All Forum Posts by: Jeshua Patrick

Sean Sullivan have you tried calling the lender and asking them to shorten the period to 6 months?

@Brian Corbett I definitely will consider taking just one to start if he is uncomfortable OF the whole deal at first. 

@Josh Stack Thanks for the podcast link. I will have to listen to it on the way to work but the first few minutes definitely sounded like what I’m probably working towards. Definitely trying to get to that win-win-win, especially since I will likely see him on a semi-regular basis and don’t need any hard feelings between us. 

Originally posted by @Ian McKeown:

Find out if he wants 100% out of real estate or just this deal. See if he's willing to go into something like a NNN lease. If so, you can put him in a 1031 exchange to help him with his taxes. A 1031 exchange means you and he trade like-kind properties. Since you have no property and no money; you could find a JV partner with money to buy the NNN lease. Then make the trade. Then buy out your partner. You need a CPA, a lawyer and a JV partner. It sounds like you have time on your side to put the deal together too.

This seems a little complicated and confusing. What I don't really understand is how the lease transfers ownership or even his tax liability. Can you expound on how this would deal with his tax situation? I understand what a direct 1031 exchange would do for him but do not understand how your suggested approach shifts his taxes/ownership from him to me/my JV partner and then into a different property? As an example, assume that I wanted to buy/lease his portfolio, rehab it, and 1031 it into a small MFU.

Liz C. If the credit report you have only shows 3 years and not when the records drop off then ask her to pull copies of her report from all 3 bureaus through annualcreditreport.com. It won’t cost her anything but it will show when the late payments occurred, whether it was more of a one time event vs a habitual thing, when the delinquencies drop off, and how long it’s been since her last late payment. I have personally been through credit rebuilding twice, once for my credit and once for my wife’s. I destroyed mine when I was fairly young in part due to bad tax advice and in part due to just trying to figure out how to make it on my own. I never really made terrible decisions but also didn’t have anyone in my life who understood finances well enough to show me how to overcome the financial challenges I was faced with. I figured it out mostly and, when my fiancée and I found ourselves in financial trouble after losing half our income in a short period in 2011, we intentionally destroyed her credit and immediately set about the rebuilding process. I will say that the one thing I learned through both experiences is that rebuilding credit is very difficult on your own often taking 7-10 years vs 3-7 years with the help of a well qualified financial partner. I personally might overlook a lower credit score for someone who could clearly show a one time event and was taking steps to rebuild; however, it is important that you stick to your criteria. If you feel the need to change your criteria then do so and set an effective date for some time in the future and only apply those criteria on or after that date. If you feel like you may want to work with people like her in the future, consider making rent based on credit and income and have tiers but maintain a minimum standard.

Tuan Dang I negotiated a short sale as a seller for a premarital property my wife financed through BB&T a few years back. Long story short, they expected you to fill out a new packet any time an offer was rejected. They flat out rejected any offer that didn’t meet the criteria for automatic approval even when the servicing contract called for manual review. In our case there was a bond agency that had contracted BB&T to service the debt and BB&T stood to make a larger profit by forcing foreclosure than by accommodating the sale. Ultimately I located the bond agency, negotiated a deal directly, located a buyer at the pre-negotiated terms, and then got the bond agency to strong arm the bank into processing the sale. Needless to say the bank fought us every step of the way to close costing me several thousand extra in out of pocket cash along the way. Short sales are tough unless you can find a way to motivate or force the bank to play ball. Good luck.

Jay Hinrichs I am likely to be in the same position as the OP and may even have a lead on a small portfolio that could be available under the right terms. I know for a fact that depreciation recapture will likely be their greatest concern. Do you have any thoughts on how to structure deals in cases like this so that the seller doesn’t get hit with the entire recapture all at once?

Ryan, that will depend on several factors that I can think of including but not limited to: the value of the property, the amount of the existing loan, the amount you are seeking, etc. Typically I would expect a refinance to replace the existing claims against the property while a HELOC or HE loan would not.

Hey BP members, I could use some advice on how to approach a potential opportunity that recently presented itself to me. My brother-in-law’s girlfriend’s father owns 5 rental properties in my area (greater Charlotte, NC). I ran into him the other day and asked his thoughts on it and how long he had done it. He said he had had them for 12 years and had done some flips with his brother who has 44 units but no longer flips due to being disabled. He then proceeded to tell me about how awful being a landlord was. He complained about repairs, depreciation recapture, and capital gains taxes. This tells me that he is ready to sell but is afraid of the tax hit if he does. At this moment I have no more deal specifics as that was the extent of the conversation. I need advice in a few areas. 1) Could this be considered not to be an arm’s length deal? If so, any precautions I need to take to ensure I don’t have any blowback if he has a change of heart after the deal is done? 2) I’m assuming this has to be an owner finance deal and would be easier for me if it was. Any suggestions on how to structure it to mitigate and/or spread out his tax liability to make it more appealing to him to sell. Depreciation recapture seemed to be the one thing he was most concerned with. 3) What are your thoughts on coming in at a lower price with a higher interest rate component? Should I offer some sort of prepayment penalty if I refinance or sell before a certain amount of time but don’t have another property available to reassign the remaining portion of the loan to? 4) What is a good set of terms to start at? I was thinking about a 15-20 year amortization with no balloon if possible and interest between 5-8% depending on the price and length of terms. Thanks in advance. Any recommendations for relevant experts in my area would also be appreciated. RE attorney, CPA specializing in RE, experienced investors or groups in my area, etc. FYI, I do have a potential partner who has indicated he would be interested if the deal is right.

Jacob Barnhart what you could also do is reach out to the seller and see if you can reach a verbal agreement on financing and price and, if so, let them know you will be having your agent send them over a formal offer with all specifics including any contingencies you might need. If they don’t want to work through an agent let them know you are prepared to pay the buyer’s agent, if the price is right.

Realtor.com has much better crime heat maps than Trulia, at least for my area anyways.