All Forum Posts by: Account Closed

Quote from @Jonathan R McLaughlin:

@Tyson Gustus so wait, did the broker push you to sign at the original rate or the one you revised to?

The latter. The terms of the offer presented to me only mentioned the 2nd. So I only negotiated the terms of the 2nd. Once I negotiated the terms of the 2nd, he said it would be "important" to put it in writing.  So he drew up a counter offer and had me sign it.  At that point it didn't really occur to me that the negotiation was over and nothing else was negotiable.  To be fair, he did say he was going to go back to the buyer and "try to put this deal together" and I didn't stop him and ask more questions. Then I was told the buyer was accepting and the broker was opening escrow.

Quote from @Wayne Brooks:

@Account Closed  Yeah, a couple of important things you didn’t consider…

1) the amount of the 1st mtg, and his resulting down payment, is crucial

2) the deal needed to be contingent on you approving the credit/resources of the buyer…without this you have no control on who your ultimate borrower is.

Having said that, your best scenario is if they don’t place the EM in escrow by the deadline.  If they are 1 minute late, Immediately send a notice of cancellation, assuming your contract allows this immediate cancellation, or a notice to cure within a certain amount of time, whatever your contract allows.

There appears to be an item in the escrow timeline titled 17 Days: Buyer Assignment Request, if any ... 10/17/2022 ... Seller Written Consent required for, Assignee Name, prequal/cash verification, & Monetary Consideration, if any. Assignee to sign/initial All Prior Docs received by Buyer.

Presumably I will have to read what I signed in detail to find what my rights really are and what factors I'm allowed to consider with respect to approving an assignment...  or maybe I'll just ask escrow.

After listing my property (a 4-plex in San Diego) too high in a declining market, receiving no offers after a month even after a 9% price cut, I asked my broker: at what price could he guarantee an offer within a week or two. He brought in a local investor (dual agency) and he gave me an offer that looked ok at first -- close enough on price, with no contingencies. This was very attractive to me because it's a very old property (1914), in good shape but with deferred maintenance, a past electrical fire, and some other issues that are relatively minor.

I had stated I could offer an owner carry. I clarified (to my broker) that I meant a wrap loan. The offer I got was not a wrap but an owner carry in 2nd position. To put some numbers on this for clarity, the property was listed for $1.75M in late August, lowered to $1.645M after 2 weeks, with no offers after 4 weeks, and the offer is at $1.45M. The 2nd position owner carry is $450k. In part, this was attractive to me because of tax efficiency and diversification (roughly half my equity would be split into DSTs and this mortgage paper). My existing loan is roughly $465k. I made the mistake of focusing on the terms of the carry -- rates and duration -- rather than thinking through the risk of being in 2nd position in a declining market. Buyer had offered a 5 year carry at 3%, after I balked he made a minor adjustment to annually adjusted rates peaking at 5%, and then I countered with a 3 year term at annually adjusted rates of 3%, 6%, 9%. The broker said it would be "important" for me to formally counter and put the revised terms in writing. Then I was informed the buyer was accepting... and noticed the purchase is assignable. I had some denial going on and I didn't stop things from proceeding. Now we've just opened escrow and I'm having seller's remorse. The buyer's EMD ($35k) is due by Monday and I don't know yet if it has been received by escrow.

Today I asked the broker to lower the price on the listing to $1.5M and accept backup offers in case the escrow fails. There was robust interest and a lot of people attended the showings at the higher prices. So I have some confidence that I could get another offer at the lower price... but I don't really want to risk going through a tough escrow with a novice buyer trying to shave me down with contingencies and unreasonable demands related to inspections... especially in a softening buyer's market. (But I also don't want to take a bath on my return.) Assuming I am ultimately made whole, the inflation-adjusted sales price ends up being around $1.3M. If I'm not made whole it's closer to $1M.

I have no info yet on the terms of the buyer's 1st. If his 1st LTV is 80% I could be underwater on day 1. If it's 60% that's obviously better. If the buyer plans to fix it up, that would help too but obviously can't be guaranteed. I'll proceed to interrogate my broker.

Other than that, what would you do? I'm considering canceling the escrow. What leverage do I have on the broker? (He gets 4.5% instead of 2% with this deal.)

What terms might you offer to sweeten the pot for another buyer without putting me in such a compromised situation? I do plan to do a 1031 exchange.

Thanks for listening.

Full disclosure, this was also posted in Tax Liens, Notes, Paper, and Cash Flow Discussions -- Please LMK if that's not ok.

After listing my property (a 4-plex in San Diego) too high in a declining market, receiving no offers after a month even after a 9% price cut, I asked my broker: at what price could he guarantee an offer within a week or two.  He brought in a local investor (dual agency) and he gave me an offer that looked ok at first -- close enough on price, with no contingencies. This was very attractive to me because it's a very old property (1914), in good shape but with deferred maintenance, a past electrical fire, and some other issues that are relatively minor.

I had stated I could offer an owner carry. I clarified (to my broker) that I meant a wrap loan. The offer I got was not a wrap but an owner carry in 2nd position. To put some numbers on this for clarity, the property was listed for $1.75M in late August, lowered to $1.645M after 2 weeks, with no offers after 4 weeks, and the offer is at $1.45M. The 2nd position owner carry is $450k. In part, this was attractive to me because of tax efficiency and diversification (roughly half my equity would be split into DSTs and this mortgage paper). My existing loan is roughly $465k. I made the mistake of focusing on the terms of the carry -- rates and duration -- rather than thinking through the risk of being in 2nd position in a declining market. Buyer had offered a 5 year carry at 3%, after I balked he made a minor adjustment to annually adjusted rates peaking at 5%, and then I countered with a 3 year term at annually adjusted rates of 3%, 6%, 9%. The broker said it would be "important" for me to formally counter and put the revised terms in writing. Then I was informed the buyer was accepting... and noticed the purchase is assignable. I had some denial going on and I didn't stop things from proceeding. Now we've just opened escrow and I'm having seller's remorse. The buyer's EMD ($35k) is due by Monday and I don't know yet if it has been received by escrow.

