All Forum Posts by: John Clark

Hey, 

I have been reading these blogs for a long time.  This is a great site. 

Post Demo Dust

I hired a GC to perform demolition in Chicago, my home.  Per the code, I don't need a permit for 1,000 SF of plaster. 

They did the demo but did not protect my furnace in the basement or took any other dust control measures.  Cleaning is $700, at least.   I have two furnaces, one in the second floor.  The one in the basement is my main concern.  

The dust expanded everywhere, we have been cleaning for weeks  

They took no measures to protect against dust.  I have a basic contract, it doesn't carry any dust protection description, just notes demo.   

A few notes, please. 

This is for Chicago.  No need to comment on your own location/jurisdiction, please.   I am looking for Chicago-specific feedback. 

No need to comment on other contaminants within the dust.  Please, don't.

Is dust protection assumed as part of the work?  

Should I file an insurance claim or absorb the ongoing cleaning costs and move on. 

I have kids and we moved out for a few weeks to clean up.  Everything was covered with dust. 

Should I just suck it up?

Thanks for your help, this has been a bit hard.  

I've been using "Subject To" and other various creative techniques for over thirty years and I've learned a few things along the way that may make it easier and less risky if you are trying to use them yourself.

1) First, there is no such thing as "zero down". It can be "little" down or "someone else's money down" but don't make the mistake of thinking you don't have to have some skin in the game. I allocate $25,000 per property and rarely exceed that. Compare that to having to put 20% down on a house using bank financing which on a $200,000 property is about $40,000 plus closing costs and carrying costs. I am "all in" at $25,000 and I get most, if not all, of that back from the Tenant Buyer I sell to. I generally cash flow my properties, some people rehab, some "buy & hold" - all using Subject To.

2) Order a Title Report on every property - it is insane not to and they generally run $50 to $60. I didn't say Title Insurance, I said Title Report.

3) Use Escrow to close. Table closings are a thing of the past. The risk is not worth it. Escrow can run to $1,500 or so, but a lawsuit can run $25,000 to $150,000.

4) Have reserves. You need to have on hand or access to enough to cover the underlying mortgage, utilities, HOA and various carrying costs in the event the house goes vacant for a few months. You affect the credit of the person who's property you are taking "Subject To". If you start missing payments and messing up their credit they can sue you. Oh yeah, they didn't mention that on the late night TV ad or the "Two Hour" real estate investor seminar you went to, did they? It's a serious business and you have to take it seriously.

5) Decide your exit strategy before you buy the property.

6) Record the Deed. Omygosh, what about Due on Sale? It is possible that the deed could be called, but I've done more of these than I can remember and I've had only two called. Don't try to hide ownership in a Land Trust. If it looks suspicious, they will dig deeper when they sue you. There is a proper way to do this step and most people won't take the time to learn or somehow think they are immune to it.

7) Know your options in the event that the Deed does in fact get called. There are several options, many of which put money in your pocket.

If this is useful and you want more, let me know.

Your question  @John Clark  "Tell us, Ken, is the buyer supposed to record his deed?"" 
Why yes, @John Clark: "Professionals Always record the deed. It would be foolish not to. Any good trainer teaches that.

Did you know that if you buy a $400,000 property . . .

In a typically bank financing scenario you put down 20% or $80,000 and finance $320,000 for 30 years the Principal and Interest at 7% is $2,129 and over 30 years you pay $766,428 (the bank loves you)

BUT

if you take over a loan using a Wrap (Wrap To, it takes about $15,000 in costs) and take over the existing mortgage at 2.5% that was taken out 2 years ago your payment Principal and Interest is $1,264 ($865 a month less) and over the remaining 28 years pay $447,894 (you get to keep the difference)

That's a savings of $318,534 Three times a Year! For 5 years and you are RICH!

Who doesn’t want to do that!

Retire Early and move from CA to FL Uhaul will love you ;-)

When you are new, looking for lenders & considering Fix & Flip, BRRRR, or rental, as a buyer, I’d ask the owner/seller to be one of my private lenders with creative financing. This works in Southern California (CA), AZ, WA, and TX.

I'm 6 months in to collecting 7% on a 75% LTV note with a five year balloon…

The only way someone could convince me to sell the note would be to offer 6% or more over the current balance. (I assume I can get 4% guaranteed from the bank so that covers 2 years of lost interest income.)

Personally. I’ve never seen someone offer the current balance, much less a premium. Even on a performing note, at a decent interest rate, where a failure to pay or failure to payoff the balloon would result in massive gains. 

How about you?

I'm curious if anyone has seen tremendous success with out-of-state  real estate investing. From what I’ve observed, many of the most successful investors tend to focus on markets near where they’re based or in areas they’re familiar with. However, I’m wondering if anyone here has had success investing OOS in locations hundreds or even thousands of miles away and still managed to maintain solid cash flow.

Have you been able to overcome the challenges of investing in a distant market, and what strategies or systems have worked for you? I’d love to hear about any experiences where out-of-state investing has proven to be both profitable and manageable in the long run.

 I've been thinking the same thing.  At the heart of it, a big function of cash flow is the principal and interest payment on the debt. In Chicago, property tax is also material.  Current interest rates make this difficult given that most investors (like me) are trying to only put 20 - 25% cash down.  I'm starting to accept that I need to consider more down to make more deals work.