All Forum Posts by: Tim Carter

Sarah Albert so sorry this happened to you. I came here today for a similar reason, wondering what to do. I don't know how many properties you have, but I've only got the one and this is our first long-term tenant (previously furnished MTR). In my case it's closer to the end of the 1yr lease term which runs until April. My tenant was great up until she dumps a load of imaginary problems on us right before the holidays and says she's moving out. She claimed "air quality" and "water quality" problems among her chief concerns. I can only speculate but I suspect she either met someone she's moving in with, or decided she wants to move to a cheaper place, nicer place, or is buying a home. Speculation aside, I don't think there is any way for us to "say no" to them breaking the lease. From what I'm reading here, and we immediately sought legal counsel on this, they're totally free to move out anytime they want. It just doesn't absolve them from the legal document they signed. The way my lease reads the tenant remains responsible to pay rent and utilities to "prevent waste of the premesis." You may not have this problem in NM, but here where those letters are reversed we have bitter cold winter to consider. The crux of the whole thing seems to be finding a replacement tenant. Until then, it seems current tenant is on the hook and my income stream is protected by law. Hopefully that is the same with your lease in your state. Personally, I would keep the deposit out of the conversation. The deposit is for damage. Hope something I said helps you.

Maybe someone can comment: I felt like we had a good rapport going prior. I wish we could keep the dialog open and we could resolve this amicably, but I feel like the way she approached this has shut down that option. She waited until I was out of state at my stepmom's funeral to pull this stunt. Calls my wife, who is not her POC. First time I was gone OOS during lease term. Inventing problems. I'm a nice guy and I'd love to help her, but now I feel like I'm down to documented, official communications only. Follow the lease, letters from lawyers, see her in court? Not what I wanted. What would you do? Advice?

Thanks so much for posting this Kathleen Osborne. This was exactly the kind of info I was looking for. My wife and I recently moved out of a small 2/1 bungalow in W Duluth, MN and into the country about a half hour outside of town. We opted to hang onto our old house as our first rental. Originally we were thinking LTR by default, but my wife, a RE agent, told me to check out FF and consider MTR. We already own a trailer full of furniture that goes mostly unused, that we bought for staging flips and occasional listings, so it seems to make sense. Duluth has limits on STRs, a nursing shortage, and an extreme housing shortage overall. There also happens to have a nursing strike going on at the moment. I was planning to rent it for $1,600-1700 LTR, but it's looking like I can get $2,500-3,000 as a MTR.

So I'm under contract to buy a property from HUD. I did my due diligence, paying special attention to Property Taxes and Assessments because I've had bad experiences with those in the past. I have printed reports in-hand from the county website showing big zeros for special assessments. Despite my best efforts, I get a call today, 2 business days from closing, from my agent saying there are some special assessments for street repairs that were found that I would be responsible for at closing. I pushed back pretty hard saying I am ready to walk on the whole deal if HUD doesn't cover those. My agent got an email back from the listing agent basically threatening me with the loss of my earnest money if I don't cave in and pay the assessments like a good little boy. What should I do?

P.S. I also posted this in the Tax category since I wasn't sure where the best place to post this question was. Sorry about that.

So I'm under contract to buy a property from HUD. I did my due diligence, paying special attention to Property Taxes and Assessments because I've had bad experiences with those in the past. I have printed reports in-hand from the county website showing big zeros for special assessments. Despite my best efforts, I get a call today, 2 business days from closing, from my agent saying there are some special assessments for street repairs that were found that I would be responsible for at closing. I pushed back pretty hard saying I am ready to walk on the whole deal if HUD doesn't cover those. My agent got an email back from the listing agent basically threatening me with the loss of my earnest money if I don't cave in and pay the assessments like a good little boy. What should I do?

Sounds like you got your head screwed on straight. I bet you'll do better than break even. Good luck to you sir!

Sorry to play the Devil's Advocate here a little bit. Everything sounds great on paper but it all hinges on you making money on your deals. Make no mistake, if your parents default on the HELOC they will lose their home. As @Jason Moore alluded to, things can get ugly fast in these types of situations. As he said, I think you need to be careful how you structure this to make sure they are protected as much as possible. If you do that, I think you should be fine. You are fortunate to be in the situation where your parents have so much equity available and you are smart for leveraging that position. Kudos for that!

The way I see it some changes you could make to the agreement would be:

Don't set the rate at 5%, but rather the adjustable HELOC rate +2% for example. You could be generous and give them 5% during their introductory rate period as a little bonus for setting this up for you. I recently applied for a intro rate of 1.2% but it only lasts 6-months. After that it would go back to (prime+x)%. I say this because 5% could very well have them losing money on every dollar they loan you a year or two down the road.

Sorry, I missed the part where you said you would be paying the interest on every statement they ever get. In that case your terms are more than generous. They really do make the full 5% even if you don't use the money for a full year, yet, you still have the incentive to repay the loan early.

Also, what "maintenance costs" you will be covering need to be carefully defined.

What happens if the loan extends past 1-year? Is the 5% still due? That could be hard to pay in the middle of a project that goes longer than expected. You do realize that 5% of $200,000 is $10,000 right?

My advice? Make money on your first deal and get it done quick! (easier said than done) That way you can have more cash going in to the next deal and/or get better terms on your next loan. This loan sounds expensive! Basically, if I read this right, you add +5% on top of any money you take. If you get the first deal done in the HELOC intro period, you will be much better off. Future deals you would be paying upwards of 9-10% or more on your money.

I have analyzed your graphs pretty thoroughly. From an outside perspective, I interpret this situation a little differently. I honestly don't see the problem. Both buildings have the same minimum and maximum usages. One building appears to run a slightly higher average than the other during mid-week. I attribute the spikes to laundry days. You answered your own question about the gas usage being for the hot water. 

People are different. Some take more showers and wash more clothes. Are there more women in one building than the other? ;-)

So far I have financed all my flips with my HELOC and credit/merchant cards. The keyword there is "my." To answer your second question first, yes, it would be as simple as your parents going to a bank and applying for the loan. They still need to run a credit check and income verification, however. Assuming they are approved for the loan, they can write checks from the account for whatever they so choose. The way my HELOC works, and I assume they are all the same, I don't pay interest or fees unless I carry a balance. I paid no closing costs to initially set up the loan, or to have my house appraised either. I pay no fees to write checks or use the money aside from the variable interest rate. I am only required to pay the interest every month, which I frequently pay from the same account.

As for your first question. I have no idea how your company would gain access.

$8500 sounds like a lot to pay for a fridge and a freezer. It sounds like a loser "investment" to me if you are assuming a mortage with $39k negative equity. And that's after repairs? Even if you could negotiate a lower short sale price and keep it rented for over $675/mo it seems to me you would be better off putting your credit to better use elsewhere. That's not to mention it sounds like you will need to put a new fridge in the place if you give the old one to your friends.

Just wanted to add a quick reply to this thread. I spoke with a different agent (from another agency) and he looked into it for me. It was indeed a Fannie Mae First Look property, as Tom McLamore above suspected, only the information the first agent was feeding me was already 2 months old. The restriction had been lifted many weeks before I made my inquiry! I waited for the next scheduled price reduction from the bank, put in my offer the same day, they countered, and I accepted. Closed August 6th. I do most of the repairs myself so I'm still working on it.