E Pluribus Unum

This Latin phrase is on most(/all?) of the coins made by the U.S. Mint. I never took Latin (only two semesters of Spanish in college), so I never really knew what it meant. I took a stab at it long ago and thought it always mean 'A People United' - but, alas, I was wrong. The correct translation is 'from many, one' (or 'out of many, one'), which sounds a lot better than my guess. :-P

Anyway, this phrase came to my head as I was brainstorming the other day. I am really starting to get interested in larger multi-family properties. I figure my snail's pace of buying 1-2 SFR's per year (and I didn't even buy one this year) will mean I'll probably be able to retire when I'm about 65 (IOW, I'll just retire still being slaved to my JOB.) I have to speed-up my plan - a LOT.

So, I've been throwing around the idea of buying larger multi-family properties, like small-to-medium sized apartment buildings. Nothing too big at the beginning, of course, but something in the 10-15 or 10-20 unit range. Now at these sizes, one could be looking at doling our some big bucks just for a down payment. I know a year or so ago, I was looking at a 24-unit in town that had a list price of about $1.2M. Even IF I could get a loan for the property, I'd still have to fork over 20% (or $240,000) just for the down payment. Even if I HAD $240,000 in liquidity, I'd still be apprehensive about buying the property as I'd then be sweating about having all my eggs in the one basket.

Then I read some success stories from individuals who decided to think really BIG and started partnering with other investors on deals. Instead of going it alone and hoping a deal in a lifetime would come knocking, why not partner with others and become 'from many, one'. Either find a group of RE investors who already have such a partnership, or develop one myself.

I guess the first question would be, "But you don't have any experience in such a thing, what makes you think you can succeed with this?" And, as is the answer to most questions that ask me to extend my comfort zone - 'because I can.' So now comes the next chapter in my REI venture where I educate myself on how to partner with others to purchase larger multi-family properties. I will still be looking at 1-4 unit residential properties, but my focus now will be on larger properties. For those that have been following my blog for some time, you may remember when I was mulling the 21-unit for $75,000 that needed a major rehab. If you guess I am kicking myself now for not buying it myself or, better yet, through a partnership agreement, you're correct. That was one of those "deals of a lifetime" and due to my novice experience at what to do, I let it slip through my fingers. I can bet that it won't happen again.

BTW, for those investors that have been with me from the beginning (or anyone else, for that matter) who feel interested in going down this same path, send me an private email and let's talk more about it.

Deposit Refunded and Tenant

Deposit

My wife called me earlier to tell me we received the EM deposit for the 4-plex. I had this nagging feeling the past week that we wouldn't get it and it'd be hell trying to get back (such is my luck). But I actually had some good news for a change. We are still out the $600 for the inspection, but in the end I'm thankful I got it done as it would have been a very bad lesson learned if I went ahead with the purchase blindly and gotten sued later. ALWAYS get an inspection - ALWAYS.

Tenant

I can't remember if I mentioned this already, but we canceled the sewer account for House #1. This means the tenant will HAVE to set up sewer service herself, or go without sewer AND water. Texas Law has provisions in place to protect the tenant if they are behind on rent, but that's only if the tenant pays the landlord for utilities. In this case, all the utilities for the property are to be managed by the tenant, therefore, I am covered in that aspect. Actually, according to the lady at the sewer office, we should have canceled the service each time we got a new tenant. However, I kept getting mixed signals from them about what to do. Now I know.

I tried calling the sewer office this morning to ask if the tenant ever started service, but never got a response. Last I heard, the sewer office sends the water company their delinquent list today and the water company will then proceed to turn the water off.

I wanted to just go ahead and start the eviction, but my wife wanted to wait. However, I've convinced her that it is in our best interest to go forward. In the interim, I sent the tenant a certified/return-receipt letter explaining her being delinquent on both the late charges and the sewer fees. I've given her until Dec 3rd to bring everything up to date. I didn't tell her the consequences if she doesn't due mainly because Texas Law has some quirkiness as far as the language to use for certain instances. Even when I post a "Notice to Vacate" (the first "official" start of the eviction), I cannot use the word 'eviction' in the notice.

4-Plex: Dead Deal

I finally received an email from the agent, regarding the 4-plex. It was basically a cut-n-paste email she received from the Seller in response to our request made earlier this week. In it, the Seller basically says the items the inspector recommended needing repaired were not major and are things he could - and would - do himself. Additionally, he said the heating units and water heaters the inspector recommended were old and were nearing the end of their usefulness would not be replaced. He said that a lot of the work we requested to be done was already done - by him. And, get this, he said due to the work he has and will do, he will be raising the sale price.

