All Forum Posts by: Hattie Dizmond

To be clear...

First, "triggering" the DOS clause doesn't mean the lender is going to call the note due. Lenders don't like turning performing assets into non-performing assets.

Second, there are events that may "trigger" a Due on Sale investigation, without actually activating the DOS. i.e. A transfer to a living trust, where the borrower maintains a beneficial interest in the property AND doesn't sign a document forfeiting their right to occupy the property.

Finally, you can do just about anything you want, as long as you get the lenders prior written approval. So, if you want to buy a property Subject To existing financing or do a Wrap on the existing mortgage, you can do those without the worry of the DOS clause. You simply have to disclose it to the lender and get their written approval. In general, as long as the lender remains in first/senior position, and you can show ability to repay, they are not likely to call the note due. Again, lenders want performing assets. They are in the business of lending money, not owning property.

This entire discussion is governed by the Garn–St. Germain Depository Institutions Act of 1982, which Brian linked above. The specific DOS regulations were put in place to protect borrowers, NOT lenders. It was written during a period when mortgage lending rates were incredibly high. Lenders were using the DOS clause to call due mortgages that were issued with very low rates, thus forcing borrowers to refi at much higher rates; ensuring bigger profits for the banks. The Act expressly forbids this practice where the transfer is simply into a trust, with the borrower maintaining interest & occupancy rights. It also says lenders are "encouraged to permit an assumption of a real property loan at the existing contract rate or at a rate which is at or below the average between the contract and market rates..."

Short version, I prefer upfront honesty.  Just go to the lender and get their written consent.

Hmmmm...snow removal?  Oh yeah, in Dallas we call that "Tomorrow"!  ;-)

@Andrew Tolleson I just picked up a property and turned it over as wholesale that was spot on the 70% rule.  It came out of our marketing campaign.  So, yes...there are still 70% deals to be had.

There's no reason to go to Zillow, if you have the address.  

Ft Worth

http://www.tad.org/search-property

Dallas

http://www.dallascad.org/SearchOwner.aspx

Even the smaller counties in Texas generally have the Tax Appraisal District info online.  Just Google the County name.  If you don't know the county, just Google what county that town is in.

 I just mean that sale prices have risen faster than market rents, which makes complete sense, when you think about it.  Tenants have the rent locked in for the duration of their lease.  Therefore, regardless of what the market is doing, the rent can't increase, until it is time for the lease to be renewed.  Add to that the fact that some leases restrict the amount rent can be increased each time, and the leases themselves depress market rent.  Plus, if you try to escalate rent too much on an existing tenant, you stand a good chance of losing that tenant...a good thing if you're trying to get rid of them, but bad if they are a great tenant.

In the last 24-months property prices have done nothing but increase, driven by both a recouping of the lost appreciation from the dark days between 2008 - 2012 and an overall lack of inventory.  It isn't a bubble, but prices have risen much faster than rents can/will rise.  Therefore, if you are having to pay $180k for a house you can only rent for $1500/mo, that's not a good cash flow situation.

@Scott Bean

Everyone knows I love Texas and DFW in particular.  But, it's not a great buy & hold market right now.  We're still in an inverted rent to value situation, and inventory for homes to purchase is still ridiculously high, so it's difficult to find quality homes for buy & hold.

With that said, why does your equation have to be so black & white?  Is there not a happy place, where you can get better quality properties cheaper than you can in Texas right now, AND get decent cash flow?  I'm thinking OKC, KC and other tier 2 markets.

Just a thought.

@Brian W.

The idea is solid in theory, but then again so is Communism.  :)

You start off with a statement that you have "massive loans", followed by the information you make $775/mo.  That means you don't have a very favorable debt-to-income ratio.  Now, granted, your student loan payments are deferred, as long as you are a full-time student in good standing.  However, I can't believe a bank would even underwrite that mortgage without a guarantor.  2nd...what are you planning to use as a down  payment?  Assuming you can find a bank to give you a mortgage &/or someone willing to go on the mortgage with you AND that you have the minimum required credit score, you're going to need to come up with $4,900 + closing costs.  I'm having a difficult time believing you have that, given the parameters you have described.

So, "house hacking", which is what you're describing, is a wonderful way to get into REI. However, you still have to have some ability to get into the house you are planning to hack.

It's quite common for larger companies, with a major presence in a market to have flexible corporate housing available to employees who are on long-term, but not permanent assignments and/or for contractor/consultants who fill a specialty niche and are working on a project basis.

As far as what you require from the company, it depends on who the company is!  JP Morgan used to keep a couple of townhouses just outside of Downtown Dallas for this purpose.  People would be down from the north for 2 or 3 weeks, and it was more comfortable for them to be in a house or apartment.  They used corporate leases at apartment complexes for longer term situations, where the duration was more predictable.  Particularly before the advent of the long-term stay hotels, it was much cheaper for the companies.  If you're talking about a company like a JP Morgan, I wouldn't really require anything of them.  :-)

Any company who is ready to make this type of commitment  is likely to have a D&B score.  Pull their D&B report to see what kind of payer they are.  They should have some lines open with someone.

Personally, if it's a smaller company, I would simply increase the security deposit.  Also, particularly if it's a tech company and there is a chance they will be using the residence for H-1 visa status contractors, I would put a limit on the # of simultaneous occupants.  This is nothing against the occupants, but I've seen companies try to cram 10 people in a 2-BR apartment, just because they know those folks won't make a stink about it.

@Bara Nwokoma

With the property address you can go to the Tax Assessor's site and verify the current state of the taxes, because I'm having a hard time believing they haven't been auctioned before now.

Also, have you checked DCAD or TAD to verify the person you're speaking with is actually the property owner?  There are a lot of shady folks out there, and I've personally encountered a situation where someone was trying to sell a property that didn't belong to them, even though they were living in it.

However, with a $100k ARV, if it does go to auction, it's going to sell for next to nothing.

@Bara Nwokoma

Whether it's worth pursuing is going to be completely determined by the ARV of the property, where it's located and what the rehab costs are.

As an example...let's say this property has an ARV of $200k and needs an incredibly modest $20k in rehab. Now, let's assume his letter is real, and the taxes can be reduced to $45k. You could pay the back taxes and liens, as part of the purchase, and give the seller $20k in walking away money and still be $51k below the 70% rule target purchase price of $120k.

So, heck yeah, it could be worth pursuing.