All Forum Posts by: Tracey Hamilton

Just entered contract on a 4-plex that will be owner-occupied and FHA-financed. We want to close the loan as quickly as possible, and get everything done as efficiently and quickly as we can. I *think* our next step will be inspections.

My understanding is that FHA doesn't require inspections, just that it pass their appraisal. My thinking is that we should have an inspector familiar with FHA standards go through it, so we can address any issues with the Seller and get them fixed before the appraisal. Am I thinking this through correctly?

Also, please remind me if I can ask for recommendations on here for local professionals, like an inspector.  I have it in my head that I shouldn't, and I don't want to violate any rules.  Along the same lines, can I share the names and reviews of the professionals I used in this deal on here, maybe on the local forum board? 

Any other suggestions to help me help my lender to close this thing fast? 

Thank you, and thank goodness for BP!  What a huge blessing!  

Hi!  We are moving up to North Idaho, and looking for a mortgage broker up there, preferably in Sandpoint area, or north of CDA.  We will be looking at various investment possibilities, first up is a 4-plex unit that's currently for sale.  We also would want someone who can work with personal mortgages, as well.  Fast response times, creative thinking, and a solution-oriented attitude is preferred!   THANKS!! 

Tracey in Idaho

Thank you for the replies!!  I think I have been so fried from all our showings on this house, and getting the new property in Idaho ready that I wasn't connecting dots I already knew, LOL.  AFter a good night's sleep I pretty much remembered that I know most of the answers to my own questions.   :-) 

So, here in Oregon, what I'm talking about is not called a wrap around.  It's called a Land Contract Sale.  And we have done them, on both sides as buyer and as seller, in the past.  They work well.  THere are options for foreclosure that need to be spelled out in the contract, and a non-judicial foreclosure is one of them.   The buyer gets equitable title, which is simply a legal concept, not any kind of paperwork, while seller retains legal title.  A memorandum of contract is recorded at the county level, but just the terms and parties, not the full contract.  This helps protect the buyer's interest, yet keeps things low-key to prevent an acceleration on the underlying debt against the property.  LOL, it's amazing what my brain re-connected after a good night's sleep, haha!  

You are right that the HELOC is the tricky spot, although since it has an upper cap on the withdrawal amount, I think that it is simply treated as if the maximum amount has been withdrawn, because it is possible that the sellers may continue to draw against it during the payoff period.

We do have an attorney, but I haven't yet been able to do the sit-down with him and go over details.  I believe he has the experience we are looking for.  I will make sure to ask if he's been involved with actual foreclosures or forced evictions.  I do think that Oregon has strict statutory foreclosure, but it includes a 180-day right of redemption if you go that route, which I would NOT like.  YOu can specify in the contract that foreclosure will be by judicial suit, and the judge can make a ruling for immediate eviction, and things can get done much faster, I think like 2-3 months time in our county.  But I need to confirm that with the attorney.  

We will still go forward with this as a Land Sale Contract, although I am getting weary with sorting through the potential buyers, LOL. I went ahead and inactivated my Oregon Real Estate Broker's license, between the move to Idaho and the fact that we are definitively selling this property outside of the MLS, there's no reason to keep hanging on the license any longer.

My latest potential buyer is a very nice young man, but I am not even certain at this point if he is in this country legally, he has a good down payment, but it's in cash in his father's safe 4 states away, and he had never heard of earnest money, nor did he keep that kind of cash around ($1000) but could get it in a few days, LOL.  He is experienced in the most profitable industry in our area (cannabis) and works steadily with that, and I do believe he could make the payments with little to no trouble, but his lack of financial "adulting" has me worried.  Last potential buyer looked good, seemed respectable and on the ball.  Did a very cursory google and facebook check, and found he had multiple, I mean half a dozen arrests and charges in California on armed robbery, real estate fraud and conspiracy, theft, etc.  All dropped or dismissed after an expensive defense attorney got involved.  I suspect his father, who was a powerful and well respected businessman in their smallish NorCal community, helped smooth things out.  SIGH.   