I called my wife the instant I finished reading the email - we both laughed (well, I did anyway - she was fuming mad).

I told her I would send the agent an email and try to follow-up with a phone call. So, after getting off the phone, I hurredly wrote the following email response to the agent:

Hi {Agent},

Based on the email from the Seller, we would like to void the deal and have our ${xxx} deposit returned. We are not comfortable AT ALL with the Seller making these repairs himself as we will ultimately be held liable if something occurs later with a tenant and/or visitor to the property. The Seller may assume some of the inspector's recommendations are not accurate, but we feel a LOT more comfortable with a licensed inspector's recommendations than with the Seller's. We had asked that the major repairs be made by a licensed professional and not the Seller himself due in whole to the liability issue. Based on the inspector's own observation that the Seller had tampered with the electrical system illegally in the past further solidifies our concern with the Seller's repair work. Additionally, the property was originally listed for $30,000, but later changed to $32,000, which we wrote the contract for. If the Seller wants to raise the price again, he is all but welcome to do so, however, we will not be purchasing the property based on a new, higher price, nor will we be pursuing the deal further since the repair work was not adequately completed by a licensed professional as outlined above.

Please relay this information to the Seller and send us our deposit as
soon as possible.

Thank you for your patience and understanding.

Regards,
{Our Names}

I'm pretty sure based on the way things have gone, we should have no problem getting our deposit refunded, but the way our luck has gone this year ...

Tenant's Lease

Back in 2005, when I purchased House #1, I used a RE agent to find a tenant for the property. During that process, the agent had sent me several different forms that Realtors in the state of Texas use, including a Lease. Therefore, it has been combed over repeatedly by lawyers and is rock solid. Ever since then, I've been using the same lease for tenants I get on my own.

Last night, I decided to go through each clause to see exactly what remedies I have with this current tenant. One clause in particular stood out:

APPLICATION OF FUNDS: Regardless of any notation on a check, Landlord may apply funds received from Tenant first to any non-rent obligations of Tenant, including but not limited to, late charges, returned check charges, repairs, brokerage fees, periodic utilities, pet charges, and then to rent.

So, basically, since the tenant has not paid us late charges for November's rent AND not paid the sewer bill for October, her next rent check (if there is one or even if she is still living there) will be applied to those two charges first.

Additionally, under the DEFAULT section of the lease, it says:

B. If Tenant fails to timely pay all amounts under this lease or otherwise fails to comply with this lease, Tenant will be in default and:
(1)Landlord may terminate Tenant's right to occupy the Property by providing Tenant with at least one day written notice to vacate;
(2)all unpaid rents which are payable during the remainder of the lease or any renewable period will be accelerated without notice or demand;

I especially like (B)(2), and verified this with the Texas Property Code. Basically, it says that if the Tenant fails to pay rent and they are given notice and eventually evicted, they are liable to pay the Landlord for ALL future rent during the term of the lease as well. The tenant signed a 12-month lease and has only been there for three months, so technically that means they will owe me for all unpaid bills PLUS nine months of accelerated rent. Of course, I doubt I'd ever see any of the money, but it's nice to know I have some rights.

I called the sewer office late yesterday afternoon and canceled the sewer account, so the tenant should be receiving a nasty-gram from them soon. My wife wants to wait and see if this gets the tenant to smarten-up and pay, but I want to just file a Notice to Vacate now. What I think we'll end up doing is giving the tenant until the day the rent is due for December, and if she is even one minute late with rent AND all unpaid charges, I'll send her the Notice to Vacate and start the eviction process.

Last Straw With Tenant

Well the tenant finally pushed the final button with us this morning. She was already on thin ice due to not paying the late rent charges yet, and now the sewer bill fiasco is the latest (and LAST) thing.

When she first moved in, I gave her a list of utilities that she had to turn over to her name - one of which was the sewer. In this city, the sewer and water are billed by two different entities, however, they have an agreement whereby if one of the utilities is terminated then BOTH are terminated. The way the water company works is that the account is always in my name, but is temporarily transferred to the tenant when they move in and I fax over the request to the water company (which I did). However, the sewer was always confusing to me and I could never get a straight answer. For the last two tenants, they would open an account which would then put my account on "standby". This was always my understanding, and I found out it was correct - but with some caveats.

