All Forum Posts by: Adam Greene

A 1031 should the way I read it work for them.. *legal disclaimer I am not an attorney and you will want to talk to one*.. but this is from the irs website on 1031's 

Both properties must be similar enough to qualify as "like-kind." Like-kind property is property of the same nature, character or class. Quality or grade does not matter. Most real estate will be like-kind to other real estate. For example, real property that is improved with a residential rental house is like-kind to vacant land.

With that aside where about in Northern Oklahoma, is your land?  I know a few people in the market for a decent bit.  It is likely too far for my people but I feel I would be remiss if I didn't even ask.

For FHA or conventional they will require 2 years of income history ... unless say you where in school the previous year and then started a business they would probably accept only one year. other options might present themselves if the property has 5 or more units, and you can look at commercial options. (I know almost nothing about commercial.).

That aside from the information you have shared so far.. I think you will probably have to wait until the end of this year and report at least as much or more income on your next tax return.  You can add back in depreciation and losses for say theft.. but not most of the other self employed deductions..  Your debt to income will be calculated using the avg of the two most recent years profits so long as the second year shows you made equal or greater profits vs the first year.. should be able to find that amount on line 51 of your return.    

Good luck with all of it... I would certainly reach out to an Mortgage broker in your area, if you can find a good one they will pull your credit and help you form a plan as to what you will need to be able to qualify.. ie next year you need to net 102k to qualify for x amount and a score of y so you can buy this property.

1st. I love Rural Oklahoma for real estate.. buying REO, and distressed can be quite rewarding.. if a lot slower than someplace less rural.

I have an accepted offer on a 4 bed 1.5 bath brick home on 1.62 acres of land just south of Stilwell Ok, and North of Sallisaw.  Great very rural place.. built in 85.. over all good condition, HVAC looks good only one broken window pane.. roof needs work.. needs gutters and new floors and new kitchen counters.. and a couple of closet doors.. oh and popcorn removed and painted.. had been occupied by heavy smokers.  Accepted offer is at 30,250.00 and after the approx 25-30 k in repairs and updates the house should in this area have a value of 85-100 depending on finishes etc that we end up with so a pretty good score..

Here begins the Rural Oklahoma part.. 

Title trouble.. turns out the bank actually foreclosed on the 1.62 acres next to the house, and not the 1.76 acres they actually built the house on..  additional complication the land they did build the house on is actually owned by the neighbor.. so now the Bank did a contract for deed and the elderly couple that lived there moved happily to an apartment..  

However they have a law suit currently pending in court.. court date is actually for some day this next week.  the bank has now tried to sell this house to me twice.. admittedly it's never gotten past my giving them 1k security deposit, but they keep putting it on the market after they can't work this out...  How do I know all of this well the former / possibly soon to be again home owners found me and showed me all their legal documents.. the funny is they still want to sell me the house themselves if they win in court.. They asked me to go down to the county and see if I could understand all the stuff that's going on and explain it to them..  the County Clerk said it could go either way, and she doesn't care so long as it goes.  She doesn't want to listen to the crazy old bat any more :)   So I figured I'd share this story thus far..  Oh if they do win they can sell the property because the old lady married the old man who owned the land about three years ago.

at this point I don't care who owns it they both want to sell to me I just have to wait for the court date.  I am a little torn about how I want it to go down.. I like the sneaky old lady who might have pulled one over on the bank and ripped them off for 43k, (what was owed on the note.) but then I really like justice and she didn't pay so I tend to think the bank should get it... either way I love Oklahoma real estate it's somehow so much more colorful than it was in CT. not to mention a whole lot cheaper. :)  

Originally posted by @Rod Desinord:

Thats not the norm with a broker like that. I would change brokerages if you're having that problem.  

I second that,   This time interview your next potential broker, and make sure He/She is at least investor friendly and preferably is an investor.. start by looking on Bigger Pockets if there is a broker near you who is on here, and working with agents.. you will know they both can understand and help you without being scared away by anything less common.  

Greg I'm afraid at this point coughing it up as experience Is your best course of action.  You can certainly ask for something, but they will be under no obligation.  

Having been an agent, I offer the extra thought that unless the agent in question is a broker he/she does have to split a portion of her commission with her broker.. that split varies alot between 30% - 70% avg probably being about 50%.. also you would be asking for post tax dollars   Neither of which excuse anything that even appears shady, but would make refunding money more painful for the agent.  

I hope this is not the most helpful reply you get.. but keep trying. You will find a lender who understands the real estate game, and will lend, with money down, and possibly a certain amount in cash reserves as well. Worst case scenario as your renters pay down your current loans you should eventually fall into a more positive debt to income ratio. You can also pursue a credit partner or private investors, since it sounds like you have a track record you might find that until you are bringing in enough cash on your own, you can keep growing by teaming up with other Investors in your area.. Try hitting your local REIA and of course using BP :)

Not at all.. though your agent (possibly not depending on state laws) should have disclosed the commission arrangements with you.  In CT the buyer would sign a form acknowledging that your agent was representing both you and the seller, and would not violate eithers "trust"     

All of that aside HUD typically allows for 6% commission on its deals, split between the sellers and buyers brokers, and sales agent. You could have negotiated with your agent requesting that they lower their commission to help make the deal more attractive to the HUD Agent, but this its not common practice, and would probably be at least a little insulting to your agent.

In the future I would suggest getting your own separate buyers agent.  I also had a deal that left me with a little bit of a bad taste in my mouth because it left the dual agent looking like they might be dishonest, and you can't tell.. If you know the agent and have a history with them then I would be much less concerned. 

Still I am glad you got the deal and hope it proves to be very profitable.

Adam 

the SPE is certainly a rule although I've heard not all banks follow the rules. It is often gotten around by transferring title into the name of your LLC after closing. This is typically an issue with traditional financing - the risk with doing that is that the bank will call your loan. As for not needing an llc and trusting insurance.. I cringed as I read that, I truly respect my agent and know that he isn't trying to get one over on me, but I also know there are pages of exclusions in most insurance contracts. And then God forbid you ever need to file a claim expect to wait up to five years to get your next home owners policy or pay crazy additional rates. Personally I use a combination of llc's and insurance. I started with one llc and insurance, I am looking at adding additional llc's for asset protection and privacy as assets grow (unfortunately I don't need more yet). As for the hassles, I second reading Suttons books but I would also suggest looking at the cost of hiring an llc company/ firm to manage the "administrative" side of things including meeting minutes and annual filings and other crap. Depending on where you live, and the amount required by the gov you might find the costs to be low on the cost vs pain in the *** scale.

Please Listen to Mark Perrine 's advice the 5 or 600 you spend to have your corp / partnership setup by an attorney will likely save you thousands or tens of thousands in legal fees and hopefully protect your relationship as well. You might not know it but choosing your corp and corp type and how your corp type is taxed is actually complicated, and carries potentially huge ramifications. ie of you go llc you can designate it function and be taxed as an s or c corp. Then the follow up requirements the tax schedule annual fees meeting mins sufficient funding for the corp. As in any real estate deal begin with the end in mind and exit strategy, what happens when person b gets pisses and wants out etc. Again just my two cents but IMO this is one of the areas you shouldn't cut costs like doing your own natural gas lines ( sure it's easy work but if something goes wrong there's nobody to share the responsibility with it's all on you).

Go Pro - Eric Worre Master the art of selling anything - Tom Hopkins