All Forum Posts by: Frank Chin

@Elizabeth C.

If it's not specifically stated sold free and clear, then it's not. As to liens, you can check down at the county clerks office, and nowadays, public records are available online. Quiet title action does not obliterate current liens, it's usually for very old liens where releases are not file, and lienholders cannot be found.  Reasons are the lienholder died, if it is a person, or the company or the bank no longer exists.

For condos, check the CC&R's to see if you plan to rent it out, if the HOA allows it, and what the rule's for that are.

Often, there is a reserve price, if you do not meet it, the bid is rejected. If it's an absolute auction, the lowest bidder by default wins, though lender banks can go in and place bids if bids are too low and below the mortgage. There was an auction for a condo unit where $125K units sold at auction for $40K which is what I got it for but one time they held an auction for a foreclosed unit where there is no reserve price indicated, was poorly advertised, and no one showed up except the owner and his twin brother. The owners twin brother realizing what happened, place a bid for something like $3K to $4K, because that's what he had available on his credit card, and it's the winning bid. Everyone was upset that a $125K condo sold at $3K and the HOA had a rule passed where they can match such bids in the future.

What would you need a title action for? Did a title search turn up old liens?

I purchase properties at auctions, some are sold free and clear and some not. If they don't say free and clear, you would pay the back taxes, and old liens. Seems there are some unpaid HOA fees and you'll have to contact the HOA on how to handle.

@Nadeim M.

No, I don't think it's the tenant's fault. Problem is there's not enough tiling in your bathroom.

The tiles should not have ended just an inch beyond the edge of the bathtub. I had many such bathrooms at various rentals, the wall to the right of the bathtub should be tiled half way up the wall as you have a sink to the right, and usually, the wall behind the sink as well. Then the area between where the wall tiles meet the floor tiles is grouted as well, Then anyone, after a shower, the person taking the shower just mops up the floor. Usually they don't. but with proper tiling, should solve the problem.

If you put complaints as tenant's fault, they'll stop telling you about minor issues that might grow into larger ones. I would suggest you tile up that part of the wall since the tiling there is insufficient, the way I see it. 

You'll first have to check if zoning allows rooming houses in your area. Where I am, if I sign a lease for a SFR to more than 2 unrelated people, it's technically considered a rooming house. At one time they allow it and issue licenses for it and for a while the process was grandfathered, but they no longer allow it.

And areas that allow it, someone has to be a rooming house manager. and follow rooming house regulations. At one time, a realtor bought me deals where illegal rooming houses are discovered, owner asked by the town cease and desist, had to sell because the numbers don't work like you, other than a rooming house. My mother in law lived across the street where it happened, owner had to sell because the rooming house was declared illegal. The buyer was absolutely unaware of this, had it as rooming house again, blindsided when once more had to sell when the city got after him.

A tenant of mine at a SFH rental had trouble with tenants from 2 doors over. They had card games on weekends taking up parking spaces including ones in front of my rental. The 2 tenants rented rooms from a retired couple needing the income to live there, technically turned their home into a rooming house. When my tenant told them to park elsewhere, they rudely answered the law says it's a public street, anyone can park there. My tenant told them the law says the owner illegally rented the rooms out as a rooming house and he'll complain to the town. What happened? The tenant's guest no longer park on the street in front of my rental during card games. My tenant held off filing a complaint as he felt sorry for the old retired couple who needed the income.

They're not suing the parent company. They are suing the owners of the entity. Usually if it's only one or at most two owners, they can prove that it is you who was the negligent one. My employees told me during depositions was asked what the owner did all day, what did he do to ensure safe operations. What prior experience did he have. The answer was none. Unfortunately, he had no prior experience in that business, sat around all day, and on nice days, take long walks.

Usually in discussion about LLC''s, they stressed the needs not to comingle funds. Based on what attorneys tell me, that's not what they go after.

If you are a one man company, have personal ownership of other entities, they can go after the equity of the other entities to satisfy the judgment. That's why having so many entities has no safety effect for you, especially if the other side has a multi million dollar judgments against you.

@Steven Cobb

Setting up all these LLC's won't do you any good.

I had S Corp's, LLC and C Corp set up for various businesses with the thought of having corporate shield against litigation. I learned in the final analysis, it's a total mirage.

Bought a business in an LLC from someone in an S Corp. Learned later the S Corp and the S Corp owner was sued for $3 millions dollars. He only had $1 million liability coverage for the S Corp. S Corp owner thought, no problem, I have the corporate shield, had his lawyer file motion to have suit against him dismissed because after all, they should be only suing the S Corp. Wrong!! The court refused to dismissed the suit against him personally as litigants has the grounds to go after him.

I'm a little concerned, check with my attorney and my insurance agent who had me buy liability insurance for myself besides the LLC. Checked with my attorney and he advises people suing small businesses usually sue the owner personally for gross negligence anyway. In that case, if they win the lawsuit, they have claims against his ownership in any LLC you have, whether you have 1 LLC or 100 of them.

