All Forum Posts by: Rob K.

I use a lot of different cards based on the best categories on my spending for cash back/miles, but one under the radar for rental investors that gives 5% cash back on up to $2,000 spending per quarter on utilities category when chosen is the US bank cash+ card.

I max out on utilities spending with the card every quarter.

 I have been sourcing hard money loans in California as an investor through loan brokers for the last 30 years. There are many brokers who work with investors and they tend to have different approaches and terms from one another. Once you have a deal, do quick due diligence and let the broker know quickly whether or not you want the deal they have. Be ready to give them specific criteria on what you are looking for. Communicate well and perform when you say you will and they will reach back out to you for additional deals. It is common for a deal to be in the works, and for deals that look good to not happen. You just have to keep at it and remind the brokers you contact you are in the hunt for loans.

For the amount of money you are starting with, you might want to indicate you are willing to fractionalize to get into a deal. Be aware though that fractional deals can be a logistics and control problem if the loan defaults and there is a need to foreclose.

Having money idle is an issue with hard money lending. One way to try to minimize this is to eventually ladder your capital into several deals so that when payoffs come, sometimes unexpectedly, not all your capital is idle. I utilize a brokerage account with wiring capabilities for my idle hard money capital with idle cash placed in short term t-bills currently yielding around 5.3-5.4 %. If I have a deal, the t-bills can be sold and cash is available for funding the next business day.

Although I am selective, I am almost always on the hunt for new loans.

Cal. Bus. & Prof. Code § 10131

A real estate broker within the meaning of this part is a person who, for a compensation or in expectation of a compensation, regardless of the form or time of payment, does or negotiates to do one or more of the following acts for another or others:

… (b) Leases or rents or offers to lease or rent, or places for rent, or solicits listings of places for rent, or solicits for prospective tenants, or negotiates the sale, purchase, or exchanges of leases on real property, or on a business opportunity, or collects rents from real property, or improvements thereon, or from business opportunities.---

Cal. Bus. & Prof. Code § 10139

Any person acting as a real estate broker, real estate salesperson, or mortgage loan originator without a license or license endorsement, or who advertises using words indicating that he or she is a real estate broker, real estate salesperson, or mortgage loan originator without being so licensed or without having obtained a license endorsement, shall be guilty of a public offense punishable by a fine not exceeding twenty thousand dollars ($20,000), or by imprisonment in the county jail for a term not to exceed six months, or by both fine and imprisonment…

I think the main thing is do you have a book keeping system in place that allows you to efficiently break out all income and expense from the triplex, especially come tax time?  If you do, then maybe you do not need to establish separate accounts. If book keeping is not something you keep up with, then you are probably better off running all income and expense for the triplex through a separate account.

Interesting how some folks like to focus on asset protection issues with entities, etc., but on issues like this one, take an attitude of "its just standard", and tend not to read the contracts they sign on issues such as indemnification.

As a property owner, is it appropriate to add a property manager as an additional insured on your general liability policy? Sure.

As a property owner should I agree to indemnify and hold you harmless from for everything you do regardless of fault, and give you the right to not only have me pay for your attorney, but to control the outcome? In other words be your functional liability insurance carrier for everything you do without exception and no exclusions? I think not. 

The examples of things that can go wrong for a property owner who agrees to such language is only limited by one's imagination. But here is one example: Property manager engages in discrimination in selecting tenants without owner's knowledge. Lawsuit is filed and property manager tenders to their E & O carrier who accepts the claim. They become subrogated (steps into their insured's shoes with the ability to enforce their rights). Guess who the E & O carrier's claims department goes after for reimbursement based on the broad indemnity language quoted in this chain?

You may have heard the phrase "Marry the property but date the rate..." I am a long term buy and holder.

I started with 30 year mortgages, but later refinanced into 15 years, and some 10 years when the government adopted the "Home Affordable Refinance Program" (HARP) at very low rates in response to the great financial crisis. I was never the one targeted by these programs, but the servicers went beyond the mandate and tried to refinance everyone they could.