I love real estate.  I love creative financing deals.  I even love second chances.  But I am getting weary, haha.  Going to get this deal done, get up to our off-grid cabin in nowhere, north idaho, and hibernate for the winter with NO real estate deals for a while, haha!   (Actually, husband already is looking for another property closer to town up there so we can flip the cabin and live closer to a day-job.  OMGOODNESS!!)  

Next phase in our plans will be buy and hold rentals.   But we will start those after we're up north, and start with them in our general area up there.  

THANKS guys, for the comments and support here!   We are slowly but steadily making the climb up to our dreams, and BP community has been a HUGE, HUGE contributor to our successes!!   

Tracey in Oregon (soon to be North Idaho!)

Getting ready to do our second "owner carry" deal where we are the sellers.  

We own the property with an existing HELOC with a balance on it against the property. No other encumbrances.

We are selling the property on an owner carry wraparound, with the details that we continue to hold title until property is paid off, and we cover property taxes and will carry landlords insurance on the property.  Buyer is coming in with a good down payment, an interest rate favorable to us, good income, and willingness to do the deal.  

We are in Oregon, and I am a licensed real estate broker with almost zero actual experience, and little contact with my office.  I only got my license to facilitate our property searches and save on sellers commissions, but this property won't be sold through the office anyways.  

If it should come to it, and the buyer fails to make payments, I am wondering what legal requirements I will have to follow to foreclose and get them physically out of the property.   I don't think that a full legal "foreclosure" would be needed, since the property is still in our name, 100%.   Typically, if a buyer fails to make 3 payments in a row, a seller can initiate foreclosure proceedings through their attorney, and the property gets sold on the courthouse steps  and seller can purchase it back for amount owed, and then title transfers back to seller.  There's also a right of redemption period on some foreclosures.   But, with title remaining in my name, even with a private contract for the wraparound sale agreement, I can't see that I would have to go through all that. 

So, any experienced "owner carry" "wraparound" "lease to buy" investors out there, who have been down this road?  

I'm going to call the lawyer in the morning, but Buyer is ready to meet and give us the down ,and we are ready to lock the deal up.  

THANKS!!!  

Tracey in Oregon

Hi everyone!  We are about to do our second OWC deal, with us as the sellers, and want to be more formal with evaluating the potential buyers this time.  

We are in Oregon, and I am a licensed real estate broker (although I don't think that impacts this).

We want to run a full credit report and score  check, and rental history, etc.  

What forms are you using for them to fill out, and to obtain legal right to check credit / background, etc ? I downloaded a SFH rental application from NOLO, but was surprised to find it pretty hokey. I also downloaded a Fannie Mae Form Uniform Residential Loan Application, and it looks pro, but I haven't read through all the fine print yet to see if permission to pull credit, etc, is included.

I found a tenant screening service here on BP, RentPrep, and I would think that it would be the same information I need, but not sure if it will work legally to use as a loan application screening instead of a rental screening.  They're closed for the holiday, so I can't ask them anything until Friday or Monday. 

Anything else I need to be thinking about? 

We did this once before on another property, but it was a lot less on the loan amount, we owed almost nothing on the back-end of the property, and we were much more certain of the buyer, and were living locally in case anything went awry.  THis time we will be out of state, and there will a large mortgage we will continue to carry, and just a lot more margin for error, so we want to be much more thorough and careful.  

THANK YOU!! 

Tracey in Oregon

@Kathy Johnson the free rent is for him baby sitting the property. Any laborer work will be paid as an employee.

We used Home Legends engineered hardwood from home Depot on our personal residence. Hardwood with a laminate core. $2 sf. Using the same product in this flip. Worked well, looks great. I'm not convinced it would be absolutely water proof like vinyl, but we ran it through entire house and caulked edges of wet rooms as added precaution.