Today I asked the broker to lower the price on the listing to $1.5M and accept backup offers in case the escrow fails.  There was robust interest and a lot of people attended the showings at the higher prices.  So I have some confidence that I could get another offer at the lower price...  but I don't really want to risk going through a tough escrow with a novice buyer trying to shave me down with contingencies and unreasonable demands related to inspections... especially in a softening buyer's market.  (But I also don't want to take a bath on my return.)  Assuming I am ultimately made whole, the inflation-adjusted sales price ends up being around $1.3M.  If I'm not made whole it's closer to $1M.

I have no info yet on the terms of the buyer's 1st. If his 1st LTV is 80% I could be underwater on day 1. If it's 60% that's obviously better. If the buyer plans to fix it up, that would help too but obviously can't be guaranteed. I'll proceed to interrogate my broker.

Other than that, what would you do?  I'm considering canceling the escrow.  What leverage do I have on the broker?  (He gets 4.5% instead of 2% with this deal.)

What terms might you offer to sweeten the pot for another buyer without putting me in such a compromised situation?  I do plan to do a 1031 exchange.

Thanks for listening.

Quote from @Cassandra Jade:

Quote from @Scott K.:

Few things going on here because you're forcing us to read between the lines... which makes me think you know why they did it.

Your rating went up by half a star? That means you were rated VERY poorly. You mention you had to rehab the place so it was nice? It must have been a dump.

So basically you listed a really bad property, and not only that, but listed it inaccurately, causing people to get upset and rate you poorly once they booked. Your rating must have been so low (probably below 4.0) that you were able to raise it more than half a star with just a few reviews.

Airbnb removes listings under 4.5 consistently. Frankly, you should never have a listing under 4.8. It's not hard if you're a good host and accurately display photos and amenities. The average rating on airbnb I believe is a 4.7 so you were well under the average.

 We have no clue why they were taken off? If it were a year ago, yea maybe. But two of these properties just had total remodels at the beginning of the summer. One went from a 4.09 in January to a 4.67 in August, another went from 3.13 to 3.5, and the third went from 3.09 to 4.5.  The second and third rentals were the two that just got total remodels including pool resurfacing. We implemented a new whole new maintenance staff from the manager down, and have been taking multiple steps to get our properties up to the levels we would want to stay at.  None of our properties are "dumps" as all are beach homes with pools.  We take in high volumes of reservations and our properties undergo excessive wear and tear due to holding 15-25 people at a time and having revolving stays. There were over 150-200 reviews on each property at the time of delisting. I would really like to know how many properties you have, the locations. and how many guests you're running through to have the high and mighty opinion that you do. 

Some of this math is very dubious...  If you were at 3 stars, with 100 reviews, it would take another 100 reviews, all 5 stars, to get to a 4.0 rating.  Same story if it's 75 reviews at 3 stars.  You'd need another 75 reviews just to get to 4.0

If you had 50 reviews and a 3 star rating, you'd need 150 reviews, all at 5 stars, to get to 4.5

Honestly this smells like you were an extremely irresponsible host -- it takes a lot to get a 3 star rating. Even 4 stars is really bad.  So whatever you did, don't do it again.  Honestly I've stayed with hosts like you before -- people who manage dozens of listings with multiple other bad-to-terrible listings (that I found out about later).  It was a shamefully bad experience.

Shared spaces like this have to be heavily discounted below private spaces, so you will have prices on the low end of the local market.  Low prices attract problematic guests.  Problematic guests in shared spaces...  can cause you a lot of anguish, stress, and other issues.  You cannot rely on Airbnb to protect you.  You need to be in a fairly desperate situation to justify this strategy.

If you do this... consider this powerful tax strategy. (Start at 27:30)

Airbnb tax hack

HUD does a great job of identifying the worst neighborhoods on their "Opportunity Zone" map... This is a good rule of thumb -- avoid these areas.

I do own property in Jax, btw. So I've seen some of these places first hand. Can't confirm them all, but the ones I have seen deserve to be on this map.

https://opportunityzones.hud.g...

What strategies work best to minimize taxes when selling while also creating access to the equity?  I considered doing a wrap loan but splitting up the capital gains into multiple years has relatively little tax benefit and adds substantial risk.  (Though the arbitrage is very attractive)

I'm now considering a 1031 exchange, but then (correct me if I'm wrong) I'd have to get a new loan to cover the loan I'm leaving behind... (since the purchase price of the new property would need to be larger than the sales price of the relinquished property) and I still don't get access to the equity unless I do a cash-out refi later.

Does it make sense to buy a DST for now? What about a "zero"? Something else?

Planning to sell a 4plex in San Diego and 1031 into something worth around $1-1.5M.  After adequate seasoning, I want to cash out refi the new property to access the equity.  I'm flexible on what to buy with the 1031 exchange if it facilitates getting 70+% of the money out later. I've read a little about "zeroes" but it sounds like zero cashflow isn't necessary per se. Recommendations? Best practices?