I'm on My Way!

[NW Landlady]

Hi Again ER Peeps!!

Just another update on FIRE plans!!

I was blessed with finding a buyer who wanted not one, not two, But 3 of my Apartment buildings!!

Contrary to the Residential Housing market, the Multifamily Market has been only slightly impacted & there are appreciating values on the horizon even as we speak (in strong employment/rental markets).

I closed Escrow last month on the Buildings & since they were sold on Owner Contract/Notes, I can now sit back & collect interest payments....YIPPEE!!

While only a month has passed, I more feel relaxed already & sort of Semi Retired. The phone has stopped ringing off the hook, I am cleaning & reorganizing the house & home office, I am able to pamper myself & take care of ME....!!

Mind you I still own 100 rental units (primarily 3 Apt Bldgs) & only jettisoned 30 of them with the sales, but they were the smaller ones that kept me most busy.

I have also located an accountant who can help out with taxes & things might not be as bad as I anticipated.

The next step I am working on is getting the last 3 Bldgs in really good condition & then seeing how "quiet" I can make the management of them...right now I'm liking how its playing out.

Anyhoo that is the latest from Landlady!!

PS: for reference here is my Intro Thread: http://www.early-retirement.org/forums/f26/i-feel-stupid-really-stupid-50938.html

 

[haha]

Good going! I guess it is time for me to bite the bullet and find a condo, as in 3 years I have never seen a vacancy last more than a couple weeks in my building.

Ha

 

[NW Landlady]

HA - that is your call, but IMO residential housing in our area is [-]Dirt Cheap [/-] a Great Value right now & economists are saying we will be pulling out of the Recession faster than other parts of the Country: http://cdnf.tlcollect.com/f1/cl/610/1291/Region%20should%20rebound%20faster%20than%20much%20of%20nation.pdf

Out of 100 rental units, I only have 1 that is empty & that is because the [-]Jerk [/-] Tenant did not give any indication he was moving out...(my collection company will be reminding him of that obligation shortly....).

Lately most of our apts get pre-rented & new tenants move in as soon at we have it ready to occupy.

So that is a 1% vacancy rate for my portfolio.

 

[Meadbh]

Congratulations NWL! Looks like you have made a great deal on your real estate.

What is the vacancy allowance you use to calculate projected costs? I have a number of rental properties and they assume 2-4%. I guess the larger the rental pool, the lower the number you need.

Where I live the current overall rental vacancy rate is 0.9%.

 

[Purron]

You go girl! Thanks for the update.

 

[NW Landlady]

Congratulations NWL! Looks like you have made a great deal on your real estate.

What is the vacancy allowance you use to calculate projected costs? I have a number of rental properties and they assume 2-4%. I guess the larger the rental pool, the lower the number you need.

Where I live the current overall rental vacancy rate is 0.9%.

In my area we have statistic gathering companies that give us regular reports on the Market conditions including vacancy rates. I actually only use projections when I buy a building -- once I own a building, then I work toward minimizing vacancies. Last year (2009) was not very good & I was running 7 - 10% vacancy rate (favoring renters) & still had good income. Some Landlords were reporting 15 - 20% of their building units were vacant. Vacancy rates now are in the 5-7% range - but I am doing much better than the market (which is not unusual).

Most Lenders & Appraisers use a more conservative vacancy rate than is indicated by statistical companies...they are adding a cushion for worse case senarios which they certainly should do!

Your .9% vacancy rate is indicative of a very strong rental market (Lucky YOU!) that favors Landlords. The more units you have the larger (more accurate) statistical base -- but also more vacancies to deal with.
Having sold a few buildings helps. I sometimes had as many as 6 -7 new vacancies to turn & rent out each month. Now I am anticipating 2-4 move outs per month.

 

[Aiming_4_55]

Congrats Landlady!

I hope to own more RE, but worried it will impact my fulltime job and family time as I'm a small timer and perform more of the work myself.

Hi Again ER Peeps!!

Just another update on FIRE plans!!

I was blessed with finding a buyer who wanted not one, not two, But 3 of my Apartment buildings!!

Contrary to the Residential Housing market, the Multifamily Market has been only slightly impacted & there are appreciating values on the horizon even as we speak (in strong employment/rental markets).

I closed Escrow last month on the Buildings & since they were sold on Owner Contract/Notes, I can now sit back & collect interest payments....YIPPEE!!

While only a month has passed, I more feel relaxed already & sort of Semi Retired. The phone has stopped ringing off the hook, I am cleaning & reorganizing the house & home office, I am able to pamper myself & take care of ME....!!

