All Forum Posts by: T. Alan Ceshker
T. Alan Ceshker has started 4 posts and replied 87 times.
Post: Living in rental and converting to condo regime
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
Please send me a private message with your email and I can introduce you
Post: Living in rental and converting to condo regime
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
Quote from @Account Closed:
Hello, I have a property in booming east Austin.
1. I lived in it for 7 years, rented it for 3 years, now living back in it (to avoid capital gains tax if I sell). It is my primary residence but still in an LLC (owned by me solely)…. just don't want to pay to have it moved out. Please correct me if I'm wrong about assuming I'll have no captains tax on up to 250k profit/single bring that I'll be living in it as primary 2 out of 5 years.
2. I’m thinking Austin just isn’t for me anymore. The lot is large with 3 new ~million dollar homes on each side and back. Condo regimes are popular here and I’m thinking maybe converting mine to a condo regime and sell either the back lot or the front lot with house and keep the other. How would this affect my capital gains taxes I’m trying to avoid? I’d be selling only part of the property (or both if it made financial sense). Any idea how much legal fees and headache having a condo regime set up would be?
My goal is to get the most $$.
TIA
I can only speak to the legal side vs tax.
The condo regime is easy to get in place and a very popular investment strategy. Not too expensive - a few thousand. But it greatly increases the total FMV of the property.
Message me and I can refer you to a very good attorney here -- I call her the condo queen
Thanks
Alan
Post: Can a “Subject to” Transaction be done SAFELY?
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
"Can a subject to transaction be done where both parties are reasonably protected?"
My title office closes 30 to 40 of these per month in Texas. Being a state that does not allow contract for deed or lease/option deals, wraps are the best choice for us.
I personally stay involved in all my wraps post closing. If there is a problem, I fix it. And, we experience problems very seldom. We close and both parties get what they were promised and the file is stable. A benefit occurs for both sides - the promised benefit.
We have also never had someone lose the house to a foreclosure from the lender. That record spans 20 plus years and over 10,000 wrap closings.
I will say - there are many attorneys/investors who think they can use some forms and close these without all the preventative measures and correct documents/disclosures. These do get into trouble and our office does help fix these quite often.
So - my answer to the question - before fanatics altered the topic - is yes - wraps can be done safely and benefit both parties. If you are working with the right people that is. You need experienced investors, experienced title offices, experienced law offices and parties that have had full disclosure and education.
Wraps are not for everyone - but they certainly are for many. And, they provide benefit for both parties.
Hopefully this is taken for what it is worth and not contorted into a political post or otherwise.
Stay safe out there (and be nice)
Alan
Post: Series LLC vs. Trust-Owned LLC – How to Handle Deed Transfers
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
If you wanted to decrease the DOS issue, you can transfer to a revocable trust with the entity as beneficiary. This would appear to 100% comply with the Garn St. Germain Act. Technically, the fact that the borrower is not the beneficiary, it does not 100% comply. However, the beneficiary interest is not a disclosed matter re the trust.
You need to check any tax concerns with your tax professional.
Stay safe out there
Alan
Post: Can a “Subject to” Transaction be done SAFELY?
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
We can close and insure FHA wraps for you
Post: Can a “Subject to” Transaction be done SAFELY?
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
That is a fantastic question.
For more than 20 years and over 15,000 closings we had 3 wraps called due. We fixed all three easily.
Then for the past approximate 3 years and numerous hundred closings, we have seen about 10 to 12 due on sale issues. There are a few reasons for this: getting insurance in place improperly; inappropriate contact with the bank; one loan servicer that is looking for wraps; etc. So, yes - there has been an increase in the percentage of wraps called due. Still a very small percentage -- but an increase.
On each of the approximate dozen that have occurred, only 1 loan was paid off and that was voluntary since the balance was very low. We have fixed all the rest.
I agree the due on sale clause is a risk in wraps.It is just a very small risk that can be fixed if needed. And, all real estate transactions have risk. Some more than others. It is our job to manage the risk at the inception of the project.
Thanks for the info and comments.
Alan
Post: Can a “Subject to” Transaction be done SAFELY?
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
Quote from @Don Konipol:
Can a “subject to” transaction be done safely?
There’s been a LOT of “hostility” on BP toward subject to transactions. Some posters have gone so far as to call these transactions scams, questioning the legality, morality, and ethics of the buyer. While imo this is unfair, extreme and just plain incorrect; the detractors do rightly point out that (1) the seller remains liable for a mortgage note secured by a property they no longer own and (2) as long as the note remains outstanding the seller’s credit capacity will be impacted negatively, often resulting in the inability to obtain a mortgage for a home purchase. They further point out that many sellers are unaware of the consequences of selling subject to.