So, back to this tenant. We received a bill from the sewer office for service in September, so obviously the tenant never set up service. I stopped by to talk to her about it, along with picking up the October rent, on Oct 3rd. She paid me for the rent and reimbursing me for the sewer bill. I also gave her the form she needed to submit to the sewer office to open an account in her name. On October 27th, I had the chimney sweep go out to the house to clean the chimney. I was there to meet him, and asked the tenant about the sewer account. She said that she did it. I mentioned in a recent blog entry what occurred next - we received ANOTHER sewer bill, which turned out to be because she STILL hadn't set up sewer service. My wife called her and said she had until today (Thursday) to set up the account and pay the current bill, or we would cancel our account. IOW, she would HAVE to set up service if she wanted water, since the sewer and water companies have the agreement. Which leads us to today.

We hadn't heard from the tenant, so my wife calls the sewer office, and lo-and-behold, it is STILL in our name. However, she said the tenant left a them a message, which she still needs to return. The lady said that when she calls the tenant, she's going to tell her that service will be terminated tomorrow (including the water) and that she will have to come in and start the service in order to avoid that from happening. She said this occurs a lot with tenants and usually this will be enough to get them to come in, but I kind of doubt it with this one. She said I would have to come in tomorrow before 4pm to terminate the account in order for service to be disconnected on Friday, or else it will have to wait until Monday.

Fun fun.
Update: - Well it seems I'm confused for a reason regarding the sewer people as my wife has been on the phone with them and the water company, and neither seem to be on the same page. I'll spare the details, but suffice it to say that this will not be resolved anytime soon. It appears the water company can't just shut off the water due to Texas law, since the tenant is paid up with them. What they can do is have us terminate our account with the sewer people, and then the sewer office will send the water company (and tenant) a formal letter of default. They must give the tenant some time to come in and open an account, though, so it looks like the tenant will have until after Thanksgiving to open an account.

Tenant and 4plex (what else?)

Tenant

My wife and I have had about all we can take from this tenant. She was two days late with her rent check, so my wife called and talked to her. The tenant said she would send the check out that day, along with the late charges. A couple of days later, we get two money orders that total the amount of the rent - IOW, no check for the late charges. So, my wife calls her again, and the tenant plays forgetful. She says she'll drop the check in the mail that day. This is last Wednesday. It only takes mail about two days to get to us from anywhere around Austin - max. Saturday, we check the mail, and no check. Yesterday is a holiday, so the mail didn't run, however, my wife noticed in the mail Saturday that we got a bill from the city for sewer services. The bill is noticeably different, and has a different account number, so we believe at first that it's a courtesy copy to us and the tenant got the actual bill (especially, since it has a different account number). The city offices were closed Monday for Veteran's day, so we had to wait until today to call the city and confirm. Well, we were wrong. The city changed the billing (without any notice to us, mind you), which included changing the account numbers. The lady there confirmed that we were still the account holders, and the tenant has never switched it over. Of course, my wife was fuming (as was I, since the tenant told me twice she had done it). The lady at the city said what we should do is just cancel the account. That way the tenant would HAVE to open an account or the water would be disconnected since the city and water company have an agreement as such. The only downside is that we would have to pay some reconnect charges in the future to have it turned back on in our names, which I think I'm willing to do at this point. So, my wife called the tenant and told her the news to which the tenant again plead dumb. My wife told her that she was going to call the city back this Thursday afternoon, and if the account is still in our name that we would go in Friday, pay the outstanding charges, have the account disconnected, and that the tenant would owe us the amount for the bill. We'll see what happens.

4-plex

This deal seems to be dragging, and dragging, and ... I got an email from the agent last week saying she would forward my options to the Seller. Yesterday, she sends me another email saying she met with the Seller and gave him my email, specifying my options and that he requested a few days to ponder his choices. She also reminded me that the property was being sold "as is" "where is", and I was made aware of this beforehand. I wrote her back today saying I realized it was "as is"/"where is", but based on the information I was given beforehand, including a copy of the Selelr's Disclosure, it was in worse shape than not only I was led to believe, but probably even worse than the Seller realized. I told her I was fine with giving the Seller a few days to ponder the decision, and to get back with me ASAP once he made up his mind.