Mind you I still own 100 rental units (primarily 3 Apt Bldgs) & only jettisoned 30 of them with the sales, but they were the smaller ones that kept me most busy.

I have also located an accountant who can help out with taxes & things might not be as bad as I anticipated.

The next step I am working on is getting the last 3 Bldgs in really good condition & then seeing how "quiet" I can make the management of them...right now I'm liking how its playing out.

Anyhoo that is the latest from Landlady!!

PS: for reference here is my Intro Thread: http://www.early-retirement.org/forums/f26/i-feel-stupid-really-stupid-50938.html

 

[NW Landlady]

Congrats Landlady!

I hope to own more RE, but worried it will impact my fulltime job and family time as I'm a small timer and perform more of the work myself.

No Kidding!

I think for about 4 years I had no life at all between a Day Job & the Rental props and I can't imagine doing it with big family obligations.

I dabbled in owning a few small rental houses in for about 4 years, then in '96 I bought my first Apt Bldg....followed by 4 more such purchases...by mid '99 I was able to Quit my day job as an Insurance Exec to handle the Rentals Full time with better compensation. So it has taken about 14 years to go from Zero to FIRE in my case.

 

[Moemg]

Great job ! Enjoy the break !

 

[Purron]

So it has taken about 14 years to go from Zero to FIRE in my case.

Very impressive! I have found your story very interesting. You're so willing to share your experience with others too - what's worked well and not so well. That's very cool.

 

[haha]

Congratulations from me too. You have done an excellent job.

Ha

 

[tryan]

Congrats on moving the buildings in this climate!

Been a long time since I've seen a Contract Sale ... last one i saw was a closing 2 years out with the buyer managing the units and paying lease payments to the seller. Can be a little sticky if prices move against you. A large deposit is key.

Can you share the terms on the contract sale?

 

[Retire2013]

No Kidding!

So it has taken about 14 years to go from Zero to FIRE in my case.

You are FI, but are you going to ER now? Or wait until 2015 as per your "About Me" information indicates?

Congratulations on this major milestone!

 

[pasadenaDC]

HA - that is your call, but IMO residential housing in our area is [-]Dirt Cheap [/-] a Great Value right now & economists are saying we will be pulling out of the Recession faster than other parts of the Country: http://cdnf.tlcollect.com/f1/cl/610/1291/Region should rebound faster than much of nation.pdf

Out of 100 rental units, I only have 1 that is empty & that is because the [-]Jerk [/-] Tenant did not give any indication he was moving out...(my collection company will be reminding him of that obligation shortly....).

Lately most of our apts get pre-rented & new tenants move in as soon at we have it ready to occupy.

So that is a 1% vacancy rate for my portfolio.

Hi Landlady, congrats on recent success!!!

From where I sit, Seattle appears to be healthy from a jobs and housing perspective, doing much better than the national average. My big sis just recently moved out there (Greenwood area 1 mile west of Green Lake) so I've spent several weeks up there already. Bee-you-tee-full city with nice people (I've living in LA so I was quite taken back LOL) and of course the best coffee anywhere.

But, again I'm speaking as a relative newbie here, RE prices seem firm and little on the high side to me. There was a neighbor's house to my sister's place in Greenwood, a craftsman at ~1200SF, which listed for 430K. Granted, its a good neighborhood and in Seattle proper, but that seemed a bit steep. I know I'm only taking a small snapshot from my narrow lens ... but I had some flashbacks to California prices from 05-06 there. Especially since my sis is renting a similar house for $1300. Just didn't add up.

Would LOVE to hear your feedback, I may be considering a move to the NW in the near future.

 

[NW Landlady]

Hi Landlady, congrats on recent success!!!

From where I sit, Seattle appears to be healthy from a jobs and housing perspective, doing much better than the national average. My big sis just recently moved out there (Greenwood area 1 mile west of Green Lake) so I've spent several weeks up there already. Bee-you-tee-full city with nice people (I've living in LA so I was quite taken back LOL) and of course the best coffee anywhere.

But, again I'm speaking as a relative newbie here, RE prices seem firm and little on the high side to me. There was a neighbor's house to my sister's place in Greenwood, a craftsman at ~1200SF, which listed for 430K. Granted, its a good neighborhood and in Seattle proper, but that seemed a bit steep. I know I'm only taking a small snapshot from my narrow lens ... but I had some flashbacks to California prices from 05-06 there. Especially since my sis is renting a similar house for $1300. Just didn't add up.

