All Forum Posts by: Bruce Lynn

Some people love them, some hate them.  I don't know them from good or bad, but I've never thought turnkey was a good deal for the investors for the most part.  Most of the turnkey companies seem to know exactly what new investors have been told to look for and provide exactly that.  However often the properties are not really in the better parts of town and don't always attract the best tenants.

I've always thought real estate is not as passive as people will make you think and maybe the buyers want.  There is work involved as you have well found out.  It's pretty rare I see any that is super easy and the cash just keeps rolling in.  Add long distance to the equation and it just seems even more risky.  It's just tough to know the area, the type of renters, the type of housing, if the repair were quality or lipstick on a pig.

I'd think there must be a dozen good PM in Akron.  Find a new one and get it rented again.  Hang on to it for 5 years and then sell.  You'll probably do ok in the long run.  Go out there and check on the property.  Interview your shortlist of PMs in person.

Typically if you are the owner, you can draft your own agreements or make changes to promulgated ones. The rub might come if you get licensed and join a brokerage. The broker may not want you to do that or may have other restrictions. Sometimes the E&O insurance will not cover you or the brokerage if drafting your own, when there are promulgated ones to use. One thing typically you cannot do, is try to write around the property code. I've seen owners try to do this.

I would guess in most places there are good if not great leases already written.  In most cases I cannot imagine that you would want to draft your own.  Are you super familiar with the property code in Ohio?  If not, then don't draft your own.   The other issue I find when people draft their own is that if you have a problem and then need an attorney to work with you, it will be much more costly as they now have to learn your contract, vs the one they are familiar with and that is used widely in your area.  Also if you go to court and the judge has to learn your contract, that is not a good thing normally.  Hopefully it never comes to that, but no need to reinvent the wheel.

Another thing you have to think about is why you have a contract.  Contracts are not for when things go right, they're designed for when things go wrong.  I know in Texas we update our lease agreements about every 2 years as more issues come up.  It's now longer than the PSA. 

@Kyle Johnston Probably not what you want to hear, but something to think about.

Most brokers probably don't want to be involved in Sub2 and creative finance type deals for a number of reasons. #1 is liability. Just a lot more risk on both the buyer and seller side. One lawsuit costs a lot of time, a significant amount a money, and sometimes reputation. The juice typically just isn't worth the squeeze.

#2 how does you're friend get paid? If the seller is selling Sub2, then often it makes it complicated for the agent to get paid. Not impossible, but lots tougher.

#3 Right now, to me the market is not ripe for Sub2. Almost everyone should have equity. They should be able to sell with a normal equity sale. Sub2 probably works best when nothing is selling, lots of foreclosures, everyone upside down. Think 2009 when there was the giant meltdown. Not sure Sub2 was the savior for buyers or sellers, but that was probably when the market was ripe for it.

#4. I'd say tell her to stick with what works. What is tried and true. Stick with what is easiest and fastest to make money. Trying to develop a retail Sub2 business is real work, probably with low returns.

Now if she wants to spend about 5-10% of her time trying to cut Sub2 deals for her own account, that might be interesting. The nice thing is she can use that in her listing presentation. I can sell it for X, but if you are willing to leave the existing financing in place, I'll buy it today for X+$5000. Give people options. The trick is if you are licensed, you'd better perform and not hustle people. Better have some cash. It is not a business for people with NO cash. You need to pay that mortgage when you have no tenant..2-3-4-5 months. You screw enough people up and someone is going to come after you. Probably bad enough if you're not licensed, but do it while licensed, people start throwing stuff around like fraud, DTPA, and charges that might involve jail time. Plus you're messing with people's life....you want to be the hero, not the chump. You want to save them from a bad situation, not put them in a position where you can't pay the mortgage and put them in foreclosure and ruin their credit.

I think another trick is, can you get a mortgage or is it an all cash deal?

Most investors seem to want to use leverage to boost returns.  In many countries foreign investors buying rentals can't get loans or loans at all.  So you want to check that out.

I also ask how familiar are you with Spanish, and reading Spanish contracts, and knowing landlord/tenant laws in Spain?  That just adds a level of complexity to everything.

I think there is so much opportunity in the US, that why would you try to complicate everything x10, but investing in someplace like Spain.  I think it is different if you live there, speak the language, know the market.  

There are also horror stories about people loosing their property in Spain.  Not sure how common or widespread that is, but it has happened.   https://www.propertyguides.com/spain/news/british-investors-...

Great place to visit, great place to live, great place to holiday.  

@Luca Perinuzzi   Did you end up getting your license?  What brokerage did you join?  How's it going so far?  Have you been able to list or sell any investment properties yet?

I think the trick is knowing how to determine those up front.  Every now and then, I'll figure it out up front, but sometimes you're in the weeds before it all comes up.

 Who says the buyers will pay commission?  I'm not sure who pays will change.  Maybe it depends on the market.  Seller's market, buyer pays; Buyer's market, seller pays. 

Some people think commissions go down. I may be the lone person out there, but I think commissions go up.  Weak agents that used to take 1-2% go away.  They didn't stay in business long anyway.   Now the strong agents may rule.  Strong agents negotiate better and with more friction and less transparency, commissions may well go up.  Also with fewer agents, and maybe fewer brokerages, or giant brokerages that control their market.  Less competition normally means higher prices.

If you're just doing it for the knowledge, take the classes, but no need to get your license.  You can probably find most of the books online like Amazon or someplace local like 1/2 priced books.  Education is always a good thing.

Different perspective...... One thing I would ask, is does the law office represent you or are they only transactional, assisting you with paperwork?  Big difference.

Who saves the commission, you or the seller?  You don't both get to save it?

Sometimes these deals are easy and smooth and everyone agrees, nice, and friendly, and then sometimes when they look easy, they end up way more complicated.  I see stuff like this occasionally and always seems like way more to the story.   Husband died without a will, had 3 kids from a prior marriage, wife thinks she owns the house 100% and will get 100% of the proceeds.   She didn't understand that the kids also have to sign and get 1/2 the money potentially.  They can't or won't sell because they won't net enough money or what they thought or are upside down.  They forgot they haven't paid taxes in 5 years,  They forgot they got a big insurance check, but didn't do the repairs, so now you can't get insurance.  They're behind on the mortgage by a year and owe all kinds of extra fees that will make them upside down.  Plenty of times $ are not in the contract...so when you agree with the seller for sale of $300,000, they think that is what they are netting, when there could be charges of title insurance, surveys, lender required repairs, prorated taxes, escrow fees, etc.  So they get miffed when the $300,000 is not $300,000 and maybe just refuse to close.   Stuff like this and 1000 other reasons are why 70% of the wholesale deals that get to title don't close.   You have to spend some time thinking about that.  Why don't they close?

When/if you run up against stuff like this, check to see what kind of consultation fees your attorney has to resolve them and see if you think it is worth the risk vs having your realtor resolve many potential issues for you.  Every location is a little different in this regard.  If the attorney represents you ask them for their professional advice or what risks you face?

I can tell you that if my mom, grandmom, or my daughter called me and said they were going to do this on their own, and their experience is 2-3 transactions, I would advise against it.  

Of course it might go totally smoothly with no hiccups and everyone is totally happy in the end and someone either you or the seller save a small amount of money on commissions.  However the savings come with increased risk and most people are just horrible estimating the costs of risk.  This probably especially true when a home purchase for most people will be one of the biggest investments they will make.