All Forum Posts by: Marc M.

@David Magnuson, I think going into business with family (or friends) can work really well...but I have also experienced some pretty difficult situations partnering with my brother on two separate properties. Generally speaking, when people start out in a business or any kind of relationship it's all optimism and excitement in the beginning (ie: no one plans for a divorce the day they get engaged!). But, you need to plan for the end in an partnership...life changes, people have different goals etc. My main suggestions are this:

1) Create a vision for you business. This is really to get on the same page with your partners. Are you doing one project or ten? Are you flipping, brrr-ing, wholesaling, etc? How long will you be in business? Short term or Long term? What is your plan B, or plan C? What is your competitive advantage in your market...will one partner make acquisitions while the other does the contracting work?

2) Get an attorney to draw up your LLC's operating agreement (and make sure it spells out how a partner can exit!) If you only file articles of organization for your company you will invariably default to your state's statutes of LLC's which are usually pretty strict and often require a judicial dissolution if there is gridlock amongst management) This is money well spent on an attorney!

3) Plan for disputes. It's easier to be diplomatic and reasonable before a conflict arises, so put something in writing about how you will handle disagreements, because THEY WILL HAPPEN. And if all else fails in your conflict resolution plan, put in a mediation / arbitration kicker if things really go afoul. You want to avoid going to court at all costs because it COSTS A LOT. 

Even though I have war stories from going into business with family I still think it can work...if only I knew now what I didn't know then! And like @Perry Ivy mentioned about birth traits, I will add to that: If you ever had conflicts with your siblings growing up, you can bet they will resurface again....what will appear to be a conflict with your business will actually turn out to be some deep-rooted, unresolved issues from childhood once you start drilling down to resolve the disagreement. 

Good luck to you!

-marc

Thanks for the quick replies @Jeremy Tillotson, @Wayne Brooks, and @Rick H.! I should have mentioned that these properties are in Detroit since my profile shows that I am in NJ. Although, I would imagine there could be some similarity between states. I have had better luck purchasing tax-auction properties in nearby counties and had regular title companies insure the deeds. However in this case Wayne County is severely swamped with foreclosures and their practices may not be as thorough. I paid $16K for each lot, and it would be fine to hang onto them for 5 -10 years, but I was hoping to move them more quickly to keep growing. A lot down the road from me just sold for $40K in October, so I should be an a good position to cash out now. It is in one of the nicest historic neighborhoods in Detroit (Indian Village) so a vacant lot is surprisingly hard to come by. There is a company in Detroit called QuietTitle that seems competitive with Tax Title Services....if any Detroit investors out there have used them before, I'd be interested in hearing your experience.... 

Hello,

I have purchased several tax-foreclosed properties through auction. One of these properties (two side-by-side vacant lots) I am planning to sell on the MLS, and I had my title company look over the foreclosure proceedings from the County Treasurer and they cannot give me title insurance due to the foreclosure notices going to an address no longer used by the previous owner. So, I either have to do a quiet title suit or pay a higher insurance premium through Tax Title Services. Given the current flaw in the title, how likely is it that if I do a quiet title suit an interested party will step forward and try to reclaim the properties...and if that were to happen would I lose my investment (ie: the county does not guarantee clean title...so I'm assuming the sale is at the buyer's risk)? OR what about doing both....in other words, is it safer to get the Tax Title Insurance, and then initiate the quiet title suit knowing that someone may step forward?

Best,
marc

Thanks for all the replies! @Tom A., this is exactly the kind of deal I am interested in figuring out:

You can approach the homeowner and attempt to buy the home from them. They would have to redeem the home, in this case for $38,000 plus fees but they would then be able to sell it to you at a price that negotiated with you. Most likely the homeowner doesn't have $38,000 nor would they have access to it from some other source, but you may be able to structure the deal in a way that makes it possible for the deal to happen. I would talk to an experienced real estate attorney.

I've spoken with other investors at these auctions, and they warn of this exact situation happening to the purchaser of the sheriff's deed....that is, a shark-investor undermining an another investor's deal by using the homeowner to redeem the property, and walking away with the quitclaim deed in hand after paying off sale amount + interest to the first investor during the 6-month redemption period. Or alternatively, a realtor approaches the homeowner and lists the house for sale above the auction sale price but still well below market value....Is anyone else familiar with these strategies?

@Wayne Brooks, I think we've been over this before, and forgive me for asking again....but what purchasing rights do the previous owner's have during their 6-month redemption period? In the case of the house that had $112K of debt and did not sell at auction for $38K....(so now the bank has an asset on their balance sheet for $38K assuming they recaptured their $74K loss through federally backed loan guarantees or PMI)....can the foreclosee buy their home back from the bank for $38K? Or can they only redeem the property for $112K?

And hypothetically, if the house was competitively bid on above and beyond the $38K....let's say it went for $48K at the auction, is not true that the forclosee would be entitled to the $10K above asking price?

@Wayne Brooks, so you don't think I could approach the bank with an REO Agent or Tax Sale Attorney before the house hit the market?

Hi @Phil Bastnagel, have a listen to podcast #39 "Dirt Cheap Land Flipping and Reaching Motivated Sellers" with Seth Williams. I just listened to it this past weekend and it was very informative. 

Good Luck!

Hi @Mary B. these are mortgage defaults, and yes the properties can sometimes have high tax bills attached to them as well. I'll look into finding a reputable REO agent in the area. Thanks!

Hello BP,

I have been attending the weekly sheriff's sale in Detroit (Wayne County, MI) to learn the ropes and recently saw two properties I was interested in have their deeds called, but there were no investors who wanted the properties. (An aside, only a few people attending these auctions actually buy in the city of Detroit....most go after the suburban properties...I'm sure @Joshua Dorkin would find this amusing!). If my title search for these two particular properties comes back clean, what is the best way to approach the bank to buy them?....and is it likely the bank would sell them to me for less than the sheriff's sale price? 

Some background...one SFH house had $112K debt and was offered for $38K (no takers) and the other had a debt of $65K and was offered for $65K (fair price, but no takers).

Going forward, I will have my title searches done prior to the auction and will gladly bid $1 over the price, but like I said I've been a spectator for the past few months. I'm just curious what will happen next to these two houses I like...and is there still an opportunity to buy one of them?

Best,
Marc

@Brian Kehoe I agree with @Matt Lane that you should hire a GC to take this on unless you have significant building experience. I would also consider hiring an expeditor to get you through the planning / permitting process. Don't fear the long approval process...it's a lot of paperwork, appointments, and waiting, but the upfront cost is low compared to breaking ground for a construction project. If your lot is already vacant, I'd assume your holding cost is relatively low. If you put together the right team (Architect, GC, Expeditor) you'll know exactly what your numbers are going into the project and you can always sell the lot with approvals already in place to a spec-builder / developer. Selling the lot as-is (unimproved, un-entitled) will get you the lowest $$ amount for the least effort, but if you can make some money on the transaction it might be a decent play....

Good luck and let us know how it turns out!