All Forum Posts by: Ralph S.

Harry
Congrats on inheriting a 9 year tenant intending to stay. She sounds good.
On the lease, I use a boiler-plate that allows for a lot of customization. While it is between me and the tenant, it separately identifies who is to collect rent, LL or PM, and lists me again as landlord, and who to call for maintenance, etc., and it identifies me in each case. Since leases live beyond the sale, all the conditions continue in force, and all you need is a notice from the seller identifying you as the new person replacing them on the lease. Your Realtor should be able to provide you with a notice form that will work, and a short letter from the seller to the tenants would work as well. A notice is a little different than an addendum, as it does not require the other party (tenant, in this case) to agree, and will still attach to the lease whether they like it or not. Reasonable tenants understand. If push comes to shove, like an eviction, having the notice will suffice. I don't want to tread on giving legal advice, so don't be afraid of calling your Realtor for a form, or a Lawyer. It shouldn't be a big deal.
Tougher situation with the other tenant. Now, you're on the other side of a notice! LOL! Giving notice to move is not intended to be flexible at the tenants option. "Not so sure" may be fine for them, not so good for you. Let them know you need them to live up to their obligations, just as they expect you to live up to yours, it's just fair. You just need to know.

Good luck. Sounds like you got the best in one, and another that could slide into trouble.

Ralph

Rick

Nike paid $35 to the graphic artist who designed their swoosh logo. Apply your thinking to that one!

IMO, your claim makes no more sense than the original seller, who sold for $9 mil, coming back and saying, "I had no understanding of my property's true value, so I emplore to your sense of common decency to share in your success." Or, the $90 mil buyer later coming back and saying, oh, we goofed, we meant $9 mil, not $90, we emplore your sense of... you get the idea. No sense to me, no reason to do so. The whole "emplore your sense of" approach, lacking any legal support, is baseless and makes me think something else is in play.

Royalties and contingency fees are not uncommon in many industries. Brokerage being one. If you truely believe in Value-Based Land Planning, and profiting beyond a fixed fee for your services, take the plunge and add it to your fee schedule, UP FRONT. Then you share in the risk and reward, which would include not getting paid until closing and possibly not at all if it doesn't sell, wouldn't it? All you have to do is lead your industry and get customers to agree to it. It's just a pricing option, isn't it?

Maybe a better use of this experience would be to trumpet it in your marketing to future clients. Sells better than letting them know you'll be back, expecting more if you later find out they profited.

And, no congrats from me on the $350k "get outa my hair" or maybe even, dare I say it, hush money payoff. Just speculation here, but when I hear that a $9 mil purchase turns into a $35 mil sales price, I'm not surprised that it wouldn't sell, but then an option to the Brokers and their quick sale at $90 mil to investors? Uh, ok, now there might be money for the taking, and I doubt it has much to do with anything that could be put on 8 pages of marketing material, either. What would motivate anyone to pay $350K for 2 weeks work that they aren't legally obligated to do it? Makes my mind race. Negotiated settlements would normally include a confidentiality agreement, if for no other reason than to keep others from lining up at the trough. So much for that! Of course I'm reading between the lines and could just be a paranoid conspiracy theorist, but I think the behavior you describe falls into the "oughta be a law" bucket, even if there weren't one or two bent or broken in the first place.

Ralph

A lot will depend upon what's in the lease now and state and local LL and Tenant laws. In some states, you can do nothing and at the end of the lease, it reverts to a MTM with all the other lease conditions remaining in place. Others might require a 30 or 60 day notice. There is a growing bias toward MTM instead of leases here on BP, so read up and consider other options.
No such thing as an OK lease, IMO, only one that can always be improved, usually after a bad and costly learning experience. There is a lot written here on BP about lease clauses, best to learn from others, and keep in mind your states laws about what is or is not considered allowable.
You're in a touchy situation right now, new LL and leases coming due. Your tenants also have a lot of questions right now, like wondering what to expect from you and whether they should stay or not. If you come on too strong, start making changes and the like, they'll take flight and leave you with vacancies right away. So, consider the quality of your existing tenants in your plans. Requalify as you would qualify any applicant, and determine if you want them to stay or not.
Sorry, but too many variables in your situation to make it a quick answer. Maybe by bumping this back up, others will contribute.

Good luck, and welcome to BP.

