All Forum Posts by: Lew Payne

For someone who lacks a moral compass and has no qualms about "sticking it to others" for their own benefit, hiding the fact that a loan's due-on-sale clause has been triggered is no big deal.  You should govern yourself accordingly, keeping in mind that when seeking advice from the wolves' den, the advice you're likely to get is that which favors the wolves.

The due-on-sale clause requires that the seller notify the lender of a change in status which would trigger the clause.  By signing the note and accepting the cash, the seller explicitly agrees to such terms and conditions.

http://johntreed.com/blogs/john-t-reed-s-real-esta...

I would be suspect of anyone wanting to purchase my property "subject to" existing loans that have a due-on-sale clause, as I have no guarantee from said purchaser that they will step into my shoes and fulfill my legal obligations (contacting the lender and informing them that the acceleration clause has been triggered, and paying it off or refinancing if requested by the lender).

I realize honesty is a rare commodity these days, but it doesn't mean all of us nest with the wolves.  Just some food for thought.  I realize there are those who justify every questionable act they commit by comparing morals to personal choice.  That just serves to further demonstrate how far they've strayed, and their perceived need to justify their actions through inane comparisons makes one realize they're in self-denial.  My advice is avoid, and move on without causing a scene.

Let them jump up and down all day, screaming at the top of their lungs trying to justify their actions.  Those of you who have raised children recognize that type of behavior, and know it's best to ignore it rather than feed into it.  Some adult children require the same therapy.

I live in Idaho (Boise), and have seen "flippers" come and go in this state. It is a tough state to find deep-discount property deals in, and it's a poor state for rental income. By poor, I mean that a better ROI can be had elsewhere. That's why, so far, all my property flips have been in FL, IN, and (as of this week) TX.

There are many mobile home parks in Idaho.  I have, as an aside (in other words - I did not intend to) flipped a mobile home.  Use $2,000 as a down payment on a mobile home that needs work, another $2,000 for repairs and remodel, and the $1,000 for carrying costs and incidentals.  Flip the mobile home, and make some money.  I paid $18,000 for a mobile home that I flipped for $35,000 (in Florida).

If he is not actively involved in real estate, then I suggest he steer clear of it.  Instead, he can put his money in an index fund, such as the SPX (S&P 500), especially now that it is down due to the Greek crisis and (less so due to) China's stock market collapse.  Use a self-serve brokerage, such as OptionsXpress.

What I just heard you say, "I am looking for chocolate ice cream.  I have called up every ice cream shop in my area, and asked if they have VANILLA.  Each has said yes, so I consider the conversation done at that point."  Just because they have one type of loan does not preclude them from having another.  Ask the question you want to ask, directly... do you make portfolio loans, not do you make FNMA/Freddie loans.

When your husband asks you to help clean this man's apartment, pull out the phone book and find a cleaning service.  Call them, have them come out, and give you an estimate.  Give the estimate to your husband, and *tell* your husband to get the tenant's signature on the estimate, stating he agrees to pay for the cleaning service.

Whenever someone asks me to do something that is outside the scope of reason, I treat it like a business - I act as the supervisor, delegate it out, and add 10% to the charges.  Most people learn after only one lesson.

If your husband asks why you're calling a cleaning service, explain to him that you want to be fair to the tenant - by getting him the best price possible... since you would charge 10% more than even the cheapest cleaning service... so it's in the tenant's best interest to agree to pay the cleaning service directly.

One more small tip - I try, as much as possible, to never say "no" to an unreasonable request.  I say "yes" and make the terms so untenable that the other person says "no thanks."  I am always, as much as possible, the "yes" man - but I control the terms.

I use escrow.com whenever I buy or sell an existing website (domain name).

I use Mad Dog Domains whenever I register a new domain name.

Thank you for sharing these tips with everyone.  Like it or not, first impressions are everything.  I am amazed at how many people either don't know this, know it and don't care, or know it and are unable to apply it to themselves.

