got my offer accepted for Property 5.
Once I close on the property, I’ll write a post about the closing process and how much hassle I had to go through. The moral of this story is that I definitely got better at buying properties. I was able to see through the real estate agent’s bullshit and stick to my offer for the property. There was pressure to up my offer, but my experience allowed me to calm down and turn the pressure onto the seller and his agent. This experience will come in handy during the rest of the process.
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