4-Plex: Options Sent

I just sent the agent an email, detailing what options we have available based on the contractor's estimate, etc. Those were:

1. Seller makes all repairs prior to closing. These not only include all the items in the contractor's estimate, but also those things that were left out and we thought were major, including a new gutter system. If the Seller agrees, we also request proof the repairs were completed by a professional prior to closing.

2. We buy the property "as is" and make all the repairs ourself. I told her if the Seller agrees to this option, we would definitely have to renegotiate on the list purchase price.

3. Neither party makes the repairs. The contract is voided, we get our deposit back, and both parties walk away.

An earlier email from the agent's assistant said the Seller was willing to make the repairs, but this conflicts with his earlier statement about having no money left for repairs, so I'm not sure which face is correct. I specifically put the clause about having proof the repairs were completed by a professional prior to closing as I didn't want the Seller to contract out some of the work that he couldn't do himself, and do the remaining stuff himself. If he's going to do the repairs, I'm going to make sure they are done correctly.

At this point, I'm not really sure which option he'll pursue.

4-Plex Estimate Update

Last night, I had a few minutes to look over the estimate some more. I knew there were a couple of items not on the estimate that were on the inspection report, and I wanted to see exactly what they were leaving out. It turns out they didn't include the following in the estimate:

* Replace gutters
* Wood rot (due to existing, terrible gutters)
* Replace two screen doors
* Replace two crawl doors
* Install heating system in one unit

Also, the inspector noted the following items he recommended needed replaced due to their age:

* Unit #1, #2, and #4 heating units
* Unit #3 and #4 water heaters

There were also some minor things like patching a pot hole in the driveway, which I can live without. My wife is still hell-bent on just getting our deposit back and moving on, but if I am going to try and see what kind of leverage this brings us first.

4-Plex Estimate

I got the estimate today from the contractor regarding the 4-plex. It actually came in a LOT lower than I had thought it would. I won't go into detail of the amounts right now as I still need to discuss it with my wife and arrive at a decision. I seriously doubt the Seller follows this blog, but just on the outside chance he does, I don't want to give out the information just yet. I will say this, though, if we DO accept this estimate and use this person (we may likely get another bid, just to be sure), I will definitely tell the Seller he will either have to make the repairs himself or reduce the sale price by AT LEAST the same amount. I'm opting for the latter, as I want to be in full control of the situation. IOW, I don't want the Seller to control the repairs and I get 'snowballed' because they weren't done adequately (or at all).

BTW, my tenant is late with the rent check (no surprise there!), but I don;t mind the extra late fees. :-)

My First Tenant EMERGENCY Call

I've been a landlord now for about 2.5 years. During that time, I've never had a tenant call me at "midnight" (or any other time, for that matter) regarding an emergency situation. Sure, I've had calls asking questions and what-not, but never the call where a pipe busted or the roof was leaking or similar REAL emergency type of things. I knew it was only a matter of time, though, before I'd get the call.

About 7pm, my wife noticed my cell phone was ringing, so I answered it and it was the tenant. She said she got home and her neighbor pointed out to her that a drain on the side of the house was leaking hot water. It had literally soaked a large portion of the yard between the two houses. I told her I'd be right over. She mentioned that they were not using hot water, which immediately told me it was probably the water heater.

I arrive and sure enough there is a steady stream of hot water coming out of a small PVC pipe on the side of the house. I run over to the water heater thinking I'd find water in the overflow pan on the bottom of the water heater, but it was bone dry. I looked all around the water heater, but there was no sign of water anywhere. I'm not very literate about water heaters, so I decide to turn the thermostat down to almost the lowest setting and turned the main water valve off, while I called a few plumbers. I also called my wife to see if she could call some plumbers as well.

After calling one plumbing company and having the lady page the plumber on call, I got a call back from him. At about the same time, the tenant said she knew of a plumber by way of some friends at work, so she was talking to him at the same time I was talking to the other plumber. The plumber I was talking to said it sounded like the temperature pressure valve(?) was bad or going bad. He said water heaters are designed so that if things get to a dangerous point (i.e., pressure build-up), the water in the tank is diverted to the drain leading outside, so the thing doesn't explode. Unfortunately, he said he couldn't make it out due to other calls, but that she could leave it turned off and someone would be out in the morning. Hmmmmm.

