All Forum Posts by: Ken M.

Technically, Sub-To is legal, but the way some "gurus" teach it, I have problems with it. The Due On Sale clause was added I think in the 1980s because of "sub-to" deals. Sub-to has been around for a very long time. In many cases, it weakens the lender's position as they did not underwrite the buyer and an owner-occupant tends to pay better than non-owner-occupants. Some gurus tell practicioners of sub-to to hide transaction from the lender by saying the lender doesn't care as long as the payments are being made. That's simply not true. For instance, I served as an expert witness in a case where a property was transferred to a new owner sub-to. The new owner did not make the mortgage payments and the seller had no idea until they were served foreclosure paperwork. The seller had a military contractor job with security clearance. The trashing of his credit threatened his job. Most seller's in a sub-to don't understand the risk they are taking and most lenders have concerns over the overall portfolio quality ratings which has an impact on their cost of funds. Sub to us a bigger deal than most people realize. It's not illegal provided you're dislosing it to all parties and not trying to actively hid it. Now, getting around the Due on Sale might be as easy as doing a Contract for Deed or a Purchase Option instead of Sub-to. In those instances, the title doesn't change hands, thus, the Due on Sale isn't triggered. I hope that helps. Good luck in your investment journey.

@Doug Smith: What you are describing is an illegal scheme called "equity skimming" which is investigated by the Financial Crimes unit of the FBI with very serious punishments. That is the illegal part.

Due on Sale though, is a civil matter, that the lender has the option to enforce or not. There is nothing illegal about Subto when it is done legally, as you infer.

Actually, Due on Sale is a result of banks calling loans due back in the 70's and 80's, simply because interest rates had increased and other spurious events like that. People thought that was unfair, congress agreed and wrote and passed the "Garn-St Germain Act", which defines when it is permissible to call a note due and when it is not. Banks must follow the law. The law does not mandate that banks have to exercise their right to Due on Sale.

"Garn-St Germain Act"
Garn-St Germain Depository Institutions Act of 1982
12 U.S. Code § 1701j–3 - Preemption of due-on-sale prohibitions

(1)the term “due-on-sale clause” means a contract provision which authorizes a lender, at its option, to declare due and payable sums secured by the lender’s security instrument if all or any part of the property, or an interest therein, securing the real property loan is sold or transferred without the lender’s prior written consent;

0 Votes

Quote from @Becca F.:

Quote from @Bruce Woodruff:

Quote from @Matthew Paul:

Just saw the news , over 1000 structures destroyed and possibly 28,000 in danger .

12,000 destroyed as of this am. 16 Dead. So sad......

This very tragic and sad. As of 2 hours ago (1:00pm PST), there were a total of 7 fires:

Pacific Palisades: over 27,000 acres burned, contained 11%

Eaton Fire: over 14,000 acres burned, above Altadena, 27% contained

Hurst Fire: 800 acres, San Fernando Valley, 89% contained

These fires are contained:

Lidia Fire: in Antelope Valley north of LA

Kenneth Fire: west San Fernando Valley, they suspect this one to be arson, suspect arrested (saw on one news report)

Sunset Fire: Runyon Canyon near Hollywood Hills

Woodley Fire: in Sepulveda Basin and San Fernando Valley

@Becca F.: Any idea how far south the potential for Santa Ana or similar winds goes?

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Quote from @Jim K.:

Quote from @Ken M.:

Quote from @Jim K.:

Quote from @Ken M.:

I took the average $4,000,000 house in Pacific Palisades CA and it shows a monthly tax payment of $4,167 for a total of $50,004 a year. (That would buy two houses in Ohio). :-)

Now, the average length of ownership is 7 years (for normal people) a longer time if you have no where else to go "UP". After 10, years they have paid $500,040 in just property taxes.
And the city "forgets" to turn on the water to the hydrants?, during fire season?

Can somebody please explain how investing in the area makes sense?
I am not smart enough to figure this one out.

Somebody mentioned they have access to the ocean. Well at 6 trips a year, that's $8,334 a trip. I can fly to Greece and enjoy the ocean there for less. And eat great food.

The Homeless are at the beach all day long - everyday, and don't have to pay property taxes. In fact, lunch is delivered to them.

"Oh, but we have easy access from Pacific Palisades", and the accompanying statement "yes, now we also have to hurdle over our neighbor's smoldering ruins to get there, but we still get to go to the beach."