I think it’s important to note that subject to became popular in 1980 - 1982 when it was virtually impossible to transact real estate using conventional financing. Mortgage rates reached 18%, so transaction were all either owner finance, wrap, cash or subject to.
The possible negatives of subject to have been thoroughly discussed. The positives are from the buyers prospective
1- the ability to buy a property with little down payment
2- the ability to obtain financing at below market rate
3 -not needing to qualify for convention/institutional financing
4- not having another debt on your PFS
5 - not needing to pay points and other fees to obtain a new mortgage
The positives for the seller are
1- can possibly sell a property in which they have negative equity without bringing cash to the closing table
2 -expand the pool of potential buyers
3 -possibly obtain a higher price/ quicker sale
4 - can utilize a wrap to potentially earn the “differential” on interest rate
5 -May be able to save the Realtors commission
All this being established, here’s the BIG question: Can a subject to transaction be done where both parties are reasonably protected? Let us know what you think!
We have closed well over 10,000 wraps in our law and title office and have not had 1 go back to the bank because of a due on sale issue. I have also closed dozens myself as the buyer and seller. It is my primary method of investing.
If structured and closed correctly, they work. You do have to be ready to deal with the due on sale clause issue - but this is doable.
As a seller, you need to be ready to deal with a buyer default -- which I have had to do.
Lastly, you cannot just close these anywhere with any contracting. The key is to have the foundation of the transaction solid before embarking on this.
Stay safe out there
Alan
Post: Title: Looking for Investor-Friendly Title Companies in Travis County, TX
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
Quote from @Jake Gasperi:
I'm looking for recommendations on investor-friendly title companies in the Travis County area. If you have any suggestions or have worked with a great title company in the area, I’d love to hear your recommendations!
First - it should really be called an investor knowledgeable title team.
A title office is a group of 25 to 70 to more locations.
You do not need to be at a small office - but you do need to reference the team you are using if at a big office. Not all EOs are equal. Not all offices can close an AB/BC sub to acquisition with a seller fi disposition using a blind HUD with pass through funding and a pass through policy.
Saying I close at Independence and they are great at wraps is erroneous. You may close at that company and they may handle wraps - but it is the EO team that knows this -- not the company.
Most offices will have 1 or maybe 2 teams that do the creative investor stuff. We have 4 teams and more than 50% of our closings are investor and creative closings. We live, eat and breath this stuff.
I am not saying you have to use us -- but you do have to use a proven escrow team versus a reference to a company with 200 employees and 70 closing locations.
Interview your escrow team - ask if they close uninsured wraps into a land trust that protects homestead rights and avoids liability for the beneficiaries. Ask if they allow pass through fundings. Ask if they clear AJs from homesteads. Ask if they fight MOCs.
Also - a corporate owned title office cannot do what an attorney owned title office (a fee office) can do. The company limits what their attorneys can and cannot do. While an attorney owned title office is free to assist on the insurance closing side as well as the legal side.
Ask if the office is fully vested in the investor world or just knows some of this stuff.
Be careful out there
Alan
Post: Rent out house and bleed for a while or sell it and hemorrhage once?
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
If there is an existing lender not agreeing in writing to accept payments from the LPO buyer, then you are in violation of the statute -- and it is a very toothy statute -- vs the seller/landlord side only though
We are getting ready to get one in place because the seller is demanding it and my client is the protected buyer.
Yes -- you must vet your sub to buyers -- some should not be anywhere near a wrap transaction.
Stay safe out there
Alan
Post: Due On Sale Being Called!!
- Attorney
- 3409 Executive Center Drive Ste 110 Austin, Texas 78731
- Posts 89
- Votes 92
Quote from @Ken M.:
Quote from @T. Alan Ceshker:
Quote from @Account Closed:
I did a loan assumption that is currently a GIANT pain in the ***. I’m here to share my story for whatever that’s worth.
Over a year ago I did a wrap around mortgage on a place here in Phoenix at 3.5% over 27 years. Everything was smooth until it wasn’t. 6 months into it the tenant called and the toilet had failed in an upstairs bathroom. The house was flooded to the tune of $70,000 in repairs.
No big deal, I worked with insurance and contractors to get the repairs done. Six months later my insurance dropped me and here is where it gets sticky. I got a new insurance policy at a higher rate. I let the original borrower know they needed to update the lender on the new insurance policy.
The higher insurance premium required a higher escrow payment which the original borrower didn’t let me know. A few months go by and unbeknownst to me the escrow account had now drawn negative which triggers the lender to no longer apply what’s considered a “partial” payment to them, given that I’m now paying less that what’s due given the escrow increase required but not relayed to me even though I expected it at some point.
