@Amber K.
I am exactly in the same frame of mind when it comes to what seems to be a play on words in many of these instances where it may seem to be legal because EVERYONE does it and it may be taught by some guru and yet seems very cold hearted and in fact, IS ILLEGAL.
I'll give an example from the pre-Crisis days that really upset me, but was very common practice.
I had joined a Real Estate Club, formerly called Cash Flow NYC, where the members were presenting deals.
The way the deals worked was that someone had to be a "Credit Partner" who would be paid $10k to basically put their name on the loan as an owner occupant.
Once the property was acquired and rehabbed by the Investor Partners who set up the "Credit Partner," the deed would then be transferred from the "Credit Partner" to the LLC of the ACTUAL Partners, $10k would be given to the "Credit Partner" and that Credit Partner's role was ended.
This was FAIRLY common and all kinds of people, from Mom and Pop to experienced Real Estate Investors had conducted this.
Most people believed that Credit Partners was a win-win for everyone.
The problem here was that the "Credit Partner" is an illegal STRAW Man, who pretended to have the intent to own a property for his own use only to defraud a Mortgage Company.
But this was fairly common practice and was done ALL THE TIME.
When the financial crisis hit, the major players who ran this scheme was put in to jail as the Investors lost money from their properties. Those Investors were silent partners and did not really understand what they were doing.
Most of those Investors were also guilty of signing a waiver as an Accredited Partner, which is needed to buy shares in a Private Corp.
The list of fraud went on and on.
I quit attending REIAs and other organizations which preached these kinds of "alternative" ways of funding your real estate investments.
These things go on day after day, year after year, and while it's illegal, people get away with it as long as everyone is making money.
Anyway, that's what I was seeing when I started reaching out to these Real Estate Network meetings. So I stopped going and started my own Group of Students, teaching them the RIGHT way to make money without losing your Ethics and Integrity.
SO... what is the right way?
Be as educated as possible to take advantage of a situation that arises legally.
For instance, in 2008, I saw a building 2 doors down from one of my 4 Family Investment buildings for sale.
The only problem was while this building had the same number of floors, it was selling as a 3 Family because the 1st and 2nd floors were combined into 1 unit.
The first thing I do when I asked for an appointment is go directly into the basement and look at the meters.
What I observed was 4 Gas Meters and 5 Electric Meters.
I didn't bother looking at any of the other floors because I knew the entire building would need to be gut renovated.
I immediately put in an offer AT ASK and was accept immediately.
So... what did I know that the seller and his Real Estate Firm didn't know?
In NYC, you cannot have any more Gas Meters than the number of legal occupancy. There is one RARE exception, and that is when there may be a Gas Meter solely for the building heating unit.
Since there were 4 Gas Meters, I knew it could either be a legal 3 Family but most probable it is a 4 Family.
To confirm it was a 4 Family, I looked at the number of electric meters, which were 5 meters. In NYC, you can have only 1 extra Electric Meter for the common electric in the Hallway, basement, front and back yards. You are allowed 1 meter per legal unit as well. SO..... it was DEFINITELY a 4 Family Building.
The building was selling as a 3 Family. The Comps on 3 Family was lower than Comps for a 4 Family like my own building 2 doors down.
The Seller didn't know it was a 4 Family because they also Bought it from a previous owner while it was in the 3 Family configuration because it was the previous owner than the current Seller that had already made the conversion.
The Seller was represented by the biggest and most prestigious Brokerage Firm in the area and yet the Broker/Agent did not know.
The Appraisal was conducted, but it appraised as a 3 Family as the Appraiser only saw 3 Kitchens.
The appraiser gave the building the value of the asking price which was $1.2 Million.
By the time I closed on the Contract, I immediately pulled out the circular staircase from the combined two floors and put in the kitchen that was missing since there were only 3 kitchens in the building prior to my purchase. Now it has 4.
I then went to take out a 2nd Loan which made me do another appraisal.
I went to the buildings department and pulled the Certificate of Occupancy, which showed the building as a 4 Family, not a 3 family.
I handed that Certificate of Occupancy to the new Appraiser.
The Appraisal came back $350k more than my purchase price even though it was only 2 months ago I closed on the sale.
I could have immediately flipped it and pocketed that money, free and clear of anything that could have been thought was wrong.
This was a GREAT deal but ONLY if you were to recognize the opportunity.
Now, for the real reward.
After doing about half a million of a gut renovation back then, which was pretty much paid for because I bought it much cheaper than it was and getting the money from the 2nd Lien bank, today, in the year 2018, it is worth $3 Million... roughly $1.5 Million more than I had paid for it with renovations.
This is JUST 1 of 8 deals that I bought.
But being more educated than the other side can definitely give you the BIGGEST reward.
It's funny how the majority of people on here say you can't make money in NYC... and yet I find it to be the easiest and most rewarding way to make money without sacrificing any of my Integrity.
