All Forum Posts by: Denise Evans

@Justin Mason, the job of the guardian ad litem is to protect the interests of the unknown people who cannot be found, served with lawsuit papers, and defend their own interests.  If there are no unknown (heirs for example) then there is usually nothing for the GAL to do.  Sometimes the court will appoint a GAL even if there do not seem to be any unknown parties. In that case, the GAL simply reports to the court that is has reviewed the title work and done some preliminary research and agrees there are no unknowns.  In such a case, if nobody demands an auction, the GAL will not demand one, either. The investor will get the deed and the quiet title order with no auction.

If, however, there are unknowns, the GAL will have to demand an auction. That is because the  unknown parties could have done it, if they'd only known about the lawsuit. So, the GAL will have to do it for them. Then there will be an action.

@Justin Mason, the new law applies to ANY tax lien certificate foreclosures, no matter when the auction took place. That is why the new law changed the holding period from 3 years to 4 years, to give people who were just about ready to be sued time to take advantage of the law change.

Someone with redemption rights does not have to hire an attorney. Technically, an LLC or corporation with redemption rights would have to hire an attorney to enter an appearance and demand the auction, but that is very inexpensive. A natural person can represent themselves in court, and make the demand without having to hire an attorney.

You are correct, if auction is not demanded then the deed will be issued and title quieted. That's why I recommend investors find owners or their heirs if the property seems to be abandoned and buy quitclaim deeds from them if you can get them cheaply. It gets rid of potential auction-demand troublemakers and it gives you the right to immediate possession. Even if you buy out only ONE of twelve or more heirs, you are now a co-owner and entitled to possession.

@Jules Aton, I don't see virtual learning being a dramatic impact on student housing except for perhaps graduate students.  Most parents of college-bound students want them to have the "college experience" of a semi-safe environment away from home where they can learn to be independent.  Different considerations for graduate students, but I'd put them in the housing category of "young professionals."  In other words, no need to live close to campus and might even relocate to cities where they ultimately want to work. Or to vacation destinations they can enjoy before entering the workforce.

At least in Tuscaloosa, student housing brings higher rents. Yes, they are often rough on the property but regular inspection visits and immediate consequences keep that to a minimum. Also neglect-proof finishes like LVT flooring, quartz countertops, one-piece shower and/or bath enclosures and painted cabinets.  Plan on changing out HVAC filters yourself and doing pest control yourself. 

While they each pay rent by the bedroom, make sure the lease includes joint and several liability, which means everybody is liable for the whole property rent, not just their portion. If one student defaults, the others make that one pay or they ante up the difference.

Parents all guarantee the leases, so there is almost no risk of default.  Most landlords make some portion of the security deposit non-refundable as a turnover fee.  

If you are a good landlord, they will refer their friends and classmates to you and you'll never have any vacancies. A friend of mine specialized in student housing. He said their last memory of their landlord is the "lasting memory." He inspected monthly and stayed on top of them to fix minor things and clean things or pay to have it done, immediately. But, he always refunded the security deposit, in full, 5 days after lease end, unless they completely trashed the place. He charged market rents and always had a waiting list for his units.

Again, I speak only for Tuscaloosa, but historically student housing sold on lower capitalization rates than regular rentals. I'm making up these numbers, because this post will be online for a long time but cap rates will change, so don't takes these as current cap rates. A SFR in a family part of town might have monthly rent of $3,000 and an annual Net Operating Income (after expenses) of $27,000 and might sell on a 7-cap for $385,700 Student housing with the same numbers might sell on a 6-cap for $450,000.

The investment strategy is to buy cheaply on the fringes of the path of student housing growth, and then wait a year or two until the area turns to a student housing area.

I agree for Alabama. I'm in Tuscaloosa, home of the University of Alabama main campus. Student housing is priced by the bedroom. A 4BR/4BA house might rent for $4,000 per month but cost only $250,000 or less to purchase with operating expenses below 25%. All four students are responsible for ALL of the rent, and all of their parents guarantee 100% of the lease.

