MacFarlane Real Estate, Inc. recently took over the management of a 16 unit apartment building in Brentwood called Westview Apartments.  It is a nice building!

There are a couple of vacancies that we are trying to fill quickly.  Any prospective tenants?

Although not necessary, grip tape can help if stairs are slippery from tree droppings, leaves, etc…

Believe it or not….  Copper theft is a problem these days.  Be careful letting units sit vacant for too long.  I have seen copper wire and plumbing stolen.  Best thing to do, FILL THE VACANCIES and keep the units occupied.

If vandalism or theft is BAD, you want to notify your insurance carrier right away and start a claim.  Delaying notification of the vandalism could cause your insurance carrier to deny coverage.  Also, check your policy.  Extended vacancies (over 30 days) could also cause your insurance claim to be denied.

I hate when they steal everything including the kitchen sink!

I’m not a tech geek…  But, I was driving a client to see prospective properties and he was pulling up information on his Ipad about the available properties.  As a Broker, its not good when your client has more information than you!

So, I bought an Ipad.  Wow, an Ipad is great for searching properties! Loopnet has a great app for commercial properties and Ziprealty and other MLS companies have apps for single family homes.   The apps allow me to drive around areas I recommend my investors to buy apartment buildings.  The map shows my current location and properties for sale & recent sales in the surrounding area.

I love when I’m driving an area with a client and they say…  What if I was willing to pay more?  Or, I only want 1960s or newer construction.  I can immediately change my search parameters on the fly.

The Ipad is a great tool for Brokers and investors.

Recently, MacFarlane Real Estate, Inc. took over management of a small duplex owned by an elderly couple.  Amazingly, there was no smoke detectors or any sign that there had been smoke detectors in the units. 

Smoke detectors are cheap.  As a landlord, there is no excuse to not install smoke detectors!  The National Fire Protections Association states that “minumum protection requires a smoke detector outside each sleeping area and on every level of the home.”  Follow the manufacturer’s recomendations  on proper placement of the detectors. 

Leave the smoke detector instructions for the tenant.  It will be up to the tenant to report beeping and other malfunctions.  It is also a good idea to check smoke detectors as part of an annual inspection of the unit.

For simple businesses, there is a simple way to purchase and sell.  Both the seller and the buyer would be fools to transfer the business on a hand shake or without a proper legal document.  The California Associationa of Realtors developed an excellent form document; Form BPA.  For relatively little expense, a business can transfer to a new owner with both the buyer and seller being protected by a well written legal document.  Lawyers, escrow companies, real estate brokers, etc… can open an escrow for the transaction. 

Things to consider when buying or selling a business:

1. Purchase price is not the only payment issue.  Most purchases are not all cash.  Decide on initial deposit, payment plan, interest rate, etc…
2. Form of ownership of the business.   Corporation, LLC, etc… 
3. Inventory-  Many people say everything is included that has to do with the business.  GET IT IN WRITING.  Do an exhaustive inventory of the business assets.
4. Consulting/ Training-  The purchaser is going to need answers from the seller.  Get that in writing.
5. Agreement not to compete-  The purchaser does not want the seller to open a shop next door and compete. 
6. Lease, Purchase or Real Property-  Sometimes the real property is sold along with the business.  However, usually a lease is involved.  If the business location is important (retail, restaurant, etc…), the buyer should get a lease with the landlord during escrow.  The purchase should be contingent on the purchaser obtaining a lease.

MacFarlane Real Estate, Inc. handles business transactions.

Do you own a real estate investment?  Are you in default on your loan?  Be aware that most lenders have a clause in the loan documents that allows for an absolute assignment of rents when the borrow is in default.  The lender files a Notice of Default and then, the lender intercepts the rents before the owner of record can collect.  If the owner tries to interfere, the owner could be liable for the attorney’s fees to get an injunction against the owner collecting rents.

The typical clause is as follows:  “In the event of a default, lender shall be entitled to accelerate all sums due under the loan secured by deed of trust and is authorized to enter into and upon the property for the purposes of collecting the rents, issues and profits from the property.”

At MacFarlane Real Estate, we often take control of a property before the trustee sale (foreclosure).  Basically, once the Notice of Default is filed, MacFarlane Real Estate seizes the rental income for our hard money clients.  At this point, the borrower has to make up the payments owed without help from the rental income.

Recently, I had an email exchange where basically, the investor was trying to get around rent control.

Initial Question:
Hi Mark

I found your blog, which is great, while looking for an answer to a LA rent control question. Am hoping you can help me:

My partners and I own a rent controlled apartment building in Silverlake.

We are paying tenants to move out.

One tenant has offered to move out at the end of the month, but wants all of the money ($11,500!) up-front.

My building manager thinks this is ok, so long as the tenant signs a receipt and an “intention to vacate” form.

