All Forum Posts by: Rodolfo Canon

Ashley,

I have been in the Denver real estate market for 12-years. During that time I have sold residences, did 70 fix and flips, sold raw land to housing developers, and built and sold $67 million in townhomes over the last three years. Give me a call. I'll be happy to discuss your options with you. Canon Property Group

If you want to speak to the best professional, in my opinion, in the area about using trapped equity to finance the purchase of additional rental property, I would contact Joe Massey at Castle and Cooke Mortgage in Denver.

Until you do that look at this simple example of how using that equity can help you build wealth:

Hypothetical Situation Analysis

Current home purchased 10 years ago for $500,000 with 20% down.

If you were to refinance your home at its current value with a 30-year fixed rate mortgage, two things would happen. One, you would have cash available to purchase an investment property and two, your debt would increase. When this is complete, someone else is paying for your asset. Now you are set up to watch your asset appreciate and the principal go down and it pays for your additional mortgage payment.

Next step. Refinance

Assume the following:

Total Monthly payment $3,339

Payment Increase$1,192

Cash Available to Purchase Investment Property$315,000

You still have your $250,000 in savings plus access to the “cash available” of $315,000 to use to purchase a commercial property. Now you must find the property. Where do you look? What is the asset class? How much “deferred maintenance” is acceptable? What will the renovation costs be? How much can you increase the rents? These are all questions that need to be answered and you will need some expert advice. 

We can help

Do you know what the annual operating expenses are?

A qualified opportunity fund must invest at least 90% of its assets in qualified opportunity zone property, which is defined to include (i) qualified opportunity zone stock (in a qualified opportunity zone business), (ii) qualified opportunity zone partnership interest (in a qualified opportunity zone business), or (iii) qualified opportunity zone business property (used in a trade or business of the qualified opportunity fund). 

Direct Mail Marketing is just like any other marketing initiative: there are multiple factors that impact the response rate. Most of the prior responses have listed many factors that may impact the response rate: letter, postcard, color of the piece, day mailed, frequency, hand written, or using an address label, etc. Wouldn't it be wonderful if you could put all of those factors in one test and determine which ones hurt, which ones help, and which ones don't matter? Well there is a statistical test that has been around for a long time that allows you to do just that: Design of Experiments (DE). A DOE allows you test multiple factors simultaneously. For example, if you wanted to test seven factors, you would use an eight run Plackett-Burman Screening Design. The design allows you to test the seven factors on and off (+ and -). The total number of combinations you would effectively run is 256. (2 to the 8th power). Nobi Group in Oak Ridge, Tennessee can help you.

As I understand your objectives, you want a commercial real estate asset that will produce income for you. You are thinking about scraping the lot and building either a multifamily or a commercial property. Another option would be to renovate the property and lease it to a commercial customer. 

I would first examine the last option. What is the rent today? If you change the use to commercial, what will the rent be? If you improve the property by investing, for example $20 per square foot, what would those improvements bring you in increased rents? If the rents increase significantly under that scenario, then, after some time, you might consider either one of the other options. 

With this strategy, you minimize your financial exposure while you garner much more detailed information about the neighborhoods, tenant types, uses, etc. In my office in Denver, yesterday, I had this same discussion with a small investor who is struggling with what to do to increase his income. Because we knew well the neighborhood in Denver where his property is located, we were able to give him specifics about the increased rents brought by the tenant improvements. 

Regards,

Rodolfo Canon

Given your objective of getting educated about real estate investing and your two constraints, children and a full-time job, I would not worry about getting licensed-at least initially. My focus would be on spending all of your spare time in learning about the different investment options, the real estate segments you might be interested in and understanding the trends in each. In Denver at our brokerage, free real estate investment seminars are offered everyday. 

You might begin your journey there Find the source for training. Its also a good source to get referrals on competent commercial agents. 

Regards,

Rodolfo Canon

In the Denver market, I have found many emerging areas for my investors. As a result, they have been able to purchase on the ground floor of a rising market sub-segment. Often my gut tells me "this is a good deal," even if I don't have hard data to back it up. Other times my guts reaction is confirmed by the data. In either case, however, a couple of things are certain in the Denver market: you had better become very familiar with the target area, and you had better act fast if you think it is a deal. It won't be there next week. 

Start by asking for the up-to-date rent rolls and the income statement (or use 30%) on the property. Calculate the net operating income.  Divide the net operating income by the capitalization rate you require to invest your funds. That's give you the value.

NOI = Capitalization Rate X Value, or, as the formula is more commonly known, "IRV." I = RV

I have an excellent spreadsheet that you can use that will calculate all these numbers for you. We use it every day in the Denver market to arrive at a beginning estimate of value. Send me a note if you would like to receive it from me (free of charge). Or you can go directly to the author, Joe Massey at Castle and Cooke Mortgage

I Googled "Title Insurance on Tax Deeds in South Carolina" and the first response was this text:

What is a Tax Deed?

-South Carolina Law provides a mechanism for your County Tax Collector to seize and sell real estate to collect unpaid county taxes owed by the landowner. Under this statute, seized real estate can be sold by the Delinquent Tax Collector in a public auction. The high bidder at the auction will receive a Deed from the Delinquent Tax Collector provided, however, that the taxpayer has not redeemed the property by paying the taxes (and other penalties) in full within one year of the sale. The Deed that the highest bidder receives is often referred to as a “Tax Deed”

Is a Tax Deed a Real Deed?

- A Tax Deed is certainly a “Real” Deed; however, it may not be an indication of ownership free of the claims of others. Potential valid claims of others against the real estate sold at a tax sale are often referred to as “clouds on title.

Does a Tax Deed Indicate a "Good" Title?

- The idea of “Good Title” typically refers to the ability to mortgage the property or to sell the property for full value to someone who intends to mortgage it. Whether or not property can be mortgaged (or in some cases sold) is usually determined by whether a title insurance policy can be issued on the property. Thus the terms “marketable title” and “insurable title” mean that the property can be sold and mortgaged free of “clouds” or claims because a title insurance company is willing to insure the title in the name of the new owner and/or for the benefit of a mortgage holder. A Title Insurance policy insures land

ownership against the claims of others. Typically a Tax Deed is uninsurable and therefore unmarketable for the first ten years after its issuance. Although South Carolina law provides that claims by the previous owner (the nonpaying taxpayer) are extinguished by statute two years after the tax deed is issued, State Courts welcome challenges to Tax Deeds by others during the first ten years. Because of this statute, most title insurance guidelines prevent underwriters and agents from issuing a title insurance policy during the first ten years after the Tax Deed has been issued unless the potential claims of previous owners (and others who may have had some interest in the land) are extinguished by a Court Order. A Court Order removing the clouds on title can only be obtained through a lawsuit brought to “quiet” the title. A “Suit to Quiet Title” or a “Quiet Title Action” puts the previous owner and any others who may have an interest in the land on Notice of the intention of the new owner to extinguish their claims. The lawsuit gives those people an opportunity to and be heard and raise any claims they may have. Only after a hearing before the Master in Equity can their claims be extinguished in favor of the new owner.

Should I Bring a Quiet Title Action Regarding My Tax Deed?

- This information is being provided to you because public records indicate that you have purchased property at a tax sale and have received a Tax Deed. The exact nature of your legal situation will depend on many facts not known to me at this time. You should understand that the advice and information in this communication is general and that your own situation may vary. 

In the Denver market, if there is doubt, contact your real estate attorney. It'll cost you a lot less and, more importantly, sleep will come easier...