Time and time again, I am approached by newcomers asking if I'll fund a deal for them.  In most instances, that's all they ask - they don't have the common sense to include at least some preliminary information about the deal; no address, no purchase amount, not even what city and state it's in!  I'm pretty much tired of hearing, "are you still funding?" or "will you fund a [unknown and undefined] deal for me?"

Despite being involved in several businesses, I consider myself a pretty easy-going person.  My existing partners can attest to that - much of the business that transacts between us is done via phone and email, and funded the very next day.  But those are relationships that have earned my trust, by adhering to my parameters and not trying to slip "bad" deals into the mix.  We are respectful of each others' limits and expectations.

If you're a newcomer looking for funding, you should realize there is no pre-existing business relationship between you and your potential financing partner.  Potential funding partners whom you approach have no reason to trust you, and without a track record, your word is a poor gauge of your abilities.  As I explained to a very indignant wanna-be flipper who was telling me that his word was "gold" and was all that mattered; when a problem that is out of your control arises (divorce, injury, hospitalization, serious traffic accident) and you are unable to fulfill your obligation - of what value are your good intentions?  In that scenario, which is better in securing my interests - your word or your collateral?

Another major pet peeve is newcomers who refuse to do their homework.  Just this month, I had one complete stranger (from BP) ask if I'd fund a $1.6M home in FL.  His so-called analysis assumed ZERO carrying cost for my funds (no interest), did not take into account comps or marketability (homes of that class, in that neighborhood, took an average of 12 months to move), and his claim of profitability had no factual basis.  He assumed that just by changing the carpeting and redoing the landscape, the property could be sold for $3.1M... despite comps in the area selling for $1.6M to $1.9M.  The carrying cost for my funds alone would have netted this deal a loss of between $110K and $440K.

One more hint... if you've never flipped a property before, or if you don't own rentals, you are not a "real estate investor" - you are a "real estate investor wanna-be."  Do not introduce yourself to me as a "real estate investor" - just because you read some forum posts and purchased a book or course does not qualify you as an investor.  Experience and the ability to handle real-world investment scenarios is what makes you an investor.  Once you tell me you're a real estate investor, and I find out differently (I always perform due-diligence), you no longer have credibility... and I will scrutinize everything you present me, as well as think of you as a potential risk and liability rather than a business partner.

Instead, tell me what you can bring to the table in these deals, and what prior experience you have that directly impacts your ability to be my ideal partner.  A man who does not understand his limitations is a dangerous business partner.  A man who misrepresents his experience is a disaster waiting to happen.

I concur with Jeff... I have a revocable trust here in Idaho, as well as an irrevocable trust that is domiciled in Utah by virtue of its corporate administrative trustee and bank account.  The irrevocable trust conforms to Utah Code 25-6-14 as well as Internal Revenue Code 541(c)(2) and is considered a restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law - and thus, said restriction is enforceable under federal bankruptcy law.  In addition, I have spent the good part of a year refining its provisions by incorporating changes to elements that were being commonly challenged or appealed in other jurisdictions (such as the FAIR Hearing Decision 1409508) so as to obviate said challenges.  As such, said trust also complies with the new Restatement of Trusts (Third) interpretation, which blurs the lines when attempting to establish what the courts will recognize as a discretionary trust with no ascertainable standard of distribution.

Asset protection, and its underlying multiple structures, is not something that one does after reading a few books on the subject.  It's an undertaking that involves consultation with an estate planning attorney as well as a real estate attorney, once you have defined your goals.

The same applies to LLCs, especially single-member or reciprocal member - as in husband/wife - LLCs... a little knowledge can be dangerous, and litigation is the best measure of any asset protection claim.

While your initial theory is correct (UT and NV allow your LLC to stay private - if you use a nominee to create them, that is - and if you use a nominee each year to file your annual report), all it takes for anyone to initiate a lawsuit is for them to serve the registered agent - who must be available during business hours.

