All Forum Posts by: Chris Calabrese

In lower-price, first time homebuyer deals, I find that earnest money is pretty useless. Buyers that don't have money for down payments or closing costs usually don't have much for earnest money either, and they will always have contingencies to get it back.

As far as the govt-assisted loan, a lot of people do them around here, but they take a lot longer to close. You need to ask the agent for more details or maybe actually try to speak with the representative for the program. Pre-qual's are about as meaningful as earnest money, you need someone who can actually get approved and close.

In situations like this, you need to screen your buyers like tenants. Find out what they do, how much they make, their credit scores, etc. so you can determine if they can actually get approved. This is one of the main reasons I like having my RE license and listing my own houses, so I can speak directly with agents and buyers and feel them out.

Yes, a seller can put a deed restriction on a property, and that is perfectly legal in the real estate world, as long as they make you sign and agree to it before.. Current Fannie Mae, and maybe some others, put a 90-day deed restriction on a property when you buy it where you can't sell for more than 120% of what you paid. The restriction gets recorded along with the deed so that the property can't be conveyed. If you don't agree to it in the contract, I don't think they can sneak it in on you at closing.

It's similar to how conservation easements are created. You can also do them for property use, i.e. a church selling land but requiring it not be used for gambling, a liquor store, etc.

It isn't automatically fraud, and to be honest, I can't say for sure that it ever is, but it is a gray area at best, and most of the gray area can be eliminated with proper disclosure. I believe that the distinction lies in that it's a short sale, and that the negotiator is convincing the lender to forgive debt, and the lower price can result in a bigger deficiency or tax liability for the seller as well. Therefore the negotiator is profiting at the expense of both of the other parties in the transaction. I'm referring mostly to the case where the negotiator, or buyer, is double or back-to-back closing and never intends to buy the house (i.e. wholesaling). In the specific case described in the original post, selling back to the original homeowner is, as Will stated, almost always prohibited.

Even in Will's scenario, you have to be careful about disclosing to the bank that you intend to make a profit on the deal. I have tried to buy from guys like this, and ended up backing out because they weren't willing to disclose to the lender that they were immediately reselling. It can be considered mortgage fraud if you withhold from the bank that you have a buyer willing to pay more than your offer, because you are basically making money that should've gone to the bank.

I would go with refinishing every time. It's very easy for a tenant to destroy carpet in one year, but wear and tear on hardwood doesn't look as bad. If you're planning on doing it yourself, it's a lot of work, but you should be able to find someone for about $1.00-$1.25/sf and not worry about a thing.

Plus, once you sand and refinish, you could probably get away with a buff & coat the next time they need redone and you can get that done very cheap.

Thanks Lance, it's good to hear that they are actually happening. When I couldn't find any good discussions on here about it, I figured it wasn't very promising.

Albert, could you keep us posted on how those work out, and maybe follow up with some details, rates, costs, etc.

Sorry, in wrong forum if someone can move it...

I guess this is old news, but I just saw that they updated the HARP program (HARP 2.0) to include investor loans and eliminate the 125% LTV requirement. Has anyone heard of any successful refi's through this program, or is it just another mortgage fantasy? I could save big bucks on one loan if it's really possible.

This kind of question comes up a lot on here, and it seems the consensus is that if you're a single member LLC and actively manage your rentals, the LLC doesn't limit your liability as much as you think. In other words, if someone tried to sue your company, it would probably still affect you, since you are the company. So don't look at it as a substitute for good insurance or fair and legal business practices.

With an LLC, you can file taxes as an S-Corp, as long as you make the designation ahead of time, by March 15th I believe. Then, you could pay yourself a "salary" for management, and take the rest of the profits as dividends. Your accountant could work out the percentages to be acceptable to the IRS. Your income level will determine how much this will actually help you, if at all.

Assuming you'll be marketing it as a rental property, the 70% rule of thumb doesn't really apply. A buy and hold investor will be looking for a certain return, which will depend on other factors. Currently, I'm trying to get rentals at less than 75 x rent, because at that number I can get my desired return with current interest rates.

When you say market value, do you mean in it's current condition or after repairs? Is it rented for less than market rate due to its condition or some other factor?

The 70% that rehabbers use includes repairs, so to market to flippers this must be subtracted out. If repairs would cost 5k, a rehabber would want to pay 70% less repairs, or 39,450. Unless, of course, a moderate rehab could boost the value to say 75k. Then the numbers change.