All Forum Posts by: Marc Winter

To cut to the meat of your story:

1. ALWAYS BE LOOKING for another deal!

2. Remember, just because interest rates fall, housing prices don't necessarily appreciate right away.  Prices can (and have before) tumbled after rate cuts.  It can take several years before the prices come back up to pre-drop levels, and then as per the usual cycles, continue higher.  

3. The question is, do you have the staying power to weather a multi-year storm?  If you have several months of vacancy, you'll be out of pocket at least $1,730 each month.  

4.  How familiar are you with the subject property's location and demographics?  If/when the SHTF, will there be any qualified tenants to rent to?  Will the rents be rising or declining?  A five-hour drive gets even longer when you are traveling to a vacant house.

5.  To get a feel for what history can teach us, talk to some seasoned investors who lived through the real estate market from 2007 to 2010.  I'm not saying that we are looking at a repeat of those times, or trying to discourage you.  Just be informed and prepared.

Good luck.  Keep investing and moving forward!

Five Things I Wish I Knew...

Student housing can be profitable.  But be aware of these items before you jump into that pool:

1.  Know your local zoning laws, building codes, and licensing/permitting regulations.

2.  Cement block construction works great.  Covering all drywall or plaster with 3/4" plywood is second best.

3.  Female students tend to be messier than male students; male students tend to cause more property damage than female students.  (I understand this statement is not PC, but after 30+ years in the industry, I'm speaking from my own personal experience.)

4.  Qualify all student applicants AND THEIR PARENTS OR GUARDIANS before renting.  Both must be on the lease as responsible parties.

5.  Structure your lease to spell out house rules and who is responsible for what.  All students and their parents/guardians shall be responsible for all the rent, ie if one student bails out, the remaining tenants shall still be responsible for that missing part of the rent.

6. (Bonus) Have at least 2 (two) local handypeople on call for regular maintenance and emergency calls.   

Keep investing and moving forward!

We live in a "what's in it for me" world.  To paraphrase a great leader: "Ask not what your community can do for you; ask what you can do for your community".  

If you're just starting, I'd suggest you attend some local meetups and network with some local, established, successful investors.  

The basics of real estate remain the same wherever you decide to settle/invest.  Learn those basics first, then you will have some foundation for collecting a good-fitting working team.  Come humbly from a position of knowledge and strength and you'll find all the help you need.

Good luck, and keep moving forward!

Could it be the seller thinks he can get more money for the property?  

First, I'd ask them why they don't want to close.  If it's money, perhaps negotiate (a very little bit) if it was a really killer deal to begin with.

Secondly, speak with your attorney about recording (county recorder) a memorandum regarding the contract of sale.  Once recorded, the owner/seller of the property will not be able to close on the property without addressing this issue, thereby blocking them from cutting you out and selling to another party.

Other than that, keep in mind it is VERY difficult to win in court for specific performance to force the seller to sell.

Good luck, and keep moving forward!

"I would prefer to place the title in a trust and purchase a majority share in the trust, as I have heard people are doing (clears the mortgage from the seller's DTI), but I would really appreciate hearing what you have to say."

@Lynn McGeein gives good advice.  I'd like to add this:

Placing the title into an inter vivos revocable trust will NOT affect the mortgage.  That means the person/entity who signed the mortgage/note will still be 'on the hook' for the loan.  

Remember, the title is placed into a trust, and administered by the trustee at the direction from and for the benefit of the beneficiaries.  That has nothing to do with any liens or loans attached to the property--they still stick to that property.

To learn more, speak directly to a VA mortgagee/lender or mortgage broker about how to assume the loan and how/if you can absolve the current borrower from any liability.

Keep investing and moving forward!

Unfortunately, it's become more common for people to shirk their own responsibility, like paying rent, and then look to blame other folks for everything that happens to them.

Question: Why are you taking calls from an evicted ex-tenant? I would not engage with this ex-tenant.  Let them file what they will, and if there is an investigation at all, (doubtful IMHO) the authorities will request whatever information that's needed.  

Keep investing and moving forward!

Mr. @Niyi Adewole makes good points.  

Another important issue is how to take the title. 

If your bank will finance the purchase to an LLC? That would be preferable imho. If not, you could take title as an individual and later transfer to an LLC (you might trigger some due on sale and/or transfer tax, so get legal representation on that).

If LLC is not possible, I've used Revocable Living Trusts many times. It does not give you the protection of a properly formed LLC, but it does provide a bit of anonymity and can spell out the division of income to the beneficiaries in the trust docs.

There should be no transfer tax involved with the trust, and it will not trigger any due-on-sale clause thanks to Garn-St Germain.

BTW, if you do use a trust, only record the Deed into Trust, but NOT the entire trust declaration.  See a qualified lawyer if this is your first time.

Keep investing and moving forward! 

Hakim,

You can record a memorandum about the option or contract--speak to your attorney on what form that should take.  To record a document, it must be notarized. 

The recorded document will put the public on notice that there is an issue (cloud) with the title and that will prevent someone else from buying the property without dealing with you first!

I'm a real estate broker and investor and have done this multiple times.  However, I'm not an attorney, so please make sure to discuss this with them.

If the unit is priced right and showable, it will get rented. 

We always provide the applicant with a list of required qualifications: income/rent %, credit score, evictions, etc.  We also list all the documentation required to be approved: proof of income, social or TIN, etc.

The application fee should not scare off a qualified tenant who likes the property, however it will keep tire kickers away.

Keep investing and moving forward!

Hakim, 

It reads like you want to do a lease with an option to purchase.  Yes, you can do both at the same time, ie 

1) contract to purchase in the form of an option to buy within 24 months, with a 1-year rollover clause, and 

2) lease for your preferred term, say 24 months.  Insert a rollover clause for an additional year in case you need a bit more time to get financing.

The lease should not mention the option, and the option should not mention the lease--if things go sideways, you'll be able to part ways with fewer complications.  

Simply tell the seller you want to purchase the property, and "Here's how I'd like to do it"...

Keep investing and moving forward!