All Forum Posts by: Don Konipol

Quote from @Quinn Olivarez:

If I were the original seller, I would tell the bank I sold the house so that I could get the ball rolling on getting it out of this sub to agreement that is probably not enforceable in most jurisdictions. I have had previous requests for help with this situation, and that's the advice I consistently offer. It is fairly easy to prove that the sleazy and less experienced sub to people had ill intent, they keep a fairly detailed record of their doings in a Facebook group and are easy to find elsewhere. Posting this here in hopes that other sub to 'sellers' see this and take action against these predators.

 ”getting it out of this sub to agreement that is probably not enforceable in most jurisdictions”

“It is fairly easy to prove that the sleazy and less experienced sub to people had ill intent”

Can you sight specific legal cases that back up the above assertions?  Or is this just what your fantasy? 

Quote from @Chris Seveney:

Quote from @Don Konipol:

The potential problems mentioned by the responding posters in this thread are real and well thought out.  IMO these problems would need a solution before the OP’s securitized token offering would be viable.  It might take a large financial institution with capital for “brainpower” and marketing, and financial and reputation strength to design as well as create a trading market for this type of security. 

Where I differ with most of the posters on this thread is that I feel solutions can be developed to address the problems and something similar to what the OP suggests would be viable. 

I do NOT have enough knowledge or experience in this arena to provide specific “how to” accomplish this, or even to provide specific”proof” of my position.   A lot of the basis of my position on this can be described as “gut feel”.  The reason I’m pointing this out is to distinguish my post here from most of my other posts where I have specific expertise, knowledge and experience in the subject matter.  Not here.  

 The issue I see is smart contracts/tokenized real estate and traditional real estate investors is like oil and water. Yes of course there are people who think tokenization is cool and you can get some $ from it, but to grow it at scale - real estate is old school and most who invest six figures in real estate are not 25 years old and are not keen on tokenization. I did a poll of 700+ people who invested in real estate and less than 2% would want it to be tokenized. The reason being they see no benefit and they do not understand it. 

Here is an example: We run a fund that has a transfer agent that handles the cap table. This is done via a traditional cap table. A competitor of ours does it on a platform with smart contract as well as crypto to invest. Within the first month I believe the company byte federal has a data breach. You investing in that fund? 

Lastly, in this example, if you are only able to collect rents but have no equity on the property - that is worse for the investor than owning the property. I would much rather invest in a REIT or another fund whereas if the rent was not going well but the property had appreciation then I would feel more secure. What is the security on the above? The only place this would appear to make sense is in Class D neighborhoods which could cash flow.

You have rights to income but nothing else - sounds like an unsecured note at the end of the day.

Chris you make good points.  My “reasoning” is based on two points

1- the current system of property records filing in a million different jurisdictions with expensive title searches necessary for almost every title transfer and mistakes still being made can be made much less expensive, much faster, and much more reliable through migration to some sort of “blockchain” National registry.

2- Numerous investments have been divided into, and offered as tranches of the whole.  While offering the “cash flow tranche” of a SFR might not be viable, the cash flow tranche of a portfolio of say triple net leased properties may be much more viable.  At its most simple we’re separating the appreciation/capital buildup benefit from the cash flow benefit.  

Obviously, the two questions that need to be answered are 
1- Is the OP designing a solution for which there is no problem?
2- if there is a “problem” Will the “solution” discussed solve it in a cost effective, consumer accepted way?

in any case a LOT more work would be needed before I, or perhaps most investors would be interested.  

The potential problems mentioned by the responding posters in this thread are real and well thought out.  IMO these problems would need a solution before the OP’s securitized token offering would be viable.  It might take a large financial institution with capital for “brainpower” and marketing, and financial and reputation strength to design as well as create a trading market for this type of security. 

Where I differ with most of the posters on this thread is that I feel solutions can be developed to address the problems and something similar to what the OP suggests would be viable. 

I do NOT have enough knowledge or experience in this arena to provide specific “how to” accomplish this, or even to provide specific”proof” of my position.   A lot of the basis of my position on this can be described as “gut feel”.  The reason I’m pointing this out is to distinguish my post here from most of my other posts where I have specific expertise, knowledge and experience in the subject matter.  Not here.  

