All Forum Posts by: Jeff Rabinowitz

If you are in first position you will actually be safer than if you lend the whole $45K. If you lend $15K and the property is really only worth $90K your loan to value (LTV) is 16%. If the property is really worth $180K your LTV is 8%. Those are very conservative parameters. Being in any position other than first can bring many complications.

However, the promised return is quite large, almost unbelievable. If you do not know how to value properties it may be prudent to require the borrower to provide an appraisal or to hire one yourself. In my area I can get a desktop appraisal (the appraiser does not actually visit the property but will do a work up from published comps) for $100. A full appraisal will be more accurate but it will also be more expensive. The desktop may be sufficient to see if the borrower is in the ballpark or is just blowing smoke. It could be the best $100 you ever spend.

It should be in your lease. If it is not the tenant may challenge the order and if it goes to court a judge may side with the tenant since you wrote the lease and did not specify.

I agree with everything that @Karen Rittenhouse says. This is not a good first project for anyone but especially not for you. Not only do you not know how to estimate costs but you don;t seem concerned about what the property is worth. You must know what it will be worth when you complete the repairs. If you are planning on flipping this you must know what you can sell it for. That is not always the same as what it is worth. In order to know these values you must know the area, what has sold and how long the homes were on the market before they sold. Obviously, the seller doesn't think this is worth more than the back taxes owed or he would have paid them. Why do you think you know the value any better?

Take action sooner than you think you are ready. You will never know everything about the type of real estate investing you choose and you don't have to. You only need to know enough to make prudent decisions--you will learn rapidly when you are actively involved and have your money on the line. You will make mistakes, we all do, but you will miss many profitable opportunities if you do not actually make an investment.

When you partner with the State and accept Sec. 8 you are at an extreme disadvantage. You have little recourse but to accept their arbitrary rules and bureaucratic bungling. The reason you get so many inquiries as to whether you accept Sec. 8 is because many landlords have dropped out of the program and will not accept it. I will never, under any circumstances, participate in this program again.

@Dan L.,  welcome to BP. This could present you with a future problem. It may be well worth getting a legal opinion as to the seriousness of the issue and possible remedies. 

@Sheri H., welcome to BP. It is possible to find what you are looking for but you may have to search hard and make a lot of inquiries. The fact that this is going to be your first investment will be a big negative but the fact that you have some cash to put into the deal will help. You will need to find a deal that is clearly being purchased significantly under market. It will be harder to buy a property significantly under market price if it needs only cosmetic repairs but it can be done. Even then, many HMLs will base their loan on a percentage of the purchase price. There may be someone who will recognize that you are buying under market and will increase their loan amount because of that. Your best bet may be private lenders, people you know, friends or family, who are more willing to take a chance on you.

@Bill S., I am not a lawyer but it is extremely unlikely that a transfer to an LLC that has the same ownership as the property would trigger a due on sale clause. I only know of one very active investor who was sent a letter one time. (She routinely does this and has purchased hundreds of properties.) When she explained the ownership was the same the bank withdrew their demand. The property was purchased as an investor property not owner occupied property. I have done this occasionally, though I do not use LLCs very often, and have never had an issue. Again, it is possible that the due on sale clause could be triggered but it is very unlikely.

@Frantzces Lys, interfering with another licensee's client while they are under contract will probably land you in a serious dispute. You could be fined, barred from joining the MLS or possibly lose your license. No, it is not at all ethical.

This has only happened one time but it has quickly become the most annoying part of BP. (Hopefully it is a single individual). Someone tagged me in a post and went on to explain what I meant. The explanation was not at all what I meant (I posted what I meant) and was a practice I wouldn't recommend and that was completely unnecessary for the original questioner. Post what you would like, ask questions, ask for clarifications, disagree, but refrain from interpreting others' remarks.