Would LOVE to hear your feedback, I may be considering a move to the NW in the near future.

Sorry I have been absent from the forum/this thread. We had some very serious storm damages to our house & just haven't been up to going online lately.

I have one apt bldg in the Greenwood area -- in Seattle area the prices for housing go up the closer in to the City you are & some neighborhoods command higher prices than others. That's because mainly the Work Commute is nicer/shorter (like only 10 - 15 minutes from home to work....). If a house is in good condition & has a lot of Old World Charm (OWC) then that adds to the price tag. On the other hand, a house near my apt bldg is listed at $215K - bit of a fixer & not very big, but still a single family home with a yard...so it depends on how flexible you are.

I actually live South of the City by about 35 minutes and I have a large house with stunning views of the Puget sound. Have seen houses in my neighborhood with equally nice amenities selling at bargain prices - $500K - $800K depending on location and condition. I don't think LA could touch that price with 180 degree +Salt Water views. I relocated here from the Bay Area & my first home was in North Seattle - New construction with a Beautiful Wooded Creek that ran through the property....something I could never afford in Bay Area. On the Downside...it rains a lot in Seattle -- NK! The weather can be an adjustment.

 

[NW Landlady]

You are FI, but are you going to ER now? Or wait until 2015 as per your "About Me" information indicates?

Congratulations on this major milestone!

I am still working out the details but I am hoping I will ER completely before 2015. It takes some work to get management stabilized in the remaining properties or get just rid of them entirely....which would be ideal....

 

[NW Landlady]

Congrats on moving the buildings in this climate!

Been a long time since I've seen a Contract Sale ... last one i saw was a closing 2 years out with the buyer managing the units and paying lease payments to the seller. Can be a little sticky if prices move against you. A large deposit is key.

Can you share the terms on the contract sale?

You really have to be careful on a Contract sale...mine is on a true Note & DOT that I paid a RE attorney to draft. I was fortunate in that the Buyer is an acquaintance of mine & I feel pretty confident that they will take good care of the buildings & they are already remodeling several of the Apts - a good sign.

The note is interest only & it has a staggered interest rate, lowest the first year & then increasing a bit more each year - it averages out to around 6%. After 5 years, the rate is adjusted on an ARM with 6.5% as the bottom rate & adjusting upward based on an index. This probably sounds a bit creative/detailed, but it worked for both of us!

I have also no prepayment penalty, so buyer can refi me off the deal anytime in the next 10 years.

My accountant says I can treat the capital gains & depreciation recapture as an "installment sale" of 1/10th per year...I like this approach - the taxes don't hit me all at once.

The down payment is adequate -- I checked with the attorney and a foreclosure takes about 6 months or less on this sort of property, plus the contract terms allow the Seller to go in & take over management & collect rents pretty quickly once a buyer defaults on the loan. It is not like the long dragged out foreclosures between banks and owners of residential homes.

There are of course all sorts of risks involved in this sort of sale, as it prolongs your financial interest & fortunes in the building. I heard from a Comml RE Broker the other day that an elderly lady sold an apt building to a man with 7% down payment. He had planned to convert the apts to Condos & remodel them.(most of such projects went into bankruptcy when the recession hit.) When he did not pay the loan, she foreclosed on him, only to find that he had gutted the building, but not remodeled it!!
So she lost the whole building value & the sale defaulted on her...really a bad story!

Over my years of investing, I have purchased a number of properties as the Buyer without any problems - many of the notes did not have specific expiration dates...I have also twice purchased properties on Note that had been foreclosed on the previous buyer....you need to make sure you have a good feel for the buyer and use an attorney -- lesson learned!

The value of Apt Bldgs is based on their income & profitability. They are not as closely tied to the residential housing market nor commercial building spaces (which rely on the profitability of a business). In fact, sad to say, the collapse of the interest in homeownership actually improves the Apt Rental Market....there is more demand than supply. I am not concerned about loss in value of the buildings my buyer has purchased, because I don't see the Apt market as severly affected as the Residential Housing market in my area. This might not be the case if the Apts were in another state or location of course...YMMV.

 

[NW Landlady]

Heh heh heh!

Just an update...been away for awhile...

Stage 2 is heading into implementation this year - I am getting my last 3
buildings ready for sale.

My goal is to sell them by the end of the year, or at least sell 2 of them. I can already smell the retirement finish line....as I hobble towards it in arthritic pain, LOL!