Quote from @Bruce Lynn:

Quote from @Don Konipol:

This is a story from my past that provides a perfect example as to why investing in tax liens at auction is so dangerous for any but the most experienced and knowledgable investors

Great story....maybe not the exact same circumstances, but I see crazy stuff like this all the time.  I warn people over and over and over to know what they are buying and to go personally see what they are buying.  So many times the address is wrong and at the sale the person running it will state....the address is a courtesy, we're selling the legal description, don't depend on the address.   I think it is also pretty weird that at a lot of auctions if we see a "newby" ready to bid on the "wrong" thing, several people will warn them.  Sometimes the person running the auction will warn them....and then they still buy and often overpay.  Sometimes I think, well maybe that newby is an expert at draining swamps....or they have a helicopter to reach the landlocked property and want to practice aerial concrete and building material transport.

There was a guy on here the other day, challenging me that he could not possibly go look at all the "deals" he was going to buy in Florida for 10c on the $1.  Maybe you have to have a little thought process too.   When you drive out to your example I'd be thinking.....hmmmm why is there a tennis court next to the deal I'm getting ready to buy?  Who owns that?  Hmmmm why does the same person own both, but they've let the house go to foreclosure, but continue to pay on the tennis court?   Hey there is someone in the house, maybe I should knock on the door and ask them a few questions...like are they planning to sell the tennis court?  Maybe knock on a few neighbors doors and ask some questions.

I've found in Texas most people are pretty nice and friendly...the tax assessor people, the appraisal district people, the sheriff's office, maybe the county commissioners, etc.  Often if you talk to a few people they'll tell you the whole story and more.  Even though they are nice, often the records can be just plain wrong as you describe.  When we start asking questions, and having friendly conversations they get it figured out.

But hey...google knows everything.  I can become a millionaire just by looking at street and sat view and bid online in my underwear.  This has got to be easy street buying tax liens and deeds.

VIRTUAL wholesaling, VIRTUAL tax lien investing, VIRTUAL auction bidding…..REAL BANKRUPTCY!

Quote from @Jonathan Glumac:

I work for a MF Development Company in Texas and I want to get my realestate license. The president of the company has his brokerage license. If I get my sales agent license, I will need a broker sponsor. I don't want him to be my brokerage sponsor because he will want me to look at MF deals, which has extremely slowed down in the past few years. My role with this MF company is to manage the design, construction of the GC's and opening of the properties. My role does not require any underwritting to deal presentation to the principals.

Do I have to legally disclose to my boss that I will have my sales agent license and have a brokerage sponsor that is someone different outside the MF development company?

The intent of getting a sales agent license is to educate myself in Real Estate and create some additional income.

If your relationship is such that you need to hide your license, you’d be better off with a different working relationship. 

Quote from @Melissa B.:

Hello,

I'm new to tax/mortgage surplus funds retrievals, and have been in contact with a homeowner who is willing to work with me. The problem is ... I need funds (but only for the buyout portion of the deal, and she's agreed to certain percentages). There might be other states added, soon or down the road.

Question: Should I collateralize the loan (if using private or hard money), or rely on roll-over loans (to maximize the lower points and 3-4% rate)?

What are the pros and cons of each, and which offers the least restrictions, flexibility and cost savings for my intended purposes?

Have a good weekend,

Melissa B.

I’m missing something. What do you need the loan for? 

Quote from @Andrew Self:

Previous apartment. So overdue rent balance.

Here’s my suggestion.  Calculate how much more in interest, lost profits, etc it will cost you to have this “blip” on your credit report.  Then offer the creditor a percentage of this amount as settlement in full.  Unless the item is a total fabrication.  If it has any basis at all (such as you left the apartment during your lease term for what you felt was a justifiable reason and stopped paying rent, but the landlord disagreed) then you may be better off paying a rather small settlement.  It may be a tough pill to swallow if you feel you’re totally right, but you may be surprised at the LEGAL opinion rendered by counsel. 