I am worried the tenant will keep the money and not move, and that I will then have to evict.

If I have to go to court and I can show the payment and the signed intention to vacate form, will a judge evict? In other words, does an intention to vacate form plus proof of payment have any legal standing?

Happy for you to use my question on your blog - but pls don’t use my name!

Separately: Would love to get to know you and your team. We currently own two 16 unit buildings and will probably buy two more in the next six months.

Kind regards,

Annonymous

My Initial Response:

Thanks for emailing. RSO (Rent Control) only allows a landlord to recover possession legally if the landlord seeks in good faith to occupy the unit (Immediate family and Resident Manager qualify) or if the landlord seeks to perform at least $10,000 of work per unit. Even then, there are requirements of returning the unit to market at the same rent controlled rental amount.

If the conditions above are not in “good faith,” LAHD may get involved and force you to allow the tenant to stay.

I need more information about the specific situation. But, from what you told me… No judge would proceed with an eviction as the relocation is in violation of the RSO.

If you want to proceed with a cash for keys type negotiation, you are probably just rolling the dice on whether you will get caught. A qualified tenant (Elderly, Minors or Handicapped) is entitled to $17,000 relocation. LAHD seems to easily find that the grandmother lived with the tenant (or some other person) and thus, the unit is “qualified.” The penalty if caught is 150% of the relocation. It seems as though LAHD always says a landlord has to pay $25,500 per unit if the landlord tried to get around RSO.

I always advise people to catch tenants on 3 days. That is a sure fire way to evict and you don’t pay relocation. However, you have to be prepared. Registered with RSO, etc… Otherwise, you will lose the unlawful detainer case. I have some other approaches.

I won’t use your name but, I will certainly post your question and my response.

As far as purchasing more properties, my suggestion is to look at smaller buildings right now. There are gold mines out there right now at the 4-8 unit size. No resident manager unit. Section 8 is paying great money for these units. Do you work with a broker? Are you a broker?

Let me know how I can help.

Thanks for the email.

Mark E. MacFarlane, Esq.
MacFarlane Real Estate, Inc.
2500 E. Foothill Blvd., Suite 205A
Pasadena, CA 91107
(P) (626) 578-1948
(F) (626)389-0563

Clarification Requested:

Thanks for responding.

I think I wasn’t clear:

The tenants in this unit have agreed in good faith to move out for $11,500 - so I can’t see how RSO is involved.

We’re not forcing them out and we haven’t told them they have to take the deal.

We want to hand them $11,500 in exchange for them signing a contract saying they will leave by a certain date.

I’m trying to figure out if that contract is enforceable or not.

Is that clearer?

Anonymous

My Final Response:

I can’t give legal advice without seeing the full file, having a signed engagement letter, etc…. But, courts will not enforce an illegal contract. From what I have heard… Your contract may violate the RSO and thus, be illegal and unenforceable.

Mark E. MacFarlane, Esq.
MacFarlane Real Estate, Inc.
2500 E. Foothill Blvd., Suite 205A
Pasadena, CA 91107
(P) (626) 578-1948
(F) (626)389-0563

The housing market is tough for sellers.  Foreclosed properties are piling up and banks need to discount the properities in order to sell.  Lets face it, if you want to sell today…  you have to sell at a bargain. 

Many homeowners don’t realize that there is a boom in the rental market.  Thats right!  Every foreclosure produces another tenant.  First time buyers that would normally buy a house…  are waiting.  Thats more renters!  Vacancies in Los Angeles for RESIDENTIAL properties are low.  So, why not turn your house into an investment?

There are a number of benefits to renting your home.  Rent can often cover the mortgage until the housing market returns.  You can report losses against your income.  Historically, rental properties have been one of the best investments.  After all, where else are you going to invest?  Atleast you know your house is not a Madoff Ponzi scheme!  You can always move back into the house in the future. 

What are the drawbacks of renting your home?  You must first prepare yourself to rent out your home.  It is now an income property.  Tenants probably aren’t going to care for the property the same way you did.  That is okay as long as you have an adequate security deposit.  Are you ready for calls at midnight from your tenant?  If not, you probably want professional management. 

Landlords must also prepare the home for a renter.  The heater must work.  Proper smoke detectors must be installed.  Trip and fall hazards should be removed.  The house should be empty and clean.  Insurance may be an issue.  A call to your insurance agent is a must! 

The big issue is LAWSUITS.  There are a number of ways landlords get sued.  Discrimination, mold, trip and fall hazards, etc…  My suggestion is to hire professional management.  For approximately $150 per month, a professional management company should prevent many of the potential lawsuit scenarios and take care of the midnight maintenance call. 

MacFarlane Real Estate, Inc. is always looking for new clients!  Give us a call to discuss renting your house.