I don't know why people are so hung-up on the so-called "privacy" aspect of things. If a tenant (or anyone dealing with your so-called "private" ownership property) sustains an injury - or decides to file a suit for no reason at all - all they need to do is serve notice of process against the registered agent. Then, as a result of you cleverly owning an LLC, you must hire an attorney - because you are NOT allowed to represent your LLC unless you have a license to practice law in that state. Congratulations.

If you're not familiar with legal structures and their ramifications, it's difficult to explain in a few paragraphs.  You have, in essence, asked "teach me how to perform neurosurgery" and many of your assumptions will be incorrect (thus making you your worst enemy!).

A trust can have any name, regardless of purpose.  I can call a personal property trust the "Steven Johnson Conservancy Trust" or the "Johnson and Johnson Baby Powder Trust."  A trust can hold land (without it needing to be a so-called "land" trust), vehicles (without it needing to be a personal property trust), or whatever.

If anyone talks to you about a "land trust" - run away from them.  There are only a few legitimate uses for a land trust... most hucksters use them for the wrong purpose, to get around due-on-sale clauses by breaking the law, or by using scare tactics to lull you into a false sense of privacy.  Many states have legislated away the anonymity of the so-called "transfer of beneficial interest" by requiring notification (including to your bank and to the tax assessor) in order for it to be legally binding.

You do not put individual properties into a trust, as that creates potential inside liability for the trust. You do not put risky assets, in general, into a trust. You create separate (or series) entities that hold the risky assets, which are themselves held by a holding company that is owned by two distinct legal entities (a single-member LLC is ineffective, and so is anything with two mirror entities such as husband and wife), each having a different class of membership interest and "poison pill" provisions that create tax ramifications for any judgment creditor that wants to attach the membership interest. My family trust is one such entity, and my irrevocable dynasty trust is my other entity. Said properties are then managed by a separate management entity, via individual property management contracts with each of the series entities. Everything has its own bank account, along with separate books (accounting). A fiduciary corporate trustee (in SD, UT, NV, or AK) provides administrative duties in compliance with trust situs requirements.

The irrevocable trust, which maintains fully discretionary distributions with no ascertainable standard and meets the requirements of the Restatement (Third) of Trusts along with those of 11 USC 541(c)(2) and is "a restriction on the transfer of a beneficial interest of the debtor in a trust that is enforceable under applicable nonbankruptcy law is enforceable in a case under this title" is fully judgment-proof against state and federal claims.  In addition, I've researched Medicaid trust appeal cases (such as the FAIR Hearing Decision 1409508) and further refined my trusts such that Medicaid has no grounds for ruling against the trust.

It has taken literally one year (on and off) of working with my estate planning and real estate attorney to refine these structures to the point where they are where I want them to be.

PS - It is foolish and unwise to put your personal residence in an irrevocable trust, unless it is a QPRT or non-QPRT, but even then they are unnecessarily restrictive. It is also foolish to attempt to encumber (protect) your primary residence through the use of an artificial HELOC for equity-stripping. There is a correct way to protect the equity in your personal residence, and it does not involve the use of artificial schemes or straw-men which are quickly undone by the courts.

I researched many of these same trusts, for selfish (personal family planning) reasons.  The problem with the 501(c)(3) trusts is that they're too restricted on use of funds, require quite a bit of accounting and administration, are restricted on what business they can conduct, what business they can directly or indirectly own, and have restrictions on use of profits.

As a result, I went the non nonprofit (the "profit") route with mine. It is a conservancy trust, and its purpose is to conserve the assets we own for the benefit of future generations of my descendants (my "community"). It can also own unrelated businesses, without UBTI/UBIT, etc. As a result, it owns a flipping finance operation (Housing for Humanity, LLC) and a management company (Management Moguls, LLC). Since it's structured as a 541(c)(2) trust (11 US Code