The plumber the tenant was talking to was more helpful. He actually walked her through steps in order to see if it truly was the valve. While I was in the yard talking to the other plumber, I heard a loud noise like pressured gas being released. After getting off the phone with the plumber, the tenant was doing the last step her plumber was asking her to do. Sure enough, the problem was fixed. The water was no longer leaking from the drain and the water heater was operational (yes, the water was turned on, too). She got off the phone with him, and basically told me the same thing the plumber I was talking to said. She went on to say that it appears when the gas people came to turn on her gas and light the pilot light for the water heater (and furnace), they forgot to release any pressure from the tank as they are supposed to do, so over the course of the last two months, the pressure built to dangerous levels.

The plumber told her to check again in the morning to make sure all was well. I told her to call me first thing in the morning, too, whether it's fixed or still broken. I still haven't received a call from her, so I'm assuming everything is still working.

Whew! I was thinking while I was driving home last night from the house that this was the first time I've had such a call in the ~21 months the place has been occupied by a tenant. In those ~21 months, I have saved myself about $2,400 in PM fees, so even if I had to replace the water heater, I would have still made money by not having a PM company manage my property.

Now, we didn't talk about it, but I'm wondering when the tenant gets her water AND gas bill, if she will call me wanting me to pay for some/all of it. I figure based on the plumber's statement about the gas company, it was probably their fault this happened. Regardless, I seriously doubt it is my problem as I was first notified of the issue last night and took corrective action. We'll see.

Finally, Some News

Well, it turns out we finally got some news today. My wife called the Broker this morning and actually was able to talk to him. Based on what she told me, he is absolutely clueless WRT what's going on with the property. So, we were back at square-one. Finally, this afternoon, I get two emails from the assistant, and one from the agent herself. It turns out the agent's husband is not doing as well as everyone had hoped, so she is still out-of-pocket for the most part. The assistant said she had an illness that left her unable to do anything the last week as well. And to top things off - (you believe in strange coincidences?) - the contractor that was supposed to give as assessment of the property was out due to his son being involved in an accident. Freakish. Anyway, the assistant said she was human once again and would be following-up with the contractor to see about the property. She said she had the report all ready for the Seller to pick up, too. Hopefully, by Monday, something will be resolved.

More Crickets

I still have not heard one iota from the agent or her assistant regarding the 4-plex. Yesterday, my wife decided to call the office number and spoke to two different people: one was an agent and the other was the broker's secretary. She first talked to the agent, who told her they are all subcontracted by the broker and don't mingle in one another's deals, so she couldn't be of much help. She then talked to the broker's secretary. The lady pulled our file and told my wife that since our contract doesn't have an inspection contingency, we are on the hook to buy the property. WTF??? There is a clause in the contract that specifically says:

Buyer shall have all inspections performed within 10 working days of Seller's acceptance, or at such time as may be mutually agreed to by Buyer and Seller, of this Contract. Buyer shall provide Seller copies of all inspection reports obtained. If Seller does not agree in writing to correct any unacceptable conditions within three (3) days from receipt of such notice, Buyer may elect to terminate this Contract and all deposits shall be refunded.

Maybe it's just me, but I think this clearly states that I must send the Seller a copy of the inspection report and he has three days to say 'yea' or 'nay' about fixing the items, or I get my deposit back. Anyone see this differently? Keep in mind a later clause we both agreed on had to do with time not being of the essence, so the 10 day inspection period was flexible. My wife didn't have a copy of the contract when she spoke with the lady, so she didn't know exactly what it said. I told her later the lady didn't know what she was talking about, or had assumed we wanted our deposit back based solely on our review of the inspection report (and not the Seller's written response saying he would or would not fix the items).

Either way, the secretary said she'd have the broker call my wife that day (Tuesday). It is now Wednesday afternoon and neither f us have heard from him (or anyone else). I called his office at lunch today, and talked to the same agent, who basically told me the same thing she told my wife (they're independent, etc.). She, too, said she'd have the broker call me back. Still nothing.

What irks me is that my agent's assistant was returning emails consistantly up until about last Wed. I emailed her the inspection report on Fri, and followed-up with several emails and a phone call. Still nothing.

My wife's blood boils more than mine about these things, so she said she will call the broker back this afternoon if we don;t hear anything. She'll demand that the secretary give her the broker's cell phone number to either talk to him or leave a "nice" message. This whole thing just reeks of unprofessionalism, IMHO.

