All Forum Posts by: Jon C.

@Brian Gerlach You definitely want an actual real estate attorney in the location of your investment property to handle your acquisition. Speak with your CPA about whether to organize your Special Purpose Entity (SPE) in the property state or your home state. If you have a foreign entity investing (meaning it was formed in a state different from where the property is) then you may need to also file it with the property state, for authority to conduct business in that state. If it’s a disregarded entity for tax purposes then you will likely want to set it up in the state of your investment and have the cash pass-through continue to your parent entity. In summary, make sure your local attorney and your CPA are on the same page.

George,

Make sure your title policy is underwritten by a national insurer (Fidelity, Stewart, Chicago Title, Commonwealth, Old Republic, etc.) As Lynnette stated, there are exceptions to coverage that you need to be aware of. Review the Schedule B exceptions on the title report and make sure all judgments, liens, violations and material survey encroachment issues (GET A SURVEY DONE AS WELL & READ INTO YOUR TITLE POLICY) are resolved by Seller prior to Closing. Make sure the Seller does not have any personal judgments, liens, bankruptcies, etc. that may be attached to the property. Those need to be cleared prior to Closing as well. Get a complete list of searches done on the property and seller. Make sure all taxes are paid to date and have the Seller represent as an express Seller Representation in the Contract that they are not aware of any litigation, or pending litigation against themselves or the property. These are just some of the ways to reduce your risk and cover yourself. I'm hopeful that you are using a true real estate attorney who can guide you on the title policy. You should check out the "Confident Real Estate" channel on YouTube, and specifically the videos on "Getting Due Diligence Done Right" and "Seller Representations: Make the Seller Put Their Money Up." I think you'll find them helpful.

Good Luck! Stay positive.  

Gina,

Co-ops in NYC are typically not great investment property targets. There is a reason they are lower in price than condos. They have Board restrictions on sublets, often charge fees in excess of what condos would charge, your tenants often require Board approval, which may be slow (not something prospective tenants want to wait around for and be subjected to), and I know of several cases where a new Board was elected and suddenly a sublet moratorium was enacted. Because a co-op is not actually a real estate purchase, but rather a purchase of shares in a corporation, they can enact a lot of restrictive rules that condos are not able to enact because they would be deemed a restraint on alienation of real property that would be illegal. You should really checkout the video called "How to Invest in Condos" that was recently posted on the "Confident Real Estate" YouTube channel. It breaks down the differences between condos and co-ops and how to invest in each. It would be better to invest in a smaller condo in Astoria, or a larger property further outside of Manhattan, but near transportation, than to get stuck in a bad co-op investment that can change with each annual Board meeting.

Best of luck,

J. Cicero

Raymond,

While I have never invested in the Bronx, I did live in the Bronx for part of my childhood and still visit family and friends that live and work there. The Bronx provides unique opportunities if you buy in the right areas. I would advise that you look at what areas are hot for housing right now, and possibly go one subway stop further to get ahead of the curve. Most of the developers I represent in NYC and most of my multifamily investments are targeted at the ripple effect - looking at where the growth is headed over the next 12-24 months and buying there now. Stay away from rent-regulated housing, which is typically over 4 units. If you are buying a 2-3 family market rate property in the right area, you will see a bigger equity growth upside in the next few years. I don't think you need me to tell you how litigious the Bronx is. Make sure you do proper credit checks with your prospective tenants and always treat them as tenants. You're running a business. the tenants are NOT your friends. Go and get your bank pre-qualification now, so you know what your realistic budget is. If it's your primary residence as well, it will be easier to qualify. Lastly, while the "Confident Real Estate" channel on YouTube does not cover house hacking, and tends to stick to more complex, next level investing strategies, you should start getting familiar with what you need to know as you grow your portfolio. Years from now you'll hopefully look back and remember this first purchase as a positive experience and learning lesson.

Good Luck!

@Robin Searle in NYC and Jersey City regulations and limitations are being implemented. In Jersey City AirBNB spent millions to fight the implementation of regulations but voters overwhelmingly (70%) voted to regulate STRs. Being so close to Manhattan, residential neighborhoods and condominiums with families were dealing with unruly tourists and transient tenancies (bachelor parties, etc.) sharing their common spaces and dividing interior walls. In NYC STR falls under hotel use and violates the certificates of occupancy for residential properties. The fines can be stiff and are imposed upon all tenants/owners within a building. In densely populated urban areas STRs can be a real problem.

@Tim Robinson to quit claim the property into or out of an LLC while you have a mortgage loan in place is deemed a conveyance that will place you in default and automatically accelerate your loan. It is also a form of mortgage fraud. DO NOT do any such transfer unless it's part of a simultaneous refinance in the name of the holding individual or entity that will be the record borrower on the new loan.

@Corey Jacques what does your contract say? When buying property from a Seller who must complete work as a contingency upon which my purchase is based, I always make sure the contract states that the Seller’s obligation to complete such work survives Closing and that they expressly represent to complete the work to a commercially reasonable standard and to obtain and provide me with all necessary sign offs and licenses/certificates. If they have not provided such sign offs at Closing I will require that they escrow money for the complete cost of the work with my title company for 90-180 days, so if they do not get the sign offs I can take their escrow money and pay for the work to be completed with their money.

@Dillon Dull they are different issues. Courts don’t look kindly on landlords that are deemed to be extorting rent from tenants. You are in a contract with your tenant. Hold up your end of the agreement by making the repairs and then evict them for not holding up their part of the agreement. Don’t give them any ammunition to use against you in court.

@Dale Walker absolutely can be done. I use IPX1031 as my qualified intermediary, but there are many decent QI companies. Adhere to the timing requirements and if the properties are held under separate entities, as they should be, you will just have to enter into a TIC Agreement among the entities for the new property. It's very simple and if they are true pass-through disregarded entities then it won't make a difference from a tax perspective.

@Bill Brandt I wholeheartedly agree with this approach.