Does nobody else see the irony, malfeasance?

So do you understand, read, speak, and write Greek? Have you ever worked on Greece? Dealt with Greek institutions, business practices, and customs? What do you know about homelessness as an institution in Greece? When the bus stops in traffic and the driver announces, <>, can you plug that right into Google Translate and get a good answer to what that means?

Sure, Greece has its moments, but spend a few years there and you might feel it's not quite the Valley of Shangri-La.

Nah was just talking about visiting, not living. Long live Baklava.

Ο Ιησούς Χριστός είναι ο αληθινός και ζωντανός Θεός. Η αγάπη Του σε σώζει από τον χωρισμό από Αυτόν, αν θα επιστρέψεις την αγάπη.

Wow. I feel so saved by the Precious Blood.

Nah, you gotta want it. It's never forced. When appreciation goes up, don't credit the escrow company. Give credit where credit is due and ignore the "noise". ;-)

1 Vote

Los Angeles County, California

Quote from @Ken M.:

Someone asked for more detail on Creative Finance. I always look at the exit strategy for the property to determine which kind of Creative Finance I would use. Sometimes I actually walk away from the deal - Not All Creative Financing Deals Make Sense.

I use a spreadsheet I developed to determine my entry costs, carrying costs, cash flow, tax write offs, appreciation and exit costs. I can tell in five minutes if it's a deal or not. Don't waste a lot of time analyzing. Make offers, then when someone says they will consider Creative Finance, that's when you make the suggestion. But, know what you want to accomplish beforehand.

Creative Finance is a great way to buy properties when done properly and lawfully.

Some types of Creative Financing include: Seller/Owner Financing, Land Contract, Wrap, Assumption, Subto, Lease Option, Contract for Deed. There are a couple of others less commonly used.

My humble advice to anyone attempting to do creative finance is:

Creative finance is for experienced investors who have access to capital if anything goes wrong.

Learn the laws
Don't use a contract "off the internet", laws vary by state and are also regulated on a federal level
Learn the financing techniques correctly
Don’t skip parts of the process
Don’t ever do a “kitchen table” closing
Use the proper deed
An attorney can help you with the legal work, but the rest you are on your own
Your guru will not bail you out
“Investing” in someone else’s deal by providing a small 2nd loan so the “investor” can pay for “cash to the seller” and for “closing costs” so he can do the deal is a very bad plan
Know what problems can arise
Learn the responses and solutions to problems before they are needed
Know everything there is to know about Title and what that means
Know who a "protected class" individual is
Learn the "back doors"
Learn human nature
Understand timelines
Understand regulation enforcement (some of these "mistakes" have a 10 year statue of limitations ( they can charge you 10 years AFTER you do the transaction) and carry hefty fines and possible imprisonment
The court doesn't accept "I didn't know" for an answer"
Know that the source of the lead plays a serious role in some states and federally
Know how much of a "profit" pushes the boundaries to invite an investigation
You can be sued by the seller if you don’t do things correctly
You are automatically at fault if an investigator or attorney or regulator gets involved. You have to prove you did everything right and then because of “empathy” for the poor snook who “fell into you schemes” you may lose anyway.
This is a legally binding transaction that will be treated that way by the law. There are regulations
I could go on, but if you learn this much, and apply it appropriately, you will cut down your sorrows and risk, considerably.

And yes, there is much more. You can learn these things over time.

Take note, Due on sale clause isn't even one of the main concerns. Chasing foreclosures is a big concern in California and some other states. Know what you are doing.

0 Votes

Quote from @Jim K.:

Quote from @Ken M.:

I took the average $4,000,000 house in Pacific Palisades CA and it shows a monthly tax payment of $4,167 for a total of $50,004 a year. (That would buy two houses in Ohio). :-)

0 Votes

Los Angeles County, California

Quote from @Ram Gonzales:

I continue making the underlying mortgage payment myself (autopay) and get reimbursed from the borrowers payment. I use a loan servicer who processes the borrowers payment and then sends to me. If they stop paying, I foreclose, but still keep making my payment to the underlying lender. I get made whole by the down payment from the next buyer.

Nice. I was hoping you'd say that you'd keep making the underlying payment even if you weren't getting paid.