Tenant

I finally got hold of the tenant this am. She said she was out of town the past 5-6 days and got in late last night. I told her about my trip to the city offices, regarding the utility account that she still hadn't set up. She claims the day after I gave her the paperwork, her mother supposedly went there to set up the account. I told her it didn't sound like it based on my conversation with the city employee. She swears her mother set it up, and told me that her mother was currently out running errands, which included paying several different utilities, and that she would call me back to verify her mother did set it up. I didn't tell her then, but this Saturday when I see her to have the chimney sweep clean the chimney, I'm going to tell her that I'll be closing my account with the city, which means she will HAVE to set up an account or not have any water or sewer service.

Too Quiet

I received the inspection report early last week, but didn't send the agent a copy of it until Friday morning. I hate our fax machine as it sometimes misfeeds papers if there is a large stack to copy/fax/scan, so instead of faxing the agent the report (about 30 pages total), I decided to scan it all into 5 separate bundles and email each of those to her. The last email I got from the agent was from her assistant saying the agent was still out of town due to a family emergency. So, after sending the 5 emails (and a 6th to follow-up), I half-expected the assistant to reply that she got them and would forward them to the Seller (and contractor). After not hearing from her, I decided to also call the number at her office. All I got was a VM system, so I left her a VM, too. It is now Monday afternoon, and I still haven't heard from her. Next phone call will be to the agent's broker, I suppose.

Our HOA

I think of HOA's as necessary evils. Without them people would probably start letting their properties go, however, they can sometimes be overly restrictive. Unfortunately, in Texas at least, they have a lot of power over homeowners.

When we first moved into our house several years ago, we found out how blood-thirsty this HOA was. My FIL set about installing ceramic tile flooring in our house, and put out a sign in the front lawn advertising his services. We immediately got a call from the HOA company telling us the sign was in violation of the covenants and restrictions. Interestingly enough, my wife and I have seen many of these signs in others' yards since that day.

More at issue is that the subdivision we live in is small (only 50 homes), and the vast majority of the homeowners are elderly - including one of our neighbors. That's usually not bad, but over time, this couple have become neighbors from hell - do mainly to the fact that they used to have a dog that barked at all hours and we reported them to the HOA many times. That was several years ago. To make matters worse, all the elderly people are good friends with one another and several sit on the board of directors. Needless to say, we are the "enemy" now.

Last year, we noticed one of our evergreen bushes were dieing (the upper half was brown while the lower half was still green). We immediately got a letter from the HOA to cut the dead portion off or remove the whole bush. I cut the dead part off. Earlier this year, the same thing happened to another bush: dead on the top, got a letter, and I cut the dead part off. Earlier this summer we get another letter saying the red tip bushes around a 4'x4' electrical box in our front yard were diseased and we needed to remove them. I went out there one afternoon and cut them all down.

That brings us to today ...

My wife told me today that we received yet another letter from the HOA saying that we need to plant NEW bushes around the electrical box (I only removed the diseased ones). I think this is the last straw. I know fighting this will probably be an uphill battle and prove fruitless, but this is pure BS.

First of all, we have done everything they asked us to do regarding this and past incidences with the landscaping in our front yard. To me, they are using their position to strong-arm us into doing more and more useless crap than we need to. My wife told me several weeks ago she noticed the next door neighbor talking with another elderly woman and pointing at our electrical box. The neighbor sits on the BOD's, so we knew they were probably conspiring to send us another letter about our yard. Secondly, our front yard is maintained by the association itself (or, at least, is supposed to be). While we own it, we pay a monthly fee each month to have it maintained. Of course, their argument will be that the maintenance is only for mowing, trimming, and watering. Perhaps most interesting is that other homeowners in our subdivision have utility "appendages" in their yards which are not screened by bushes. Ours is probably the biggest that isn't screened, but the covenant and restrictions don't go into detail. Matter of fact, I don't even think they talk about this particular thing at all - only as part of the overall "appearance".

Update on 4-plex

I sent the agent's assistant an email this morning asking her if she thought the Seller was interested in fixing the repairs I mentioned and/or reducing his list price significantly. She responded by saying:

From what I understand, there is a possibility we can get the repairs done. I have been trying to get a hold of our contractor(who is a certified electrician as well) to get him to look at the property this weekend and give us an estimate. Would it be possible to get a copy of the inspection report when you receive it? I didn't discuss any price reduction with Seller. [The agent] was going to try and call him from the road sometime today.