Selling commercial multifamily properties is hot hot hot this year, much better than 2 years ago when I sold the first 3 bldgs. Peeps have been coming out of the woodwork with interesting offers. All 3 bldgs have had multiple offers and they haven't been on the comml mls or advertised! It is really exciting and my only down side is how hard I am working with a team of painters/contractors to get the buildings in the best shape ever for sale.
Whew!

I have been very happy with the owner contract/notes on the first 3 bldgs I sold in 2010. Every month the interest payment checks arrive just like clockwork and without all the work I used to do to make a living on those buildings.

These last 3 buildings to sell have 6-7 figure first mortgages, so I can't just float a note on them unless I pay the mortgage off. (don't think anyone does wraps anymore, do they?) But a number of cash buyers on 1031 exchanges are in the market & especially from Out of State (ie California) because our rental market & cap rates are better. Low interest rates have fueled the Market ferver as well.

Anyhoo!....I am thrilled to report that the end is in view & my life will be on FIRE soon!

 

[MooreBonds]

These last 3 buildings to sell have 6-7 figure first mortgages, so I can't just float a note on them unless I pay the mortgage off. (don't think anyone does wraps anymore, do they?)

Congrats on your hobbling to the finish line.

Just a suggestion...if you're interested in floating a loan on your property to the new buyer to increase your FI allocation, why not sell your property with the largest equity $ amount first, and then use that equity from the sale to pay off your smaller note property(ies) and then underwrite the mortgage to the buyer on the smaller note ones?

 

[NW Landlady]

Congrats on your hobbling to the finish line.

Just a suggestion...if you're interested in floating a loan on your property to the new buyer to increase your FI allocation, why not sell your property with the largest equity $ amount first, and then use that equity from the sale to pay off your smaller note property(ies) and then underwrite the mortgage to the buyer on the smaller note ones?

LOL! Great minds must think alike!
That is exactly what I am doing! (or at least trying to do)
Except now another buyer has come in and may make a cash offer on one property I was planning to sell by note....so that is throwing a monkey wrench into the deals....

Holding a mortgage note entails a lot of risk, no matter how you slice it. Look at how many peeps have walked away from their loans recently just because the market dropped! What if there was a major catastrophe? Cash is always king....., but sometimes a pain in the butt to please a cash buyer unfortunately...

 

[LandlordInvestor]

I think owner financing is a great exit strategy for rentals. Glad to hear it worked out so well for you as this is my eventual exit plan as well. Congrats.

 

[NW Landlady]

Wheeeeee!!

I'm pleased to report that the last of my buildings is in process of selling in a month & a half & then I am FIRED!!

I sold 2 bldgs last year to my favorite buyer on owner contract/notes - had to use a little creativity to buy down the mortgages.

Then lo & behold a buyer on the last apt bldg came back this year & made me an offer I could live with.....and it will be sold as a Cash Deal!!

So like a square peg in a round hole....Real Estate investing can be a conduit to FIRE --- and then some!

So happy to be ON MY WAY and ARRIVING THERE FINALLY!!

 

[MooreBonds]

I'm pleased to report that the last of my buildings is in process of selling in a month & a half & then I am FIRED!!

I sold 2 bldgs last year to my favorite buyer on owner contract/notes - had to use a little creativity to buy down the mortgages.

Then lo & behold a buyer on the last apt bldg came back this year & made me an offer I could live with.....and it will be sold as a Cash Deal!!

Congrats on reaching the finish line!!

Just out of curiosity....for a little glimmer of financial excitement and fantasizing, what were the terms (down payment and rate) on your seller-financed notes?

 

[NW Landlady]

Congrats on reaching the finish line!!

Just out of curiosity....for a little glimmer of financial excitement and fantasizing, what were the terms (down payment and rate) on your seller-financed notes?

My terms were rather generous, but that is because I knew the buyer very well & they historically pay very promptly & spend a lot to fix up & improve the properties. In fact I'd love a default...LOL!

Because of that unique and trustworthy relationship, and the fact that there was no realtor commission, I accepted 15% down payment. Very unusual for commercial properties which are typically 25-30% down. My RE attorney actually suggested that this would give me a decent buffer. If there is a default in payments, I can directly take over management & rent collection at the building & foreclosures for non-bank mortgages go thru the courts in 6 mos or less.

However, I did get my PRICE!
On every sale including the cash one, I did.....

Interest rates and other terms are what ever the buyer & seller agree to, but are usually at least 1% above bank mortgage rates.

HTH!