All Forum Posts by: Dion DePaoli

@Roy N.

Yea, I am not the expert but I have experience with the structure. Our investors in our fund were exempt from the NRA Withholding. They were subject to the domestic tax laws of their country.

So do you imply that the CRA has a reduced rate or exemption for US sourced income, what is the nutshell version of that, just curious.

I was with you until this post.

A brief exert from the IRS:

Certain interest is subject to a reduced rate of, or exemption from, withholding.

Portfolio interest. Interest and original issue discount that qualifies as portfolio interest is not subject to NRA withholding. To qualify as portfolio interest, the interest must be paid on obligations issued after July 18, 1984, and otherwise subject to NRA withholding. [NRA = Non Resident Alien]

I am in no way saying don't consult attorneys on matters of legality. However, I am saying the OP can simply read the paperwork which is where the answer is located. A presumption that an attorney will offer service for free seems like a bit of a stretch to me. When engaging a professional to do something, I would not expect that service to be free. Frankly, I would even expect an attorney first tell the OP to do what I just said, pull the paperwork out and read it.

This thread is much, much, much simpler than the evolving conversation. Too much speculation and frankly poor assumptions. Fact of the matter, the second didn't waive deficiency as such, they are trying to collect since that is what debt collectors do. Why does that seem so clear, because even as Bill mentions, that idea not being the case would mean this transaction is super complicated, which I would say has about a 0.0001% chance of being true. Let's not forget that a Seller would be taking title subject to the lien being attached.

If the OP can read English and the paperwork is in English, then it is not too far of a stretch to assume the OP can read the paperwork and understand. Further, the lack of knowledge right now seems to suggest the paperwork was not read prior to execution, it's about time he read it then since he agree to something that he doesn't seem to know what he agreed to.

The best place to start is with what is available, the paperwork, read it. Do not jump to the extraordinary when the ordinary is slapping you in the face. You didn't get a deficiency waiver, they are trying to collect. To stay collection attempts, write the letter. You will still owe the debt, they just will slow the correspondance in accordance with the collection law.

Slow the roll here a bit.

In the United States, we have tax treaties with other counties which essentially state that US sourced income is taxed at 30%. That is before any taxation of the domicile country of the foreign investor. There is also a Portfolio Tax Exemption which can be structured to the foreign investor. Rules and restrictions apply to the exemption on the direct ownership of assets in order to be considered exempt.

The point here is that a straight forward approach to joining a US based LLC and making investments may very well be the worst tax idea that you could come up with, considering the available family member willing to do business with you.

Clearly the knowledge of PTE is not widely known by domestic investors since they are domestic. I ran a blind pooled mortgage fund which was capitalized from foreign investors and it was structured to accommodate the PTE. You will want to find an attorney in the US or Canada that is familiar with the law and they should help you setup the investment.

None of the questions around bank ability will apply since the borrower to the loan would, when properly setup, be a US entity.

I recently typed some information around the rule, you can read the thread HERE.

This seems to have gotten a bit confusing for frankly a simple concept.

A "Short Sale" is the sale of real property from one party to another. The 'Short' refers to the Mortgagee taking less than the total balance due to satisfy the lien. If there were two leins, both leins would have to release their lien position on the real property otherwise the Buyer would not get clear title.

In the event, the Second lien did not agree to satisfy their interest in the real property, then the transaction would be considered a Subject To transaction, since the Buyer's interests would be Subject To the existing lien. This would mean the second lien is still attached to the property. In the OP, this does not sound like the case. Therefore, no foreclosure action could be further pursed, since there is no longer an interest in the real property to foreclose on.

Deficiency waiver in a first lien is common and usually found within the paperwork. Deficiency waiver in the second lien is somewhat common however it is also not uncommon for the second lien holder to not waiver deficiency. This is what sounds like took place. It is possible, that a waiver of deficiency was accepted by the second and they are simply trying to collect on something they no longer can, however that is not all that common of a mistake.

As such, the suggestion above relating to the issuance of a letter to the second lien holder regarding collection attempts is the best response. Fact of the matter, if the Borrower did not get a waiver of deficiency from the second lien, the amount due is still due. It is just not attached to real property any longer.

Usually the agent(s) involved help negotiate a waiver of deficiency for the borrower. In addition, the Seller usually reads the paperwork which will also state exactly, as Wayne mentions, what is happening with the outstanding debt.

