All Forum Posts by: Andy Mirza

We ended up using PSOs for our first two NPNs that we bought in Ohio. 

We tried two different PSOs and I felt like both did an excellent job in selling or trying to sell the properties. One of the properties sold at auction while the other reverted to us as REO. Those outcomes were due to our max credit bid requirements since we wanted more for the 2nd property, which was built in 2017 and we assumed correctly that it didn't need much rehab.

The PSOs held online auctions that were open for a week, with almost all of the bidding taking place in the last couple of hours before the auction ended.

Using a PSO requires a few additional steps with court filings that seemed to make the process take longer, although how much it added, I don't really know. I feel like the extra effort was worth it because I think selling with a PSO will get you higher bids compared to the sheriff's office, which doesn't have the same incentives. But then, maybe the buyer's premium (up to 5%) in the PSO auction suppresses the final bid.

One property was located in Stark County, the other in Franklin. Both courts seemed very slow to me and one didn't even do things online. Things seem to move so much faster when attorneys can digitally file their motions. Who wants to wait for the US mail? @Chris Seveney what do you think? 

I wanted to provide an update with our experiences. 

We bought 2 reverse mortgages also known as HECMs (Home Equity Conversion Mortgages). We were able to get interior photos before we bid on the NPNs because the homes were vacant.

Yes, these will require a lot more rehab than normal because they weren't updated or in some instances weren't well maintained at all.

For one, the process has been pretty easy. No one contested the foreclosure so it was more like a normal, uncomplicated probate proceeding.

The other one is proceeding more slowly only because one of the potential heirs is now deceased, which is requiring further title research before we can move for judgement. Again, similar to a typical probate situation where you have to spend extra time sorting through probate issues.

The plan will be to go to sale and most likely take these back as REOs to renovate before selling.

I plan to buy more HECMs in the future. As long as you provide an extra cushion for the additional rehab and are comfortable with taking on an REO from long distance, buying reverse mortgages can be profitable.

I wanted to provide an update on the two "successes" I mentioned in the original post.

We were actually granted relief for one of the loans. The trustee in the other case moved for a dismissal before we could get our MFR.

Both borrowers filed new Ch 13 cases, which stopped our trustee sales. One has dragged on and, months after getting nowhere with the borrower and her new BK attorney, we're getting our MFR hearing in October.

The other borrower filed a motion to extend the automatic stay. (When a borrower files their first BK, there is an automatic stay preventing creditors from trying to collect; if it's a second filing within 1 year of the last one getting dismissed, the automatic stay only lasts for 30 days.)

Our attorney filed a brilliant opposition laying out the borrower's 6 bankruptcy filings within 10 years, which showed a pattern of bad faith filings. The debtor's motion was denied and we were free to foreclose a few days later. The property sold to a 3rd party at auction and we were finally able to liquidate this note that was sub performing for years!

@David M. Deeding a property is absolutely transferring the property from one person or entity to another. As you point out, there are numerous transfers that are not taxable events.

This would be a transfer for purposes of dissolving a partnership. The purpose of the transfer is to allow me to do a legal 1031 exchange, following all of the rules.

My belief is that it does not qualify as a taxable event but I'll make sure my CPA blesses this before I do anything!

I've learned that an essential thing for a 1031 exchange is that the vesting needs to be the same for the entity that you use when selling your down leg and when buying your up leg.

In my situation, my partner and I have to figure out how to divide up our assets. Once that's done, our LLC deeds certain condos to my new holding LLC. That new holding LLC buys the up leg property.

Based on some research, it appears that we can easily do this by drafting a resolution for our LLC outlining our plan. Anyone have experience dividing up assets in an LLC or doing a dissolution that can comment?

The other thing that needs to be cleared up are the tax consequences which a competent CPA or tax attorney should be able to address.

Am I on the right track here? Anything I'm missing?

For the most part, foreclosure & eviction moratoria have gone away and it's mostly business as usual for us.

Exceptions:

Cook County, Illinois is still not setting foreclosure sales for occupied properties. (The Cook & collar counties started allowing foreclosure sales of vacant homes)

Cumberland County, New Jersey is not scheduling foreclosure sales.

Sacramento, California - courts are backed up & everything is slow going.

Stark & Franklin Counties, Ohio seem very slow but I don't have experience prior to COVID so I'm not sure if it's normal or not. Maybe @Chris Seveney knows.

Other experiences out there?  

We don't buy any CFD, only notes. Maybe one day I'll learn enough about them to understand the risks but I haven't got around to it yet. Not sure if there'll be a reason to. Too many notes to buy...

Yes, most of them are. One of the benefits of buying recently is that most NPN's have progressed all the way to the "pending FC sale" status. The Fund that we closed last year is down to 2 REOs.

Investment Info:

Single-family residence note investment investment.

Purchase price: $2,105,000
Cash invested: $2,105,000

Coastline Capital Fund 6, LLC raised $2,105,000 and closed to new investors onFebruary 22, 2021. The Fund purchased 11 first position, non-performing notes with $2,519,522 in Unpaid Principal Balance ("UPB")The properties that secure these notes are located in Illinois (5), New Jersey (3), and Florida (3).

Investment Info:

Single-family residence note investment investment.

Purchase price: $2,105,000
Cash invested: $2,105,000

Coastline Capital Fund 6, LLC raised $2,105,000 and closed to new investors onFebruary 22, 2021. The Fund purchased 11 first position, non-performing notes with $2,519,522 in Unpaid Principal Balance ("UPB"), $3,526,187 in Total Collectible Debt, and $2,391,946 in Fair Market Value of collateralized property. The properties that secure these notes are located in Illinois (5), New Jersey (3), and Florida (3).

The Fund offered an 8% Preferred Return and a 60% or 50% Profit Split to the Investors.

The notes were purchased between February, 2021, and May, 2021. We expect the bulk of liquidations to occur between August, 2021 and July, 2022. The Fund will terminate operations and return all proceeds by February, 2024.