0 Votes

Austin, Texas

Quote from @Otis Clayton:

In my search for private money , I have heard there people use SDIRAs to fund real estate investments and be in the first position.

I wanted to know what are the pros and cons of using SDIRAs for fund Real estate?

.
I think you are asking a C.P.A. or enrolled agent type of question.
Are you wanting to know how to access a SDIRA or are you asking what are the risks associated with using SDIRA money?

We'll try to get you to the right people.

0 Votes

Houston, Texas

Quote from @Ram Gonzales:

Do a wrap. Include balloon payment after 5 years. Get a big downpayment so that the buyer doesn't end up in the same situation 5 years from now. I'm in San Antonio. I've done lots of subtos and wraps. I've also been in a similar situation in the past and solved it with a wrap. Either way, run your proposed solution through an attorney. Happy to chat more if it would help.

What was your backup plan on the Wrap, if the buyer stopped paying on the underlying mortgage?

0 Votes

Austin, Texas

Quote from @Luis Cerwin:

I have a single family house in Detroit (I'm out of state) for past few years. This october the tenant left without warning and house went vacant. Repairs were needed and were finished by early december. Now the house has been sitting vacant for over one month despite PM putting it on zillow and other sites.

I'm curious, at what point does this reflect poorly on PM and suggest I should get antoher PM? On that note, any good PMs anyone would recommend in Detroit area?

Also concerning, I just looked at zillow post and the pictures are very grainy and unflattering, even though they should have access to the nicer photos (I have had these for years, see below)..

I've also been getting lots of calls form companies wanting me to sell my house. Anyone familiar with PMs who collude with house-hunting companys to purposefully make me more inclined to sell?

The picture they have on Zillow vs one of the several I have with the same view:

Go to Redfin.com for your neighborhood. Find "like" properties for rent. Take a look at the pictures, is it higher, lower, middle quality compared to yours. Same number of bathrooms and bedrooms. Usually, a 3 bed 2 bath will rent a lot faster than a 2 bed 1 bath etc. It will tell you how much they are asking and how long they have been available. Go to Rentometer.com and check there. That should give you an idea of what to expect.

2 Votes

Detroit, Michigan

Quote from @James Hamling:

Quote from @Jay Hinrichs:

Quote from @James Hamling:

Quote from @Jay Hinrichs:

Quote from @James Hamling:

Quote from @Jay Hinrichs:

Quote from @James Hamling:

Quote from @Jay Hinrichs:

Quote from @James Hamling:

Quote from @Chris Wilson:

@James Hamling

Not trolling but just trying to provide some context about why states and other countries like CA have such stringent earth quake codes that keep getting updated.

I will never really understand the power of a Cat4 or Cat5 hurricane until I experience one. I have been in a 6.8 and 6.9 earthquake in WA and CA respectively. The 6.8 was some 65 miles south of me, I was on the 2nd floor of an office building that shook so hard for a minute that people were having problems staying standing up. A 7.0 releases some 32 times the amount of energy as the atomic bomb used on Hiroshima.

https://www.omnicalculator.com/other/earthquake

I am fully aware and well versed.

I have been a Building Contractor for over 30yrs. Master Journey Carpenter, Journey Mason, Journey HVAC. My last remodeling co. was a specialty Design Build firm. I had been scouted more times than I can recount to come to CA to apply my skills because the standards I came up in exceed that of CA and most places.

Building for seismic zones is actually not all that difficult. Wind and water, those are tricky ones, especially wind. Wind is an exerted force in many more ways than just the direct most think of. And hydraulic is a force that's very extreme.

Point is, the predominant production method of housing in the US is rather lack luster. The framing lumber popularly used is pathetic. And there is a lot of superior options out there in both product and methodology.

If you want a good CA home, do timber balloon frame, mortise and tenon joinery with masonry facade. Slate roof or even Spanish tile. Now you have seismic resilient with fire preventative.

Rockwool insulation...... I mean, your doing $1m+ for a property, why not get one built like it's a $1m+ home????

No, I'm hearing reports of shake roofs being predominant in a FIRE ZONE.... I'm sorry but anyone doing that is literally begging for it.

You tempt the Devil, bad things happen.