IMO, you don't need a lawyer to read you your paperwork. Pull it out and read what the second lien holder put. I am pretty sure you will find, you agreed to reaffirm the debt which they agreed to release on the Subject Property but not release you personally. The debt is now unsecured. Collections on all debt must follow the law and the Fair Debt Collection Practices (rule can be read HERE) will dictate further correspondence between the creditor and debtor.

To some degree the numbers do seem a bit high. Local factors can play into the cost of work performed. The first problem is you have no bearing to compare it to. I would recommend getting a couple other construction quotes. Perhaps even schedule one yourself, opposed to going through the PM. Simply have the PM open the unit for the inspection to produce the proposal.

When we have managed assets far away, pictures are your best friend. Anything that demands more than $100 worth of work suggested by the PM, I request photos so I can understand what the work is and I can make a better decision.

It would not be the first nor the last time a PM and a construction company collude to make profits. You are certainly able to express your concerns to your PM. A simple conversation around how you don't believe the expenses make any sense economically and see what type of response you get. To some degree, you expect your PM to manage and act in your best interest and this seems to be a little outside of best interest. As you mention, 10 years to recoup is a bit much.

There is no requirement to open a holding company and place the assets into it. A holding company does provide liability protection but in the post it is not clear how you would capitalize the trade. Capital sources will have some affinity on the funding and holding structure of the investment. This type of advice should be sought from your accountant.

Can anyone invest in the loans? That depends. Some states require the investor to hold a state approved license, other states do not. The Seller of the asset may place restrictions on the designation of the Buyer. Some Sellers will look for accredited investors, others will not. The Seller may have some liability selling to a non-accredited investor depending on the details of the deal.

If you like Dave's program, which many folks do, simply reach out to his company and start the process. Good luck and welcome to whole loan mortgage investing.

@Bill Gulley internet courses can be just as good or just as bad as in person. In person classes can be just as spoon fed and actually cost more time from the student. I have been to both forms of classes and know a slew of licensed folks in the same boat. I agree, your 'pro' points are valid in some sense but that doesn't mean it is always the case. I simply think we should be careful to put too much fluff on one opposed to the other.

As with any education, the workload still falls on to the student, the institution is a means to the end.

I am not inclined to dive too far into this but you should go seek a local experienced tax professional who is familiar with Troubled Debt Restructuring (TDR) and the guidance that has been issued by FASB over the last couple years.

Many publications from 2009 and prior fail to include the guidance and clarification from FASB on the treatment of troubled debt. After the crash, the conversation around TDR came to the forefront and most of what you see on the internet is simply the echo of the conversation and may not include the rules that have been reviewed and commented on for clarity. Impairment losses can be used to offset gains, provided it qualifies. Guidance is given in FASB 15 and a couple other publications.

Moral of the story, this is not so straight forward and is a complexity that, in my experience, only a few accounting firms have had to dig in and sort out. Simply stated, the tidal wave of investors entering into distressed debt investments and the subsequent actions and consequences of such actions, while not overly new, grew exponentially in volume since the crash and cause much discussion, for the greater good. Further, in my experience, and certainly not taking anything away from Steve or Bill, whom I have much respect for, not many smaller accounting firms have had to actually deal with. I can't tell you over the last couple of years the amount of time and energy that has been spent going round and round with accountants and auditors about taxation's applicable rules. Needless to say, a lot.

I will also agree, Bill said it well, if you are being taxed, you are making money and that sort of is the point. That said, nobody wants an excessive or unrealistic tax burden and there are things that you can do to complement that idea. There is no real way through this thread to go over all of the finite details. Many details will apply.

I also note a dangerous idea mentioned in one of the OP follow ups, "...my client and I...", be careful that sounds like you might be giving accounting advise and presumably without a license. If your client suffers harm from your "advice", you may have some issues.

I have not attend the particular school mentioned here, however official schools that teach classes for state licensing are monitored and approved by the state itself. Many of the schools have both brick and mortar and web presence.

When you get your license you will have on-going continuing education, many folks like the web access for that. I looked at this site and believe you will be just fine with them if you want to pursue your license. They are a licensed school.

If you are ever in doubt of an officially licensed school, your state has a license check, just like for real estate agents, on their website. A simple Google with "license check" should produce the results for the link.

Be aware, classes for license are classes geared to take and pass the state license exam. Those courses will teach you state law and a few other concepts to pass the test. There is a difference with learning to take the test and actually learning to work in the industry. As such, there are many things the class can not and will not teach you. For that, you will need experience under the guidance of an experienced licensed broker. Taking the state exam allows you to practice real estate, it doesn't make you an expert, it is but one of the first steps.

Good luck.