This is a story from my past that provides a perfect example as to why investing in tax liens at auction is so dangerous for any but the most experienced and knowledgable investors

20 years ago I purchased a SFR as a long term rental investment that sat on a double lot. The second lot had the remnants of a tennis court the original owner had built, but was now in disrepair. The seller has the two lots legally separated, but due to deed restriction imposed by the subdivision development, found that building a house on the "tennis court" lot was not allowable.

Do to an anomaly pertaining to the appraisal district, the total value of the two lots was divided equally between the lots instead of allocated by market value.  Hence the lot on which the house resided was taxed at a 45% discount based on actual value, while the tennis lot was taxed at about 4 times what it should have been by value. 

I purchased both as a package and for the next six years enjoyed great cash flow as I paid the tax on the house lot annually at about half of what it should have been and neglected to pay anything on the tennis court lot.  The law firm handling tax foreclosures for the county put the tennis court lot up for auction. Of course it probably wasn’t even worth the amount owed in taxes as nothing could be built on the lot. 

To add to the confusion, the party that had divided the lots had instead of distinguishing the lots by A and B, used A1 and A2.  The result was that a few maps had the lots reversed - in actuality A1 was the tennis court lot and A2 was the house, although intuitively one would expect the opposite.  Since both lots had the same mailing address, this was the address used by the foreclosure attorney when posting the sale.  Of course a visit to the county records office and -correct reading of the legal description would reveal that the tennis court lot was the one being sold.  A less then full investigation may result in one thinking that the house and or the house and tennis court lots were what was being sold.

As I later found out, a newbie tax lien investor thought they were getting a great bargain by outbidding other misinformed investors and paying the back taxes, legal fees, and an additional $34,000 (overage) which the county forwarded to me.  The buyer of course believing he had purchased the house paid a visit to the tenant, who of course called me.   when I informed the tax lien purchaser that he did not purchase the house, only the tennis court lot, he did not believe me.  He contacted an attorney, who finally got clarification from my attorney as well as the county recorder.  The investor “gave up” after numerous attempts to sell the lot or get a “refund” from the county proved unsuccessful.  The buyer had paid over $70,000.  The appraisal district shortly thereafter corrected the tax allotment “anomaly” between the two lots, but the investor never made a tax payment and eventually lost the lot to a tax foreclosure.  

I see that real estate agents and brokers are too negative on sub to deals……investors looking for low interest rates and or low down payments are too positive on the same.

As I stated the reality is somewhere in between, depending on individual circumstances.  

If you’re referring to the “newbies” with $10k to their name that watch a video by Pace and get excited and pay for joining, go out with their last $5k and do a sub to with a “desperate” homeowner without revealing all the possible consequences (because they are unaware of the consequences through lack of experience and lack of knowledge and or choose not to inform the seller) then I agree, it’s probably going to turn out badly for all concerned.

If on the other hand you’re referring to a seasoned investor with excellent credit, significant cash reserves, who wants to add a property to their portfolio without going through loan qualifying, and can pay enough to give the seller “walking away” money because of the low existing interest rates and or, and is dealing with a informed seller, then I find nothing wrong or negative about the transaction.  I purchased a number of properties this way, and sold a few too, with nary a problem arising. 

The “I helped the seller by a sub to purchase” and the “you screwed the seller by a sub to purchase” are both correct AND incorrect.

Because it depends on whether the seller was provided with a full disclosure of the ramifications and possible consequences of entering into a sub to transaction; whether the seller is mentally competent to understand the ramifications and consequences, and whether the transaction is accomplished without lying to the lender. Notice, I am NOT stating that the transaction needs to disclosed to the lender; just that a lender should not be given false information.  

Btw, the buyer is in no way at any criminal risk vis a vi the lender, he has no contract with the lender and therefore no obligation to the lender. Yes, he can be sued by the seller; anyone can sue for almost any real or imagined cause.  Which is a good reason for full disclosure of ramifications and consequences. I would also INSIST that the seller have independent legal representation before I entered into a contract with an owner occupant.