All Forum Posts by: Curt Smith

Never lease back on a long term lease a house back to the seller.  Many reasons why not.  Especially if this is forclosure!!

Always hold some reserve in escrow to b paid once they vacate and leave broom clean.  Always even for 30-60 day lease.

Best to all, curt

Read / study the padsplit.com site and info.  Google padsplit .   They are branching out to new cities probably not yours.  BUT you can learn from their systematization.

Natalie gave a nutshell.  And hinted at the zoning, code enforcement, neighbor problems.  Here in Atlanta where padsplit was founded I have friends with 30 doors on padsplit.  Like Airbnb it takes alot of work to systematize all the issues.  A new person can't have a day job and run a few of these, at first.   Its very hands on.   Without the padsplit back end AND tenant screening system, a newbie running a rooming house naked (no franchised system like padsplit) will make every mistakee in the book AND get code enforcement actions and turn out to a miserable headache (at least this is a possibility LOL).

Join the local REIAs where old timer experts hang. I'm seroius, join the local REIAs you find in meetup.org. This is my very best tip for any REI issue, find locals!

#2 tip is NEVER ever buy a property that can't at least break even with a long term renter.   IE never do like so many vacatoin area Airbnb buyers did/do and buy full retail with a monstrous mortgage that only makes money if everything is perfect in a full Airbnb bookings.  What about down turn, vacancy?   Well a rooming house properly run will never have vacancy but its running one such that you don't get shut down by code enforcement, then you owe the morgage and no income.

The zoning that is common is;  3 unrelated adults.  Which means no mater how many rooms y9ou have, the county will only let you stay in business (once yoiu get complaints and code enforcements) in business with just 3 rooms rented...   

Much for you to learn and find local help.  Best to all, curt

BTW to the county that is a sale and is fraud to not pay the xfer taxes due.  in some states like CA/FL that tax is significant.

If both LLC are pass through (not s-corp/c-corp) then its not an IRS sale since both funnel down to your personal 1040. BUT if one is an S-corp you do have IRS tax implicatioons.

IFF both LLCs are pass through, then answers to your qs are; nonthing happens since both LLCs pass through to your 1040's sched E as if nothing happened.  JMO,  best to NOT ask the "internet" re these important tax implications.  Ask your CPA/real estate tax expert.  

Just fyi, curt

I agree with Caleb EXCEPT I'm risk adversed and will only do deals that have the odds highly stacked in my favor. I'd only do 10 yr balloons. You have to know how banks/appraisers work re a REFI. If a commercial loan, they go of the T12, trailing 12 mo rent, which means you need to have your expenses dropped and rent increased by no later then yr 3 to 3.5 yr to execute a REFI by yr 4 to 4.5. Y9ou can't risk running out the clock all the way to month 11 in yr 5 of a 5 yr balloon. Even if you currently think the property needs little capex, after owning, attempting to rent raise, you will see your much nicer compitiion and figure you need to do a bunch of upgrades. This takes time and cash cash and only then the rent raises after the curent tenants move out or you push them out, then vacancy and no income while you bleed cash doing remodels.

Not raining on this deal.  Just shinning a flashlight on problem areas and realistic logistics of raising rents and only then getting a bank to give you a higher appraisal.  IE the "income method" for value goes off trailing performance, typically last full 12 mo.  So the deal has to be kicking on all 8 cyclinders 12-24 mo prior.

Negotiate a 10 yr balloon!  is my suggestion.   And/or get a price reduction.    This is the knife hiding in seller financed deals, agreeing to paying toooo much on the basis of not having to qualify for bank financing, then being in a trap.  Few can do the math to find the trap in the deal.  Best of luck.

For others who read this thread.   Pay for good lease option education that comes with good contracts.  Find these folks on youtube via searching "lease option" "subject to" "wholesale lease option" etc.    I like Joe McCall,   John Jackson (esp if you do deals in TX but good everywhere) and otehrs.

My Option contract says;   the lease but not be in default.  If the lease is in default the option to buy is void.

Thus, for me, a tenant who is behind on the rent has no option to buy.   State real estate contracts protect the broker NOT the investor/owner/seller!!   I'm sorry to see this.   Your option to buy contract MUST say its void if there are arears in the lease.

have the cash for keys discussion.   Tell him that it would be very bad for him finding future housing if you filed eviction, just filing will nearly permanently prevent him finding good housing.

