All Forum Posts by: Richard Balsam

Just be careful not to use the lease forms from Office Depot and others - too generic. You want to protect yourself. Most issues with tenants can be more costly than getting the right lease in your hands from an attorney. I spent a lot of money on mine and have adjusted it each time something else happened where I either got "burned" or to stop something  from happening again in the future (it "grew" from 4 pages to 6 pages in length). Contact real estate attorneys to see if you can buy their lease from them. Doesn't hurt to ask.

Here is another angle. Contact the foreclosing attorney's office to see how the contractor can either be added to the balance at the auction, or...go to the auction with a lot of capital and buy the 1st mortgage at the steps. If the contractor can raise the necessary funds - either he will bid for the home at the foreclosed amount and win, or in theory, if in a bid situation - (I doubt it if the mortgage amount is large) - maybe someone else can bid the value of the home greater than the first mortgage balance and he can recoup some his costs. This assumes there isn't another lien holder on the property looking to recover costs at the auction. If he wins at the auction - sell the home to recover his costs.

You could try and contact lenders that are not quite HM - but not a bank with strict lending rules. For example- I have contacted Colony American Finance (from their ads I see on my Facebook pages). Turns out - they lend either 70% ARV and you provide the repair costs or 80% of total costs ( no ARV calculated I believe). They mentioned to me they charge 2 points, and 9.95% interest - but prefer longer term financing. Maybe they can work something out with you. The other ad I see these days is Flip For Funding. Don't know much about them, other than their marketing of unsecured financing and I have left a message with them twice to call me ( they keep sending me e-mails instead - which makes me a bit suspicious of their operation). Either way- it's worth a few phone calls. I would use hard money as an extreme last resort - due to their 4-5 points and 15%+ interest.

Luis:

Last year, I went to a 3 hour real estate continuing education class run by Aquaguard (I have a real estate license). They specialize in this type of problem. In fact- they provided us with a book they print that explains all the ways to secure a wall that is caving in - and the methods to repair. This problem is one of those things that look much worse than the cost to fix it. They ran the class to explain to agents that this problem is not a deal killer. I was speaking to them after the class about investment possibilities with this type of problem-they completely agree. Most people run from this problem. They said smart investors run toward this problem! The only downside - it must be disclosed to the next buyer what was done - and the warranty is transferable to them. I'm not sure if companies such as Ramjack does this as well- but it's worth a call to contact them both for quotes. Please let us know what you found out, costs, etc. I'm sure it can help all of us out in the future.

It would make sense to have an attorney in the state you're investing in. If he is licensed in these states- I assume it's fine. If he is not licensed in those states - what service can he provide you? He can't close any deals ( in Georgia- we use real estate attorneys to close deals - in Florida they use title companies). If you have a legal issue or sued - how can he help you regarding each state's law? If you need help with an eviction - what can he do if he lives in Virginia? In Florida- it is a judicial state- and must bring a lawsuit to evict (not in Georgia). Not sure the benefit - except you are familiar with him in your state.

My opinion - it depends on what you're trying to protect. I own the Lou Brown materials - mainly for the contracts. I have studied the land trust issue he passionately teaches investors. I tried to use it- but was convinced against going that route by two different real estate attorneys. They both said basically the same thing. If your goal is asset protection so nobody can try and sue you for your assets - 1. incorporate as a LLC (which works better than a Chapter S corp in real estate - and maintain separate bank accounts for it and pay the annual registration to keep it active, and do annual minutes to show it transacts business each year. 2. Maintain a high insurance amount on the property. This way- the asset is not in your name- so you cannot be sued personally, and if you can prove the entity is "alive", the insurance policy will protect you anyway up to the limit of the policy amount. I keep $1MM on each lease option home I have, and a separate $2MM umbrella policy on me personally ( I also have two young car drivers with cars I own- as well as my own house-so I have to be careful with that too). Anyway - had one situation 10 years ago- was sued by tenants - wife fell down stairs holding 6 month old baby- three days after moving in. Claimed it was my fault. Was met by Sheriff at my house- twice. Once- was sued personally, and company was sued later same day. Turns out- insurance hired the attorney. He learned the rental house was not in my name- other side dropped the personal suit immediately. Insurance offered them a low ball amount that they accepted immediately. Reason- it was cheaper to settle than prove we are right in court - would cost twice as much! So- no reason for a land trust when I was sued. Fortunately, no other lawsuits in 10 additional years. If your reason is onbly to hide ownership for some other reason, land trust would work - just not sure what it provides - not legal protection with the above in place.