Ralph

If the surviving spouse is incompetent and in a home (likely on our tax dime), has no hiers and the property is free and clear (besides the tax bill) and is being taken care of by the city, you might just find that the county, state, a court or some other jurisdiction has assigned a trustee to administer the trust while she is still alive. Finding whoever deals with these things will lead to that person. Usually these things are of public record. Make a few calls. County Clerk, Court Clerk, Dept of Mental Health, etc. Somebody knows.

I don't think asbestos regs will ever be negated, so expect that to happen. Mine didn't require testing, only a visual inspection by a person licensed to do so, and was done by the same company that did the demo.
Despite the alure of the $2k listing price, don't give it minimal DD, give it more. Plan through to your exit strategy, and know what you can and cannot do. I've seen demos that couldn't then be built upon because the old lot no longer meets current minimum lot size or setback requirements for new construction. Lotsa special gotchas.

Doesn't sound like a SS to me. If the seller is making up the difference between the sale price and outstanding loan amount by bringing cash to closing (and taking out a personal loan would be the same thing), there is no "short" to the lender.

Christopher, it's true, if you have to ask, and I had a pretty good hunch, which is why I asked. Nothing wrong with riding right up against the line, you just have to be sure where the line is and have your ducks in a row.

And thanks, Jon, always glad to hear your input, but there has to be clarity and definition and in most of the posts I've read on the subject, it involved how Joe Homeowner couldn't live off of it, or I'll loan to you, you loan to me. Most of the sites you visit tout buying real estate, then refer you to the IRS pubs. Nothing specific beyond a generic FAQ, never framed in a business/professional service scenario, and there are a number of custodian sites that talk about using SD IRA to start your own business. Glad I didn't ask about that one.

It seems the freedom of Self Direction comes with some shackles, but there has to be some way to unlock the potential within the regs.

Thanks.

Thanks Clint

But I clearly don't want to A(a), or A(b) although I hear you can borrow from an SD 401(k). A(c) "Services" seems a glitch. A(d) is a no, and A(e) could be a second glitch, perhaps. I'll just assume A(f) has a glitch in there somewhere, but it should be taken out and shot.

I have a brokers license, but have spent a career in accounting & finance in large corps (still doing it), and for the last 12 years, owned and managed our own small collection of properties. I part timed as a broker associate for a few years. We sold most, too late, in '07/08, and I'm thinking it's about time to reverse that course. I've been considering several approaches for re-entry, with the brokers license and the ability to hang out my own shingle in the center.

Brokers and PM's are already regulated as to the handling of client funds through trust accounts and making sure those funds are segregated and accounted for separately, so no desire to comingle or involve "his own account" with SD money in any way, and I have no questions about how to handle the bank/accounting aspects to support that.

In my mind, (don't start), nothing I had hoped I might do, would infringe on an otherwise arms length transaction, or impact my SD account beyond the wisdom of my own investment choices. Think that is the spirit and intent of the regs. Current taxable income isn't the objective, more like cost avoidance or recapture would best describe it. After the bath I've taken in the IRA already, getting it back on a growth pattern with Real Estate was the plan. I've got six years before I can begin to distribute without penalty, so not a lot of time and I don't see it going anywhere where it sits.

Ok, so you can, but you can't. I fully understand (no, I don't).
No, I don't want to vacation in the vacation home my SD IRA owns. Please don't point me to an IRS pub.

That you can't personally benefit from the profits of your SD IRA or SD 401(k) is a pretty clear statement, mentioned many times here in the forums, well, now forum. No skimming, syphoning, comingling. It alone makes (or loses) on the investments, I don't get any. Makes perfect sense and I can live with that. I'm not interested in milking it, want it to grow, so I ask.

Is there a separation between an SD IRA real estate investment and the business income I might derive by providing normal and customary business services to the SD IRA?

Or, would it just appear as an LLC shell game and an attempt to avoid detection?

Let's play What-If:
What if, I'm a broker or agent, disclosure issues aside, do I get a commission when my SD IRA buys and sells?
What if, I'm a contractor (licensed, insured, file a Schedule C, have employees, blah-blah-blah), can I competitively bid, and be awarded the contract to work on my SD IRA owned properties?
What if, I'm licensed and provide Property Management services, can I have a contract and charge a fee to manage my SDIRA owned investment properties?

What sayeth you SD wizards out there? My SD IRA, my client. Sure to get great service, but is it allowed?

So, Tracy
Now that Deanna has kicked this thread back up to the top, care to share what you decided?