BTW the poster did not give numbers re his arears.   IMHO if >2 mo behind, he's in default on (my) option to buy contract.  

Best of luck, curt

You say wrap loan, to me that means; you sold on a warrantee deed to the buyer, seller / lender (you) got a note and mortgage. The note has terms to meet else in default and the cure is foreclosure process. Most real estate attorneys also do foreclosure. But if you sold on a contract for deed (CFD), then the "contract" states when default occures. Most CFD also state you must send "notice of default; 1 mo to cure" blabla. But CFDs are non-stanard and often are custom written docs by someone often the seller so the terms are unique to your docs.

Hopefully your scenario has a default clause AND a cure clause.   Follow them.   If its a poorly written doc,  ad lib;   send all forms of communication;  notice of default, 1 mo to cure;  pay all arears by 30 days else eviction or foreclosure starts.   Email, sms, mail AND registered mail, all.

BUT in parallel as above, cash for keys should be offered many times.  It takes 4 times to get the point across.   Also talk about how impossible it will be for this person to rent a place if you file eviction.  Just filing eviction is in public records.   You (the owner/landlord/seller) do not even have to get to court or even win to screw the tenants abitliy to get a rental to move out, just filing is a death sentance today.   Today after the CDC moratorium no landlord will take any tenant with any eviction in their record, none!   Tell your tenant and work with them.  Say you do not want to file eviction because it will make it very difficult for him to find another place.  AND thus make it more difficult for you to get rid of him.  So actually filing eviction needs to be the last resort. 

Best of luck.  BTW to get better help, you need to give more contract details!!  Even cut and paste of clauses.

The above are all good, focusing on legal, zoning all a huge variable per the locale/city/county.

The practical is re NEW separate power meter, NEW separate water meter, hopefully NO gas to duplicate.  All of which are impossible without a valid building permit in hand that the utilities go by to install new meters at YOUR expense, plus the cost of the plumber and electrician and new breaker panel. 

Cutting an SFR in half only works for STR/airbnb where you pay the utilities for all units. Some cities are enacting Airbnb/STR/<30day rental restrictions, licensure etc.

Keep thinking of how to forced value increases like this.  Lots of $$$ is made from takeing lower valued property and forcing value increases via changes, adding baths, adding bedrooms etc.   Best of luck, curt

Hi Folks, I focus on just doig subject to.  I've created a free training PDF showing the process and examples of all docs YOU BRING to closing, the attorney orchestrates getting signed and notarizing.  The attorney in my process just creates the warrantee deed and attaches MY affidavit of trust.   Connect, PM me I'll send it to you.   I also like interactively helping folks qualify deals and help them get them closed over email.

Call those and other attorneys and ask; will you close a deal where the mortgage is NOT paid off? In most states the line on the HUD/settlment is lines 203/503 has the balance of the mortgage, subject to the existing mortgage. They have to say yes. Most attorneys actually don't know what you are asking or will bail after thinkking about it.

The best way to find "investor friendly" attorneys is from other investors in that area. The best REI tip I have that made a huge difference for me 10yr ago is for you to join the local REIAs, real esttate investor associations. Find them by googling; city REIA. or look in meetup.org, real estate investor associations. Join, these orgs are where old timers hang.

The attorney has to be comfortable with all the investor scenarios and for some investors, subject to, to bring most of the documents, trusts, seller affidavits etc.

Good luck, curt

Hi Bugsy,  I suggest to everyone to join the local REIAs to find locals, boots on the ground, old timers.  There's 3 REIAs in Ohio.  They are virtual; zoomed.   I'm a member of Oree from Atlanta.   Use meetup.org to search for real estate investor associations and use google.   Best of luck, curt

Hi Rick, Brandon,  I'll add that local experts and helps are in local REIAs.  I found that there are more old timers with knowledge in REIAs.  Find REIAs in meetup.org.  Join them all, figure which serves your needs.  I did some years ago.  Just FYI I ended up just staying in GaREIA.  They have a google group (email list for help) and specialty sub groups.    

When I was searching for an architect I ran across Atl architects who specialized in ADUs. See this one at least: atladuco.com , Atlanta ADU...

Best of luck Brandon and all.