You can always buy title insurance - so you do not have to defend the title forever. When selling - it depends on how you took title originally. For example- I take title in one of my LLC's when I buy. Therefore- I cannot sell with a general warranty deed - since it calls for my company to defend it's title to the new buyer - indefinitely. I do sell with a Limited Warranty Deed - because my company can only defend the title as long as my company has existed. Only had one attorney refuse to sell that way- but I got the impression that since he already printed the paperwork- and didn't want to re-do his efforts - so used a general warranty deed - and told the buyers that my company can only defend up to its inception - and they understood - it didn't really matter to them. Hope this isn't too confusing!

Sorry so long! Here in Georgia - it's relatively easy - but a lot of research is needed. First, the GSCCCA web site is a real time saver. I have subscribed for over 10 years now. But- they changed the game a bit and you need the book and page number when researching the recorded deed on each home. Used to be able to search by name - and read all liens associated with that person. Can still do it- but they charge double per month for this service ( 11.95/month or $23/month to search by name). You can go to any courthouse and obtain this information free. Just need the time to get there and spend hours researching! As for the liens - when you receive your Foreclosure Deed and file it at the courthouse ( do not mail it - trust me) - it wipes out all junior liens except: IRS, State of Georgia taxes and F.I.F.A liens. If the house is in a POA neighborhood ( not a HOA run subdivision) - their liens remain as well. The good news: IRS and Georgia back taxes are considered removed 90 days after the sale. I had this happen before on a property. Never received anything confirming removal - but I sold the home to the lease option tenant - and no issues with his title insurance at all - just a smooth closing three years after I purchased the home with GA and IRS liens on it. Unfortunately, there is no short cut if you are to research title - and real comps on each house. I assume there are other investors that just buy a home not knowing about title issues and liens - as they say- buyer beware! Oh...one more thing as an insider "been there, done that" kind of issue to watch for: ALWAYS check the title of the home you purchase months AFTER your purchase. Sometimes ( ask me how I know) a state tax sale can occur at the same time - and this investor can actually foreclose on your home after 18 month or so - and take your house, with his lien accruing 18% interest - when you think you own your house without liens! Had this happen. Received a letter detailing the foreclosure and date of upcoming sale without a "final payment" which I never heard of - turns out $3800 payable this week. Yes- they waited until one week before the foreclosure date to alert me. I didn't know 12 years ago that a state tax sale can run concurrent with a foreclosure sale. Doesn't happen often. But...it's a numbers game. Eventually something can try and bite you if not careful! Good luck.

In Georgia - the state has always "invoiced" me annually for my LLC's. I used to receive postcards reminding me to renew, but for the last few years, I receive an e-mail with the "control number" for the LLC. I renew online with a credit card. Renewing is inexpensive. Last year, each LLC had to pay $50. The due date is April 1st - so I pay in February just to be safe.

Please be careful with your situation. When you buy at the foreclosure auction and the now previous owners still occupy the home- things can get ugly. For example - they can claim you sold them the home - (of course not- no paperwork to explain it- just free time in the house until a court date is set and you hire an attorney and a judge throws them out). I always do an eviction - even if the home is empty - this way, they can never come back to me for anything - claiming I stole, etc. There have been cases where the previous owners actually left belongings behind and the new owner was sued for $15K - the maximum in small claims court ( here in my state of Georgia). They claimed they had a diamond ring in a sock somewhere and it was now missing. Since the investor didn't file for eviction, the items "belonged" to the previous owners -and  the judge somehow believed the poor old previous owner vs. the big bad landlord. I heard this from one of the criers on the courthouse steps that knows me - he has told me stories over the years - that are hard to believe. He's been around the block a while and has seen a lot of strange things from other investors. At a minimum - the "new tenants" should sign a lease with you explaining everything (the new relationship) so there is no "misunderstanding".