I'd like to correct some statements in @Fernando Alonso post. Tax sale redemption rights can be far longer than 3 years.  The interest rate after a lender foreclosure has been 7.5% for many years now.  Payment for improvements is based on the value those improvements added to the property, not the cost of the improvements. Valuation does not require an appraiser, but that is the recommended best method.  Redemption is not uncommon with investment properties because the borrower can often sell their right of redemption to another investor, who then has the right to exercise it.  In fact, redemption is probably more common with investment properties than with owner occupied residential properties, but that is just based on anecdotal evidence, not actual numbers.  As far as coming up with enough money to stop the auction, once the loan has been accelerated in Alabama, only payment in full will stop the auction, or a voluntary agreement by the lender to pause while a short sale or something similar is negotiated.  I doubt a waiver of post foreclosure redemption rights would be enforceable, because they do not even come into existence until after the foreclosure, so there is nothing to waive at the time the mortgage is executed.

Michael Morrongiello, You have a deed of trust on an Alabama property, rather than a mortgage?  If a mortgage, it makes no difference regarding ownership of an investment property, natural person or entity has the right of redemption.

I'd have to research the technicalities of a deed of trust foreclosure. Offhand, I'd think no different from an Alabama mortgage foreclosure. In an Alabama mortgage foreclosure (unlike all other states' mortgages) title vested in the lender when the mortgage was executed. Title defeases and goes back to the borrower when the mortgage is paid in full. The foreclosure forecloses the borrower's equity of redemption (not to be confused with their post-foreclosure right of redemption), which allows the title holder (the bank) to sell the property on the courthouse steps. With a Deed of Trust, the title is transferred to the trustee when the money is borrowed. Title is transferred back to the borrower when the loan is paid in full. The foreclosure forecloses the borrower's equity of redemption, which then allows the title holder (the trustee) to sell the property on the courthouse steps. So, off hand, I'd guess no difference in post-foreclosure redemption rights if it is a mortgage or a deed of trust.

No, you can't use that law to eject former owners or their tenants after a foreclosure. You must file an ejectment lawsuit.  

Also, post-foreclosure redemption rights are only six months for homestead property in Alabama. 

Also, be aware that the federal Protecting Tenants at Foreclosure Act (PTFA), passed in 2009 during the Great Recession, expired and then was reinstated during the final days of President Trump's first term. It is still the law. Residential tenants in possession after a foreclosure have rights, including the ability to stay in the property until the end of their lease term, at the rental rate in their lease. The rent has to be paid to the new owner, though.  If you are unfamiliar with the PTFA, here is some additional info:  https://www.occ.gov/news-issuances/bulletins/2020/bulletin-2...

@Eric Miller For a purely commercial property, the appraisal is primarily a capitalized income approach based on the rents and the expenses. If you can get the rents up, and the expenses down, you increase the Net Operating Income, which increases value. On a property with $24,000 a year in NOI and a market cap rate of 8.5%, and a rent increase of $50 per month and a savings of $1,000 a year by increasing your insurance deductible, you will add $18,824 of value.

If you can reduce risk, such as having all tenants with significant time remaining on their leases and all with security deposits, that will often decrease the cap rate, which increases value. Cap rates are related to market interest rates and to risk. If you can reduce the risk of near-future capital expenditures, such as replacing an older HVAC or roof, that also reduces the cap rate which increases value. A $10,000 capital expense for a brand new HVAC unit does not count as an expense for purposes of calculating NOI. It can result in a cap rate reduction. If the cap rate goes from 10% to 8.5% on a property with NOI of $24,000 a year, then the increased value is $42,353. Well worth the $10,000 expense.

For SFR, appraisers generally look to see the character of the neighborhood. They will then do a psf analysis based on comps, and a capitalized income analysis. In the reconciliation, if the neighborhood is predominantly rental, they will lean more heavily towards the capitalized income value when doing their reconciliation. If the neighborhood is predominantly owner/occupant, they will lean more heavily towards the psf valuation when doing their reconciliation.

If the property is a rental property but vacant, they will accept comparable rents as long as you can substantiate the properties and locations really are comparable to yours.

BVRRR-"Beaver?"  Nature's builders. Makes sense.