All Forum Posts by: Jeff Copeland

This is not uncommon, and these things do take time. We have these processes in place to discover issues such as these and protect you as the buyer.

I've had to hire a private investigator in the past to have previous owners sign a new deed to correct a conveyance. 

The underlying question here is do you want out of the deal, even if these issues are corrected and you get a new title insurance policy protecting your interests? (I would think not, if the deal was a good deal then, isn't it still a good deal now?). 

The contract will dictate whether, when, and how you can walk away should you decide to do so. 

Your best bet is to simply ask the HOA for a payoff amount. They may charge an estoppel fee for this. But they are the only ones who know for sure.

Even the utility lien should be confirmed. They may have recorded a lien for $1000 or whatever, but with a stipulation for interest to accrue. Sometimes it can be a ridiculous amount like $250 per day. These often can be negotiated down by a new owner, but it's best to know what you are stepping into up front. 

There is going to be a wide range of answers and costs. The key is to make sure you are comparing apples to apples. 

On the one hand, I recently had a cheap 1600 BTU system installed in a garage I use as a gym for something like $800 by a handyman selling them on Facebook. The electric was already there, I was just replacing the last cheap one I bought. I know this one may only last 1-3 years, but it's a garage and no once is calling me on a Friday night if it stops working. 

On the other hand, I just had a 1.5 Ton, 2-head system installed in a 600 sq ft apartment where my son will be living. This sounds almost identical to what you are pricing.  I went with a top of the line Carrier brand system with 10-year parts and labor warranty, and it was $10k even. I went with a national chain (ARS Rooter) who I know will be around in 8 or 9 years to honor the warranty. 

Where?

Time heals all wounds. So don't wait to buy real estate; Buy real estate and wait. 

Buildium, Property Ware, and Appfolio are the "Big Three" players in this space, and they are very sticky - Meaning once you invest the time and energy into setting up a system, you are very unlikely to change over to another one. 

So most people can only really advise you on the one they use, and I would venture to guess that very few people have used all three. 

We use Buildium, and find it to be very robust and scalable. We literally do everything inside of Buildium, from marketing vacant units, to applications and background checks, to rent collections and accounting, to tracking maintenance requests. They also have tiered pricing, which makes it more palatable for a smaller number of doors. 

Just do your research and choose wisely, not only based on what you're doing today, but based on what you might be doing several years from now in terms of growth. 

Consider paying an attorney to draft it. Your business is worth paying an attorney a few hundred bucks to protect your interests in a situation like this, and it can be cheaper in the long run.

Pro Tip: In addition to possession of the rental unit and disposition of the deposits, have your attorney include a release and hold harmless. I had a tenant sign an early termination agreement for possession only once (I was genuinely trying to help her avoid eviction), and she turned around and sued me (with a pro bono lawyer) for violations of the consumer protection act! You just never know what people have in mind.

(It was a completely frivolous lawsuit and she ended up with a judgement against her in a counter-suit, but it still cost me $10k in legal fees and an E&O claim).

If the employment  verification takes 20 days, then they wait 20 days, and in all likelihood someone comes along and beats them to the rental unit.

If they understand this, and are legit, they can and will apply pressure to get a quicker response from their employer. 

Hey Dan,

Thanka for the the well wishes. We definitely have our fingers crossed with regards to the Hurricane Ian. 

My response to the OP. wasn't specific to the calculator, but I'll PM you some info. 

Great questions!

1. Wouldn't this make you more in debt, why refinance when you could live off the cashflow? Why is the refinance step useful? it seems silly to get a mortgage on a property when you paid in cash in the first place.

If you don't need the cash, and you need the monthly cash flow, you are correct. No need to refinance. But there are a few more factors to consider here:

 - Often it isn't your cash, or isn't cash at all. It's very common to use hard money (short term, higher interest debt), as well as other types of debt (i.e. Home Depot Card, HELOC, or a credit card), and then refinance into long term, lower cost debt (and pay off these debts) once the asset is stabilized. 

- The underlying goal of the BRRRR Method is to build a larger portfolio of real estate. In the scenario you described, you ended up with only $2500 of your own cash tied up in a cash flowing, $150k asset! And you'd end up with $112,500 in your pocket to go do it again. 

- Now project this our for 30 years: Which investor is better off: 1) The one who left his cash in the deal and enjoyed the cash flow from one rental, or 2) The one who strategically refinanced their capital and purchased fifty rentals, then let the tenants pay off the mortgages?

2. How is it possible to refinance a property that you bought in cash? In my head this is the same as buying a car with cash then asking to have an auto loan. it makes no sense to me.

- This is very common. It's just called a cash-out refinance. By the way, banks do this on cars all the time. The asset is simply collateral for the loan. 

(Side note, there are generally two types of refinances: Rate/Term, and Cash Out. As the names imply a Cash Out is when you want to tap into your equity by pulling out cash, and a Rate/Term is when you want to keep the same loan balance, but refinance into a better rate or terms.)

3. Is there a certain type of loan you get when refinancing so that it will free up cash? I guess I am confused on the process of refinancing. Do you get the cash in hand from the loan you took out?

- It's simply a cash out refi, which creates a new mortgage. It's one of the most common loan origination types. 

- Yes. You get cash in hand, minus any closing costs (such as recording fees for the new mortgage, loan origination costs, impounds for taxes and insurance, and closing fees to the title company or attorney who closes the transaction), and minus any liens or mortgages on the property (see next point). 

- If you had a $75k hard money loan on the property, you'd have to pay that off (so that your new mortgage is in first position), so you'd only have $112,500 - $75,000 = $62,500 to cash out.

4. When you refinance do you get the money back in cash? I am confused on how this all works.

- Yes, subject to the conditions noted above, you get cold hard cash (normally in the form of a wire transfer) at closing, to do with what you please. Note also that there are no tax implications on this cash, because it it offset by a corresponding debt. In accounting parlance, it changes your balance sheet, not your income statement. 

5. Are there closing costs when you refinance?

- Yes, as noted above. This is always a factor when considering whether or when to refinance. For example, you wouldn't refi if you have only $10k in equity and the closing costs are $5k; The juice wouldn't be worth the squeeze.

6. How exactly is refinancing freeing up cash? You buy a property in cash and then you get a mortgage on it that you have to pay back. then you buy another property with this cash and refinance that property and now suddenly you have 2 mortgages. How is this beneficial? Can someone provide me a clear example to show the benefit of this and how it builds wealth?

- This builds wealth in several ways:

1. It frees up your (always limited) capital to buy more real estate. 

2. Debt Reduction: Your tenants pay off your mortgage debt. In 30 years, the balance of that $150k mortgage your tenants are paying off for you is zero. 

3. Appreciation: Your properties appreciate in the long term. In addition to the obvious benefit of making you richer, it also presents opportunities for future cash-out refinances to expand your portfolio even further. 

Example: In ten years if that $150k house is worth $250k, at that point you'd have $187k to play with at 75% LTV, and your mortgage balance would be something like $80k at that point, giving you an additional $100k to "withdraw" in a cash out refi, tax free.

4. Tax Savings: There are tons of tax advantages to owning real estate, so you can save thousands on income taxes each year.