Last month I’m on Zillow looking at the value of my properties. One of my properties says it’s going to auction in March because it’s being foreclosed on. My heart rate goes through the roof as I have about $90k in equity in that house. I reach out to the original borrower and ask them what’s going on. They weren’t paying attention to it, and why would they, it’s not their house anymore.
They send over 3 months of notices from the bank. $10,000 has been collected by the lender and is in an “unapplied” status due to the short payments. They are foreclosing and are not open to discuss it. I call them, they won’t speak to me about the loan at all BECAUSE ITS NOT IN MY NAME.
I have to sell it, but guess who has to request the payoff amount from the lender….thats right, the ORIGINAL borrower. So I am at the mercy of that person for basically EVERYTHING.
I am still waiting on that payoff amount 9 days later and am up against a clock where they have scheduled the home for sale at auction come March.
Take it all for what it's worth, I've learned plenty of lessons and made my share of mistakes. One thing is for sure, if I ever wrap another mortgage I am getting a POA to access the docs on the original loan so that I am never again at the mercy of that borrower to relay information. If it wasn't the insurance it would have been the property taxes. FFS
THE END.
Let me know what you would have done differently?!
You are correct re the POA. Actually, to allow access it is an authorization. We use the POA to allow for signing escrow refunds and claim checks.
A couple other notes. You also need to change all contact information to you - all email, phone, address. Another thing is the insurance is sent to the bank from your insurance provider and the seller should never be needed as long as the documentation has been completed correctly.
This is why you must vet the law and title office you are closing with to make sure they know how to handle these transactions. A law degree does not mean you know anything re wraps.
If worse comes to worse, you can stop the foreclosure with legal action - it costs some but you will not lose your equity.
I would not throw the baby out with the bath water re doing wraps and I do hope all works out for you.
Reach out if you need a referral to a good AZ attorney to help
Be careful out there guys
Alan
Not to be too blunt, but you are handing bullets to a six year old with a gun. He obviously will only get himself into more trouble because he now knows 1% more than he did, but not nearly enough to keep out of trouble. And, in my opinion, more importantly, the lurkers who never comment, now believe they have the "golden key" of information.
As you already know, there is so much more to this, in order to stay out of trouble over the long term.
He believes he can find all that he needs to know on the internet. Which of course he can. You can find everything you need to know in a grocery store to make
Pumpkin spice loaf with almond praline dessert, too. But that doesn't mean you know the right ingredients or can assemble it without disaster. And it might not look very tempting when put together.
This part is for anyone reading this who never comments:
My humble advice to anyone attempting to do creative finance is:
Creative finance is for experienced investors who have access to capital if everything goes wrong.
- Learn the laws
- Don't use a contract "off the internet", laws vary by state and are also regulated on a federal level
- Learn the financing techniques correctly
- Don’t skip parts of the process
- Don’t ever do a “kitchen table” closing
- Use the proper deed
- An attorney can help you with the legal work, but the rest you are on your own
- Your guru will not bail you out
- “Investing” in someone else’s deal by providing a small 2nd loan so the “investor” can pay for “cash to the seller” and for “closing costs” so he can do the deal is a very bad plan
- Know what problems can arise
- Learn the responses and solutions to problems before they are needed
- Know everything there is to know about Title and what that means
- Know who a "protected class" individual is
- Learn the "back doors"
- Learn human nature
- Understand timelines
- Understand regulation enforcement (some of these "mistakes" have a 10 year statue of limitations ( they can charge you 10 years AFTER you do the transaction) and carry hefty fines and possible imprisonment
- The court doesn't accept "I didn't know" for an answer"
- Know that the source of the lead plays a serious role in some states and federally
- Know how much of a "profit" pushes the boundaries to invite an investigation
- You can be sued by the seller if you don’t do things correctly
- You are automatically at fault if an investigator or attorney or regulator gets involved. You have to prove you did everything right and then because of “empathy” for the poor snook who “fell into you schemes” you may lose anyway.
- This is a legally binding transaction that will be treated that way by the law. There are regulations
- I could go on, but if you learn this much, and apply it appropriately, you will cut down your sorrows and risk considerably.
And yes, there is much more. You can learn these things over time.
However, you do not need to go and study all aspects of Dodd/Frank, Safe Act, Senate Bill 43, the Property Code, the Finance Code, insurance law and all case law regarding wraps. You can rely on the experts to assist you. You can also partner with veteran investors and learn. You just need the knowledge or rely on those with the knowledge - proven knowledge.
Thus, my comment of: This is why you must vet the law and title office you are closing with to make sure they know how to handle these transactions. You must also vet the insurance agent, the RMLO, the 3rd party loan servicer - everyone.
A well thought out medium between analysis/knowledge and using experts -- in my opinion -- is the best way to advance.
Stay safe
Alan