All Forum Posts by: Ari Bachrach

This is probably a Maryland specific question as I don't of any other states that do ground rent the way MD does.

My understanding is that is you buy a property in MD subject to ground rent then you can depreciate the entire purchase price and don't have to segregate out the cost of the land because you didn't actually buy the land. (If I'm wrong, please let me know).

What happens when you redeem ground rent after the purchase? Can you continue to depreciate the entire purchase price since the land was purchased separately, or does the conversion to fee simple then put the "normal" rules of separating out the land from the improvements into play?

I'm the standard BRRR investor doing a refi right now and going through the pain-in-the-neck process of doing a bank refi. I was thinking though - I know many people buy and sell notes. What if I basically gave myself a mortgage and then sold the note on one of the note marketplaces like notesdirect. Could that work?

Since the properties are owned in an llc, I would give the llc a mortgage from my personal funds with the name of the llc being the borrower. I then sell the note, and get my personal funds back. Other than the fact that I would feel ethically bound to disclose this to the potential buyer in the listing, are there any legal pitfalls to look out for?

Can I ask if you ever followed through on this? I've been looking for a lender who mentioned this and I'd never heard of it before. If you did get a bank guarantee or surety bond, how did it go? How much did it cost, and how was the process compared to a standard mortgage?

In theory any portfolio lender should be able to do it if they want. Warrantability is set by Fannie/Freddie, so any lender that's keeping the loan on their own books anyway will care a lot less about it. However, as Russel said, the reason it's non-warrantable is important as that may matter even to a portfolio lender. 

All that being said, try Revere bank. They've done non-warrantable condos for me.

@Melanie McDaniel Do you need someone with a net worth of 40 mil or someone with 40 mil of capital to invest? Those are two very different problems.

40 mil is pretty high. At that point you're probably better off talking to private equity firms who will raise the money from a large network of people than finding one person who is willing to lend you 40 mil on a first time investment.

I can't find a more appropriate place to ask for this, so I'm trying here. I don't have a specific question, but I'd love to have a hard money lender or some other sort of lender on the show. I'd love to hear more about their business model, what they look for, what mistakes people make when coming to them, etc.

Here are four website where you can buy either performing and/or non performing notes:

https://notesdirect.com/

https://www.pprnoteco.com

http://www.loanmls.com/

http://www.fciexchange.com/

I used that county designator a lot. Besides just being able to tell at a glance where something was, I do a lot of work writing computer programs to do various analyses and computations for me, and the county desginator made it a lot easier to know which property tax rate to apply, or where to look up the property in SDAT, etc. I'm sorry to see it go.

This is more of just a pet peeve than anything else. I've seen a handful of bank or HUD owned properties where they had winterized by turning off the water and the electricity. The water I completely understand, the power less so. Know what needs power to work? The sump pump. On two occasions that I can remember I've gone down to the basement only to find it wet (once there was about 1cm of sitting water across the whole basement) because the sump pump was turned off. All that water sitting there for months is likely to cause other problems too - rot, mold, damage to other appliances in the basement, etc. It drives me crazy because it's serious physical damage being caused by some silly bureaucratic rule somewhere that is not in the owner's best interests. Why on earth do they do that?

It seems like most people on BP don't like condos. I started with condos and own a few. Here are some good and bad things about this.

In my market real estate is expensive so it's very hard to make things cash flow. Condos haven't appreciated as much, so it was easier to make them cash flow, even with their high HOA fees. Your mileage will obviously vary, just don't forget to count the HOA fees in your calculations. For example the 1% rule becomes to 1+HOA% rule.

Vacancy is a bigger deal because you're paying HOA fees. How long will it take you to get the place ready to rent? If it will take 3 months, it will take 3 months of HOA fees too.

While they cash flowed better on paper, smaller units are the hardest things to rent out. Don't fall for cheap 1 bedroom units like I did. Unless it's near a university, no one wants to rent those.

You will have much lower capex - there's no roof, no foundation, no gutters, no hot water heater, etc. I know a lot of working professionals that only do condos for this reason - they just don't have time to deal with the increased aggravation of a house.

There is a lot less competition from fellow investors. As I mentioned initially a lot of people on BP are anti-condo, so it simply means you'll have fewer fellow investors competing with you.

HOAs can be a pain in the neck, and condo associations are more invasive. First you should obviously check that the condo rules don't prohibit rentals. They can also limit what you can do inside the unit - everything from floor coverings to type of windows may have rules.

When it comes time to refinance into a conventional mortgage, the condo association will likely be scrutinized too. Fannie Mae and Freddie mac will only take mortgages of the condo fits certain rules. These associations are warrantable. If your units are unwarrantable, it's going to make it harder (not impossible, just harder) to get a mortgage.  

The last thing is that you've simply brought an additional partner into your management. Normally there are two people involved - the landlord and the tenant. If it's a condo, the condo association is involved too. Are parking spots assigned? Does the tenant want to rent out the condos party room? Did someone else's unit spring a leak and leak into your unit? All these issues now involve three people - landlord, tenant, and association.