Now, based on earlier conversations with the agent and the Seller, I was led to believe the Seller had "run out of money" and had no intention of making any more repairs (at least, any that required him to spend money). So, this comes to me as a surprise. What I hate about all of this is that sooner or later I am going to have to fork over a copy of the inspection report to the Seller for his review (per the contract). I paid a decent amount of money for that inspection, and I'd hate to just give it to the Seller for HIS own benefit. IOW, he gets it knowing full well he won't make any more repairs, and uses it for his own benefit.

What I found interesting in the assistant's response is that they are having a contractor go out there to make an estimate on the repair work needed. But how? I never gave the Seller a copy of the report yet. All I did was send the agent a general overview of the major problems. I told my wife that it will be interesting to see what comes out of the contractor's inspection.

What also has me scratching my head is the assistant's claim that she "didn't discuss any price reduction with Seller." Not that the Seller would be interested in dropping the price knowing the place is about ready to fall apart, but still, she couldn't at least mention it to him?

No Response?

I got an email from the agent the day of the inspection saying she would be out due to a family emergency, but she would be answering her cell phone and her assistant would be available. The night of the inspection, I both called her and left a VM as well as sent her an email, regarding our decision based on the inspection. We still haven't heard back from her or her assistant.

My wife is worried that since the inspection technically occurred after the 10-day cut-off per the contract that we will not get our deposit back. However, I'm not too worried on four accounts:

1. I received the signed contract via fax on October 1st, which means I had until the 10th (or 11th) to do the inspection. The inspection was on the 9th.

2. The signed contract I received was signed by the Seller on September 26th, however, it was the wrong contract. I told the agent that I had forgotten to add my wife as a Buyer and sent the revised contract to her on the 26th of September. I also told her that the contract I sent her two days before that should NOT be used due to it not having my wife's name, which she said she would do.

3. In the contract, I specifically mentioned the owner has 10 days to give me a copy of ALL of the current lease agreements for my review. I still haven't gotten them.

4. There is a clause in the contract that says something to the affect that Buyer and Seller agree that time is not of the essence and will not be strictly enforced unless agreed to in writing.

I sent the agent a follow-up email this morning asking her if the Seller wanted a copy of the inspection report, and, if he did, it would probably be a few days since the inspection company mailed it to me and I still haven't received it.

Update: Not more than 20 mins after making this post, I got an email from the agent's assistant saying the Seller wants a copy of the report, and that she left a message with the inspection company to get a copy.

4-plex: Inspection Results and Our Decision

While driving home from work last night, I received a call from the guy who did the inspection for the 4-plex. We talked for a good 20 mins as he went over all the items that he inspected. It turns out the property is worse shape than I had thought. The major items the inspector found included the structure, the electrical, and the heating.

Electrical - The entire electrical system is in bad shape and should be inspected and fixed by a licensed electrician. The inspector talked to the owner while there and the owner told him he had made some fixes to the electrical system. The inspector noted that one of the things the owner fixed was not only a potential fire hazard, but probably illegal (he said he was essentially "stealing" electric). He went on to say that some of the electrical is not even up to code.

Structural - The structure itself is in bad shape, and will require extensive work in order to support the roof. He is very worried the roof will not support a heavy snow and could collapse due to the inadequate support beams in crawl space. He recommended that it be repaired immediately. He also said many pier posts needed "capped", and that that the flooring is unstable in areas.

Old/Outdated Heating - The heating elements in three of the units are old and need replaced. He said the owner's unit does not currently have a heating element.

There were a lot of other "minor" issues, like damaged screen doors, a non-working and hazardous gutter system, old water heaters, a bad sink trap, a bad toilet, excessive moisture due to property being on slope and poor ventilation, no smoke or CO2 detectors, and on and on.

The inspector said that in his best estimation, it would take a minimum of $10,000 (and probably more like $15,000-$20,000) to fix the items in order to bring the property to code and make it livable.

After hanging up, I then shared the disappointing news to my wife, and we both agreed that we would not be purchasing the property. I told her based on my conversation with the agent in the past, I don't think SHE even realizes in what piss-poor shape the property is in. I even doubt the owner himself knows the seriousness of what he currently has. If there were a fire or the roof were to collapse or any number of things right now, he would up to his eyeballs in litigation.