James shake roofs were the go to product back in the thats why there are so many in CA the material came from the Cedar industry in Oregon and Washington.. My bizz partner when I was doing timber in the 90s prior to us doing our thing.. he had a Cedar shake mill.. things changed in San Jose area tile roofs are very prevalent. Its all about the heavy brush with Manzanita and other dense brush full of oils that burn so hot and fast.. thats why in many areas in CA they have control burns.. And keep in mind the Indians used to burn this stuff hundreds of years ago as well

That helps to make a lot more sense. The fire prevention policies were different, more aggressive, so far less imperative reasons to sway away from a then amply supplied and I imagine price adjusted material of shake vs fire resilient material.

I saw news other day of those winds and just clouds of embers and that, holly-cow with shake roof's, wow, that's literally an impossible fire to fight as it could jump homes and blocks in a blink, with every ember filled gust.

It drives me nuts seeing the lions share of blame being placed on weather in main stream media (talking as an aggregate whole not going to cherry pick individual ones of differing messaging) when I see a laundry list of obvious human caused contributing factors.

Because next thing, without a doubt, will be all about taking Federal funds to pay for all this. And that means YOU, me, WE paying the bill for what was in fair-share a CA person-made catastrophe via there idiotic actions.

FL can't do a dang thing to stop a hurricane, but they at least try to put in place mitigation items to lesson impact.

CA, stopping doing fire breaks because it messes with a mouse..... How's that mouse doing now? Crispy fried right....

Or not topping off reservoirs in advance of a known annual heightened fire risk season.

I am not saying it would have been 100% prevented if hadn't done these dumb actions, but with 100% certainty the scale of it all would have been different, lessor.

People died because of this, and thus there needs to be a criminal inquiry. Criminal negligence, that's a thing. And this, what I am hearing, wreaks of criminal negligence. Accountability must be demanded by Californians, and the nation as a whole.

But let me guess, Biden will issue pardons for entire CA political class...... Retroactive for any crimes known or unknown for the last however many years......

well typically middle of January is winter and not fire season so you have that .. Fire breaks work for sure I remember a big fire in Lake co. cA when I lived there and there were 4 to 5 dozer in a line doing fire breaks along ridge lines.. keep in mind though this is steep country so moving dozer through there is not that easy.. That fire in 1980 burnt 35,000 acres between ukiah CA and Lakeport Ca and only stopped when it got to the pear orchards in lake co.. there was not stopping it.. moved at about 10 to 20 miles per hour.. all over 8 hours.. until you see it in person you simply cant understand it..

Also keep in mind in LA most of those lots were created from 1900 to 1950s and well they are lots of record.. and were developed with the standards of the day.. Todays standards are far different as you know.. I deal with it in all the subdivisions I have built.. Fire department is the toughest one to deal with.. U need 1500 GPH at the hydrants.. no street can be longer than 600feet with out dual access.. If you cant meet GPH you need to sprinkler the houses so add 8 to 12k per track house to the build cost and oh by the way we need starter houses.. Etc etc.

I always heard the fire risk season was tied to Santa Ana winds, Sept. - May..

I am sure your right on the winds.. I spent a winter in Palm Springs and brought my plane down there and you talk about some wicked winds .. I got caught in a mtn wave on one trip from Napa to Thermal Ca and we had 2k ft ups and downs un commanded you just ride the wave like a surfer and on the back side of the wave U pick up some pretty impressive ground speed.

No thanks, I'm way too Norwegian for that noise. Put me on a boat with 10' swells and I'm happy as a pig in slop but in air getting thrown.... I'm the guy turning 3 shades of green with the verps. Lol.

my wife if Norwegian Wika :) raised on a little island in the Columbia River and family were all fishermen and loggers.

Without doubt a brilliant and fierce women she is, SKOAL!

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I took the average $4,000,000 house in Pacific Palisades CA and it shows a monthly tax payment of $4,167 for a total of $50,004 a year. (That would buy two houses in Ohio). :-)

4 Votes

Los Angeles County, California

All Forum Posts by: Ken M.

Ken M. has started 64 posts and replied 863 times.

Post: Is Subto legal?

Post: L.A county California fires

Post: Why do people Buy Property in California

Post: Creative Financing and Some Things To Know

Post: Why do people Buy Property in California

Post: Rent out house and bleed for a while or sell it and hemorrhage once?

Post: How do closing agents fund private money deals?

Post: Rent out house and bleed for a while or sell it and hemorrhage once?

Post: How long should I give my PM to Rent a Unit before changing PM?

Post: Why do people Buy Property in California