Should we have a rental agreement in the following situation, and should we say zero rent? We just bought a house we are going to rehab and flip. It is liveable, and we have a friend who will be living in it to basically babysit it, so local criminals don't target it. He will be living there rent free, sewer, water, trash and electric week be on our name. He will also work for us as a laborer, part time to full time, on the books. We don't want to declare any rental income or file schedule E. Just run expenses through the llc for the flip, and have him caretaker the property. Should we do a rental agreement , a generic I agreement, or what?

Actually that made good sense.  Here's a couple of quick add-on questions:

When figuring expenses or improvements on the rental, where do overall expenses and asset purchases go - the things not applicable to just that one property? (Business cards, licenses, tool trailers, equipment, etc.) I'm thinking as a rental, everything applicable to just that one rental goes on the Schedule E, and everything that has to do with the Contracting / Flip Business LLC goes on it's K1 partnership, or in the accounting that underlies that. Would that be correct?

We will definitely be holding this property less than a year, hopefully only about 3 months.  It's not destined to be a rental, it was always intended to be a flip.  Having the buddy live in it fills a need for onsite security for it, and to have someone who can help with the rehab without having to be an employee.  

If I take depreciation expense against the rental income, for say 3 months, then sell, I have to recapture that, right?  Sounds like a monumental bookkeeping pain the hiney, LOL.  But then the recapture would increase my basis, which would decrease the STCG profit at that point, correct?  

And then, since I'm the contractor, bookkeeper, tax lady, and homeschool mom, I'm thinking it sounds simpler and worth the extra costs to simply let the guy stay there as a buddy, and pay him through an employee leasing service, do no rental income (or bookkeeping, or Schedule C), and just run it as a regular flip.  

On the labor / employee / contractors, we only need help from one or two guys, here and there.  The general contractors in our area won't do it unless we let them do the whole job, and then they want a fortune (TY cannabis industry for jacking contractor rates up), and my husband has a couple guys that he likes working with, that will work cheap, but they're certainly not contractors, nor could they or would they go through the process of getting that license here in Oregon.  So, labor either is 1) under the table, which I'm opposed to on fear of getting caught plus the bookkeeping sucks, 2) me do a full payroll, which is do-able, but not cheap with workmans comp insurance, and I have more than enough to do already, or 3) put them through an employee leasing, which is easy but costs 70% over base wage, so not cheap.  Or 4) come up with some creative way to get them cash that I can legally deduct from the business (or rental income, or flip profit, or somewhere!), keep them from being employees, and get the work done.  

Thank you for your thoughts and expertise on all this!  

Tracey

Am I over complicating this?  

We just picked up our first property.  We are in Oregon, and we are licensed general contractors.  Initial plan was to rehab and flip the property before the end of 2018.  

We are seeing issues of needing labor help, but not excited about getting workmans comp and running our own payroll, nor excited about paying for employee leasing service.  

Personal friend is wanting to come stay in our area and learn a little construction.  If we rent the home to him, and he lives in it (legally, has utilities in his name, etc.), as a tenant, he can do work on the home without needing to be an employee, correct?  As long as he has the homeowners permission (that's us), he can climb on the roof, remove windows, etc, right? 

Next issue would be once he is ready to move on and we're ready to now sell the house.  IF that happens after 2019 starts, I can see how I'd run the accounting pretty easily - 2018 as a personal rental and 2019 as a conversion and sale.  However, if things move faster, and he is out and we sell during 2018, do I try to separate out the income/expenses/depreciation from when it was a rental, adjust the basis, and then figure the sales profit off the adjusted basis? 

Just to throw another monkey into things, the property was purchased and is currently held in our personal names.  We had thought about having the business (the general contracting business) purchase it before we started the rehab, so as to separate out the dealer status business from us personally.  I'm thinking maybe that should happen AFTER the rental period is up.  

My brain has been swirling with all these issues and possibilities all night, haha.  As if making sure I have all the custom window sizes correct wasn't enough, ha!  

Thanks!