So, I wrote a lengthy email to the agent explaining what the inspector told me about the place. I concluded the email by saying that from past conversations with her and the one I had with the owner, he is reluctant to make any more repairs. Additionally, the owner did not want to come down on his price. I told her that given the results of the inspection, the owner would either need to repair ALL of the major problems (i.e., electrical, structural, and the heating) -OR- we could renegotiate the sale at a significantly much lower price. If the owner was unwilling to do either, to let me know at once what steps I need to take in order to be refunded my deposit. I also left her a brief VM telling her I sent an email re: the inspection, and to contact me immediately if she had any questions. That was last night, and I have not heard anything yet.

We'll see what happens.

4-plex: Status

Last Thursday, I realized that the check I sent to the inspection company had insufficient postage. My wife usually handles sending out our bills, so I haven't sent anything via USPS in months. I just grabbed a 39¢ stamp, slapped it on, and dropped it in the mailbox. When I send out our personal mail, I always check before dropping it in the mailbox to see that there is a stamp on it. When I did this Thursday, I noticed she had TWO stamps on each bill - a 39¢ one and a 2¢ one. GULP! So, I expected to receive the check back any day with a rubber stamp that said "insufficient postage". However, Saturday morning, I received a call from the inspection company saying they received my check and the inspection is all good to go. WHEW! I would have hated to have to call everyone and tell them my goof-up and to have it rescheduled. Needless to say, I will definitely know next time.

I still haven't received a copy of the "final" contract - the one with the Seller's signatures - yet. I sent the agent an email a few minutes ago, and hopefully she can send me a copy ASAP. The last I heard, she said the Seller signed it and she took it to their attorney for review. In WV, they use attornies to close instead of title companies.

Two Good Web Sites

I saw a posting by Diane Kennedy on another web site, where she talks about two great web sites she uses for real estate information. This was her post:

Two websites I watch all the time that have great free info for real estate investors:

www.RealtyTimes.com - Do the search from the pull down menu at the top to view market conditions across the country. This website is primarily used by real estate agents, but anyone can access.

www.ofheo.gov - This is the one federal agency that actually creates something of value! And most of us never hear about it. Every quarter they come out with an amazing market report regarding real estate across the country. They analyze a number of leading indicators to make their prediction of what's going to crash, what's going to boom. I've been following for years and find they tend to be right most of the time.

House #1: Tenant issues already

Even when you check someone out thoroughly, you just never know what type of tenant they'll be until the 2nd rent check comes due. For this particular tenant, we have TWO issues to contend with. First, as I mentioned in a previous entry, we received a sewer bill for House #1 for the period of September. This tells me the tenant never set up sewer service as she was supposed to. The second issue is not receiving the rent check yet. To head off a disaster, I decided to call the tenant last night to touch base with her on these two issues.

I first reminded her that rent was due on the FIRST, but was not late until the 3rd, so she had one more day to give me the rent for October before I would start assessing late fees. She said something like her and her mother "were just talking about the rent." Hmmmm. She said she could drop it off at my house, or we could meet, or I could come by and pick it up. I'm not too comfortable having tenants come by my personal residence, so I told her I could swing by her place to pick it up.

I then asked her about the sewer bill to which her response was something like 'I called everyone on the list you gave me, and I remember trying to call these people, but I could never get hold of them.' This is probably true as I am having a helluva time trying to get a live person on the phone there. Regardless, it sounds like she just "tried", but never actually set it up. She said to bring the bill when I pick up the check and she'd pay it. Hmmmm. I went ahead and printed out a new resident application form from the city's web site and pre-filled for her. I'll bring it along with the bill with me when I pick up the check. I'll also tell her to give me the amount for the bill, so *I* can pay it (i.e., I'm not going to trust her to pay it), and tell her to send the application with the deposit ASAP to the city to start sewer service in her name.

Of course, all of this sounds "pleasant" over the phone - we'll see what happens when I actually go to her house to collect.

Update: Met the tenant at House #1 as planned. She had the Property Condition report made out and gave it to me. We chatted a little regarding community issues, like the proposed upgrades to the "lake", a new grocery store coming nearby, etc. I then handed her the pre-filled application for sewer service and told her where to submit it. I also showed her the bill we received that she needs to reimburse us for. She gave me the rent AND the money for the sewer bill without any qualms. HEr mother was also there and I talked to her for a little bit as well. All-in-all it was a good conversation and I hope she understands now about rent and utilities needing to be paid on time. She did mention the fireplace again, and I told her I would get a chimney sweep over to clean it as I didn't think it'd been cleaned since the house was built 5-6 years ago.