All Forum Posts by: Adam Adams

From my CPA, JVs do not require 1099. However, you want to be able to show money leaving the company and the best way to do that is to issue 1099. Otherwise it could create a red flag for the IRS to check out your books. So we do issue 1099s when there are distributions. For expenses, we provide a balance sheet as the JV gets to realize the expenses when they provide workout funds.

At AJA, we do not put the JV on any part of the chain of title. Our view is that this is a Lead / Passive relationship and putting the passive on the deed or assignment puts that passive partner in a decision making role. While we always consult with our partners while making the big decisions on what to do with the assets, we still maintain the decision making role in the JV. As far as proof of equity, our JV agreements creates a 50/50 equity split in the asset, so the need to put the JV on the title is not needed.

You make some assumptions. I assume the title is clean. I assume the water bill is current. I assume the property is in OK condition. I place my bids based off of just two things. What do I think the rough value of the property is and are there any delinquent taxes. Then I lowball it a bit because it's a dance and I like to tango with offer, counter offer, counter the counter offer, etc.. Finally we agree on a price.

THEN I check the values of the property by doing visits. Sometimes I pay for two BPOs. Then I pay to have the taxes researched. I pay for a title search. I contact the utilities and code enforcement. Finally I have my attorney review the digital collateral and title search and give me his opinion. I pretty much put two sets of eyes on everything, not counting my own because for me getting this valuation and final price is the most important part of the deal. Then I take all the deficiencies I find and I fade my bid. 

Hey, the water bill is over $1100 in a state that I'll have to pay for it, I need to fade my bid. Hey, the roof and windows are shot and need to be replaced, I need to fade my bid. Hey, there is a civil judgement against the seller for $7,000. I need to fade my bid.

Rarely is my initial bid on an asset the same as what I pay. Most of the time I am fading it. Sometimes I overreach on my fades, but I am usually buying in small pools, so what I can't get a fade on with this asset, I can get a really good fade on the other asset. I even got a $5000 fade once because I told the seller that I MIGHT have to pay for a legal issue that MIGHT be associated with the property. I wound getting that property so cheap that the county required an affidavit from me and the seller on why it was so much lower than the appraised value before they would record the deed. 

Anyways, the indicative bid is just a bid. It's not the final sale price.

Before my  bid, I get a rough value of the asset, which I get from my realtors and online comps. And lookup taxes. After my bid, I start paying people to do things. If my bid isn't accepted, the only thing I lose is a little bit of time.

And I pay for all of my notes. After I buy them, then I look for JVs. However, I am a little different than others with that.

RUN!!!

Since Christiaan left, I've had nothing but shady dealings with everyone. I've been through 4 due diligence with 4 different reps only to find out that they were outright lying to me. I won't do business with them anymore.

I use QuickBooks. Use the desktop, which will allow you to manage multiple LLC and your personal accounts. The online version will charge per entity. The desktop version is one price for countless entities.

To help you with keeping books for notes, Debbie Mullens, can help. She has been doing books for other note investors. She has been teaching me how to use QB with notes and she can teach remotely. Send me a message and I'll shoot you her contact info. I do not think she is on BP.

I wouldn't pay that much. You are hoping that no one bids 176k+ at auction. The Payoff is the most you will get for it. You can try and get that up by prepaying all the taxes owed for the year. I paid the 2nd half taxes two months early in Cleveland to get my bid up on a property that went to sale last month. I still lost it. I'm just not willing to part with $153k for a 13% ROI.

Do you trust this realtor? If not, then maybe you want to get a second opinion on that 277k. What if the sellers BPO is accurate? 

And then is the Payoff legit? Not all fees are legal. In some states, you cannot add the attorney fees in the payoff. So if you spend another 5k for the attorney, that's a cost you might have to eat. And look at the FC Complaint. I bought one in progress before. Payoff was 180k. The problem was that the complaint was for just 106k. 60k principle had been deferred. Before we could get the complaint modified, the judge said, Let's Go. So we dropped the complaint and started over. 

Then let's say you did buy it and went all the way to sale. The borrower can throw in a flag and says, I Declare Bankruptcy. It doesn't kill this deal, but it can delay it for a very long time.

I'd pass.

@David Dachtera makes a good point. As a borrower, how do they stand up. Right now their rent is $1900 and that pays for everything. If you create a note, their monthly payment goes up. They also have to pay taxes and insurance, so it's a big chunk added on to that. Plus, they have to fix the house. If something major comes up, will they be able to handle it. HVAC goes out? Will they fix the HVAC or pay the note? 

You want to make sure they can afford the note. How bad do they want to own this home versus just living there?

Go Google a mortgage calculator to decide if you want to. 375k at 7% for 30 years is $2495/month. And you can get a down payment too. Let's do 10%, which is $37,500. That leaves $337,500 to carry. That's $2245/month and you aren't the landlord. To me, it all sounds great. I would ask for referrals for an attorney who can draft up the note. Someone with an originator's license. 

You can board it with a servicer for a small monthly fee. They can also escrow the taxes and insurance and make sure they get paid. Or just handle it yourself. Just make sure you keep your books clean on how the P&I are applied. If you ever have to get legal, that will come up.

Every state is different. Best to ask a foreclosure attorney in that state. Florida example had a Supreme Court ruling this year that set a number of year for the statute of limitations. But they also said that ever missed payment is a new clock. I don't remember the particulars, but let's try this example. And someone please correct me if I am wrong. Let's say the SOL is 6 years like in GA. They haven't paid in 8 years. Well there are two years that you are SOL on that SOL. ha.. But the other 6 are good. In fact, that payment they missed last month is good too. So you can go to foreclosure all day long if you want.

I don't think there is one in Ohio or Indiana. Usually when I get a mortgage that is that far behind, I'm getting with my attorney on such details. He has to remember. I don't. :)

Again, I can't stress enough that each state is different and you should talk to the professionals for that state.

@Tim Johnson if I donate the property, I'll be able to deduct the county appraised value. I haven't done the math, but a 50k deduction might save me 18k in taxes, which would make this deal a wash. basically it's lemons into lemonade, but without any sugar.