For me the key in refinancing was not to take cash out and do not extend the duration of the loan. With 30 year loans you can still pre-pay principal if you want and wait to refinance into a 15 or shorter when the time is right and rates are lower. One of the nice things about a fixed 30 year mortgage is that it is a great inflation hedge.

In terms of educating yourself, it would be good to get an understanding first of what, if any, your family's estate plan is, and if there is not a good one, get yourself educated in that area for a continuing discussion with your dad. Once everyone is clear on the big picture of what the estate plan is and what your parents want, other issues dealing with specific properties and specific issues such as 1031s, shifting to other investments, financing issues, etc. will become clearer.

Well there is a lot to sort out in how the compensation model will evolve going forward.

As I understand it, the rule will be that you can't post buyer compensation from a seller/listing agent on the MLS. But that does not mean a listing agent can't make it be known outside the MLS that a seller is still willing to cooperate, although perhaps not at the level it has been. As a seller, I can understand incentivizing buyer agents to show my property by offering some level of compensation to maximize market exposure, especially when many other listings don't offer compensation.

As a buyer, the new system would seem to be for the benefit of sophisticated buyers who don't necessarily care about the down sides of dual representation and are able to protect themselves.

As a buyer's agent, generic exclusive representation agreements at buyer's cost are likely a very hard sell. I would think a more nuanced marketing approach where agents compensation is based on achievable results and other factors (e.g., hours committed to representation, achievement goals, discounts for properties based on price for square footage, negotiation of post escrow discounts, credit for seller/agent cooperation, transaction coordination commitment) might be more digestible for a buyer.

Should be interesting to see going forward, but I do think in general, agent compensation will be less as things develop.

 I guess it all comes down to how one wants to manage their risk. Becoming the subject of a title related claim might be a low probability event, depending on due diligence on transactions, and an individual's savvy, but if a claim arises, it is potentially very large.

The same might be said for auto insurance. 

When you refinance, the lender's policy is for the benefit of solely the lender even though you pay for it. A title issue may or may not relate to an issue the lender cares about. Do your loan documents have an indemnification/hold harmless clause or personal guarantee in favor of the lender? It is worth checking, because if there is a lender title claim that the title insurer covers, the claims department (depending on the nature of the claim) will absolutely scrutinize the loan documents and likely step in to enforce lender protection provisions against you if you don't have title insurance. 

For those sellers who rationalize title insurance is not needed when it is being provided to the buyer, where the lender is being insured, or the hold period for the property is short, etc., there is a misunderstanding of the risks involved. The benefit of title insurance is not just insurance for the title itself, but coverage for legal expense in the event some problem results in litigation in which you get named or are potentially liable under some legal theory.

Wholesalers or flippers will typically purchase a title product called a binder when they purchase a property. What a binder does is the title company, for 110% of the cost of a regular policy, will agree to insure title as of the date of purchase with the purchaser having the right to have a future policy issued, usually two years or so. In the typical wholesale or flip transaction, the binder is used to issue a policy to the buyer the wholesaler or flipper sells to. So with a binder used this way, the new buyer has title insurance, but the seller, unless they purchase an additional policy, does not.

Real life scenario: purported owner of vacant land is desperate to sell off market to a flipper who gets the lead on their web site. It is a fantastic deal and flipper closes the purchase and immediately sells for a big profit to a developer. Flipper uses his title binder to give developer title insurance. Turns out the the deed was given to flipper with a forged notary and after closing, the money was wired to a mideast country. Real prior owner sues everyone to cancel deed and title company covers developer buyer in full for purchase price since developer was insured.

When Insurance companies cover a claim, they get to step into the shoes of the party they covered under a legal theory know as subrogation. Insurance companies look to anyone they can go after when they have to pay a claim for reimbursement. Since flipper had no title insurance, only a binder he used to give his buyer insurance, guess who the insurance company goes after and sues for reimbursement of the claim they had to pay?

It would be a very different outcome it the flipper had actual title insurance and not just a binder.