I was aware of the progress of the lawsuit as my employees were called down to give depositions about their former owner, who was sued for gross negligence. The plaintiff attorneys was not aware the S Corp owner sold the business, moved from NY to Florida, bought his home with the proceeds and sheltered by the state's homestead laws. In the final analysis, it's not the corporate shield that saved him, but the state's homestead laws. 

The lawsuit was finally settled for $1 million. Had he stayed behind in NY, the lawsuit would have been for $3 million, and had he lost, would be personally out $2 million. He complained to me he was told the insurance company's lawyers only represent the insurance company and he was told he better get lawyers to represent himself personally.

I decided to used my money I saved from not setting up all those LLC's, and instead spend it on buying several million in umbrella liability insurance instead. It's my way of sleeping better.

@Steve Y.

Thanks, good read, I read it twice. Keep us posted.

@Caitlin B.

I agree with you, most renters are not that good with mowing. I owned a SFR rental for nearly 40 years. With professionals busy with their careers, or young ones busy with their social lives, mowing is on the bottom of their priorities. For the first 15 years, I had tenant do lawns. That changed after I had a tenant, after the tragic death of his live in girlfriend, suffered a bout of depression so severe that when I visited him, not only was the lawn not mowed for over six months, but looks like he didn't have a haircut, shave, or bath for that long. He was so weak he can hardly walk. What should I say to the guy "hey, what's going on with the lawn"?

The property is in an "A" neighborhood. The town also had few rentals available, and all the neighbors are homeowners utilizing landscapers to care for the lawns, all neatly mowed, edged, besides having spring cleaning, mulched, etc. Neighbors complained to the town and they threatened penalties and fines if I didn't take care of the eyesore.

These days, the SFH should rent for $3,000/month, though I charged less. Landscapers charge me $125/month for 4 mows/month. My rent includes mowing. Based on this, if I charge $100 more a month or $100 or $100 less, it doesn't matter to most people if I cover mowing. What mattered to me is all the neighbors are happy, the town is happy, mowing is done, and I don't have to hassle with the tenants, the neighbors or the town.

All in all, as I don't use a PM, the rental is 40 minutes away, during vacancies, I can get the landscaper to shovel snow during the winter, pick up junk mail in between. Recently, the tenant had a rat problem, need the landscaper to clear the foundation of the building so the pest control people can see where rats enter. Years ago, I was going to hire a PM, and he asks me "do you have a plumber you use regularly and a good landscaper"? I answered "yes" to both and he told me, "in that case, you don't need me, you don't have to pay me $250/month to check if tenants did the lawns or call the plumber". 

Bottom line, I'm $100/month ahead. How about that. 

@Jacob Blake

Jacob, regulations and codes vary vary from area to area, so you'll have to know how to navigate this.

First, most counties and localities have a Planning Department when includes Zoning. In areas where I own rentals, we got single family zones, two family zones, multi family zones, commercial zones. Generally you can visit the planning department and ask what the procedures are, or if it's possible to do. There are zoning codes, building codes.

I have a duplex in a two family zone that a previous owner added a basement unit. It was discovered and declared illegal. Can I legally convert it to a triplex. Answer is it must be approved by a zoning board, after a public hearing is held. Advised that it is generally voted down as the thinking is if you approve exceptions for one person, you must approved it for every one, and if they do it for me, then every one else, the population would increase by 50%, and the water, sewer, power grid does not support it. Local schools already crowded, cannot support a 50% increase in students. The local civic association president who attends all these zoning board meetings says he opposes any exceptions, and will speak against it.

Beyond the zoning, there's building codes. Three families are built to a different standard than two, and if you do a conversion, must conform to current codes. So I have to build fire escapes, concrete enclosed furnished room, as well as sprinklers throughout the building. Even if I chose to do it, the community board may object as buildings with fire escapes does not fit the look and feel of single or two family zones.

I bought a SFR where the previous owner converted a garage to a living area, namely a rec room which a fire place. Got an architect who handles the legalizing process, and the answer I got was I can do it, since others have done it, but the breezeway that connects the house to garage is also enclosed, thus living space, does not have the proper footings, and the garage windows are not large enough to provide a second egress, and the beams that holds up the garage roof is not the required 2x6 beams. All these issues must be addressed even though zoning is OK.

These are the issues I encountered. You consult expeditors or architects for these projects. The local planning department can provide general guidance for free

@Antonio Aceves

You say you are new to flipping, then mentioned 1031. A 1031 is not for flipping. You have to show that you have the intent to keep it first as an investment and then move on to another investment to do a 1031. The common advice is you have to hold on to it for at least a year to to qualify to play it safe though it's not stated in the law. You usually don't hold on to flips for a year.

A QI, or Qualified Intermediary is required in these transactions and you cannot lay your hands on the funds, the QI must hold on to it in the process, else the 1031 transaction is disqualified. There are a few QI's on this board, @Dave Foster is one, and can give you further guidance.

For 1031's consult a QI first, rather than a CPA.