All Forum Posts by: Leon D.

"Under contract" does not mean you own it. Beyond that, you'd need an attorney in your state/jurisdiction to tell you whether you're required to disclose it. Certainly, the bank would view it as a potential risk (after all, the financial exposure you have now will not be the same after you close on the first property).

No way of knowing without reading the loan documents. There may very well be a call provision for not maintaining a property as a primary residence, or change of ownership, or just because the bank feels like it.

Depends on the bank.

In your example, owner had a $750k note to the bank, and nominally $250k in equity, They now want to refi. If the property's value has dropped below $1m (which you'll only know from the bank's appraisal, not yours), the refi won't happen. If the value has increased, then the owner might very well be able to cash-out refi, up to whatever LTV the new lender is willing to go, which in turn depends on the lender's view on the market, quality of ownership/management, quality of tenancy, purpose of the cash-out, etc.

I mean, a borrower would be a fool to say that they plan to use the cash to take a vacation to the Maldives, for example. Instead say the cash is to be used for new real estate opportunities, etc.

You sound confused about which side of the deal you're on.

If you're the buyer, obviously you want the method that gives you the lowest offer price while still being defensible and reasonable. Only the seller wants the method that gives the higher price.

Do all three (it's just Excel, after all), and see what numbers you arrive at.

I've been through it, and it can be a NIGHTMARE. Don't rely on Joe Schmoe attorney. Find yourself a good probate/estate attorney, and make sure he brings in guys from tax, corporate, and real estate as appropriate. He or she will also have a relationship or recommendations for a CPA to handle anything that needed on that end. 

Here are a bunch of questions for you to answer for yourself, to gauge how prepared you are for the transition:

1) You say "we want to keep the properties," but what about the sister? Does she want to keep them, too?

2) Will you take 30 units and the sister the other 30, and spin off a new company (so each of you can handle your 30 as you see fit)? Or will you each have an evenly split interest of shares in the entity that owns them all?

3) Will the death and transfer of ownership trigger any default clauses in any loans that may be outstanding?

4) What state is the owning entity (if there is one) incorporated in? Where are you and the sister? Is the owning entity a single-member LLC or a corporation (the tax implications are wildly different)?

5) You each have 50%, but who has management authority? That can't be split; what happens when they disagree, which WILL happen.

6) Have you reviewed all the corporate/loan/management documents to make sure they are current, accurate, and complete?

7) When was the last appraisal done?

8) Were any of these properties part of a 1031 exchange?

Be as prepared as you can possibly be, with as many of these answers (and more) that you can get. Good luck.

To be clear, you're asking if there are any benefits to a loan which allows the lender to go after you personally in satisfaction of the entire principal (simply speaking)? Once that sinks in, I'll add that yes, there is one that comes to mind: the process for recourse doesn't take nearly as long and isn't nearly as complicated as non-recourse. The paperwork for a CMBS loan can run into the many hundreds of pages and take months to finalize.

Hmmm, that's hard to say:

1) Who's doing the valuation?

2) Where are the spots located, and how would you regulate their use?

3) Who handles/pays for the maintenance (striping, resurfacing, etc)?

Baltimore is not New York, Hong Kong, or Tokyo, where you can genuinely say that parking is at a premium. I live in downtown Chicago (grew up in NoVA). Parking is not much of an issue here; unless something's really changed about B'more from when I was younger, I doubt it's really much an issue there, either.

Hard to say, but once you answer these questions, you should have a good idea about what to do:

1) What kind of crime? Petty theft/property, or violent (rape, assault, shootings, etc)?

2) Ten minutes by car, or walking? On what sort of road or right of way to get to college, shops, beach?

3) What's the condition of the surrounding streets? Lots of ground litter? Buildings in poor shape? Do the street lights work?

4) Would you be willing to walk through the neighborhood in broad daylight, alone?

5) $50/month is cash flow. So is $5000. Which is it for this property?

I'm not sure what about this property is confusing. Sold for $505,000. Gross annual rent of $37,500. At 50% expense, that's a cap rate of about 3.7%, which is competitive with a lot of other California commercial properties, or certain commercial properties everywhere (look up NNN cap rates for Starbucks and McDonald's, for example).

The California market is known to usually be about appreciation anyway, not cash flow.

The property is an ante-bellum 15-bedroom, 16-bath SFR that was divided up into eight apartments. The building itself has a footprint of about 6,800 ft2, but I don't know the size of the total lot.