A owner in NY is trying to sell me a property that is a 5-unit building. I know the area fairly well b/c I was raised their. This will be my first commercial property, so I need a little help to get me through.
From everything I have been taught about commercial property, I know that the best way to get a deal is to find a Landlord that has problem tenants and wants out of the property. This particular landlord has one apt vacant and two apts he is in court with trying to have them evicted. So, out of the 5 apts only 2 have current leases. I know that NYC has some pretty hard eviction laws, but my question is… How do I turn this around to work in my Favor? I am sure I can get this property at a good discount, but I don’t want it to back fire on me and I inherit the old landlords eviction problems. I already know that most of the problems with the property are due to miss management and I an prepared to make some nice changes if I do indeed get the property, but I am not sure if I should walk away from this deal because the evictions maybe a long term headache for me that will cost me money in the long run. Has anyone out their bought multi-fam properties with pending evictions? If so How did you structure the deal in terms of pricing and other terms?
Any thoughts on this, I really appreciate the help.
Evictions are tough in NYC in general. What are the grounds for eviction? How long have the non lease tenants been living there? With a 5 family you shouldnt have rent stabilization issues…are there any rent controlled tenants? In NYC you can take back one apartment for personal dwelling and one apt per year for immediate family members as well. There are a few ways to get the apts but I dont want to generalize sincde each eviction case is unique.
If youre able to manage the mortgage for about 6 months to a year then you should jump on this deal. hopefully it wont take that lontg to get the apts back but you should be prepared for the worst.
Thanks for the pointers. The evictions are for non-payment. Seller claims their are no housing violations and the property is up to code.Their is one eviction that is in the final stage and should even have a date for eviction next month. The other one is just beginning, so that one could take months before I can get the apt. back. There are no rent controlled in the building, I checked that first b/c I know that NY has alot of rent controlled and stabilized rentals.
Can you help me to understand these statements
[size=2][size=2]In NYC you can take back one apartment for personal dwelling and one apt per year for immediate family members as well. There are a few ways to get the apts but I dont want to generalize sincde each eviction case is unique[/size][/size].
Please tell me more about how to get these apts back, I am not interested in actually living there, but I have plenty of family in NYC that could occupy at least one of these apts.
Also, here is my next concern. The current seller was not only a really bad lanlord, but his property management has also been quite poor. What I mean by this is that he has very little paperwork/documentation. He can tell me verbally what his debt service is but he does not have an actual paper trail or tracking system. The same goes for the rent rolls. Seller appears to be somewhat disorganized and I guess that has contributed to how he got into the current situation. Nonetheless,This makes the due diligence part difficult. Also, he is not using a broker, he is really trying to save as much money as possible and sell it himself. In a situation like this is there any "major"red flags that I should look out for? Any pointers on dealing with sellers like this?
Ill email you some infor on how to get the apartments back for your/your family’s occupancy.
The non payment I assume is in the hold over stage at this point ? And the upcoming proceeding will also start with non payment I imagine…or is that going straight into holdover (which is fine if they dont have a lease and they have been served a 30 notice prior/at the beginning of last month…that would speed up the process for you instead of the whole thing starting in court with the nonpayment turning intio a hold-over followed by order of eviction).
If you are SURE that he will deal with you, then I suggest you get a preliminary search on the property and owner (Just the basics for now…municipalities, taxes, etc…and of course, liens and bankruptcies which may or may not affect the building) also you may want to go on the internet first and check to see if the building has any outstanding violations/liens. I think you can find out on through the HPD website. I think you can get to the hpd site using the following link: http://www.nyc.gov/html/hpd/home.html
NYC is a great place to inevest in Real Estate. I would definitely do my homework on this one before entering into contract. Just be sure that your attorney is/ wil be doing everything he/she should be doing to protect you…and that the final contract of sale contains language allowing you to opt-out if seller cannot convey title free and clear at the time of closing, etc.
I hope that this has been of some help to you…
Zen, when you purchase a property from a burned out landlord, you automatically inherit the problem tenants. I would suggest you to investigate the matter further to see if its worth proceeding.
Dave Lindahl has a basic material on buying, selling and holding apartment houses. You might want to educate yourself first.
Thanks blueprints1971, that was very helpful. I have gone to the HPD website and began my research there. I will look for your e-mail, on getting these apts back.
I have some of Daves material and have participated in a seminar, However when it comes to these commercial deals I still tend to have more questions. Is there a particular article or book you had in mind? I will do a search here and see what comes up. Thanks for your suggestion.