All Forum Posts by: David M.

@Ruth S.

I found @Wendy Patton 's book, Investing in real estate with Lease Options and subject-to Deals, extremely informative.  It was highly recommended on a BP thread many years ago.

I don't do subject-to's, but just be careful.  There are plenty of pitfalls to them.  So, those risks need to be managed well, which is the main reason why I don't do them.

Good luck.

@Alan Asriants Another sort associated aspect is need to continue to educate the consumers on the broker splits.  I had that conversation with clients, some because of their cynism and some for just education.  One buyer joked that its in my interest, as their buyer's agent, to have them bid more.  Well, for $1000 I only take home additional $12.5 (half of the mostly usual 2.5% comp for my market for the sake of argument with a traditional broker).

Clients think somehow each agent is making %5-6%, in their pocket, for each transaction.  Sure, the non-traidtional brokerages have higher splits for starting agents, but its not always that way.

I've posted on some thread in bp recently... I've had clients who actually looked at the broker comp commission on the MLS sheets and that would drive/tie-breaker their decision.

So, I think it will be really interesting on how the market fragments depending on the relative size of the groups of buyers...

@Account Closed

I guess I'm still trying to wrap my head around this.  Maybe because there are still too many unknowns.

Does this proposal basically legalize wholesaling?  Would wholesaling be considered brokering of real estate and thus subject to State regulation (in whatever state we were talking about)?

Maybe wholesaling gets its own license...

As I vaguely recall, a real estate license course doesn't teach much about doing or structuring a deal.  I've thought about it a bit, but don't seem to recall any "complaints" about wholesalers on this board or in other discussions with investors that would be potentially corrected with the licensure course material.

Would this open the door for "regular" agents to wholesale on their transactions?

I guess how would the fee/commission be disclosed?  I've never wholesaled...  I thought the wholesaler just gets the property under contract, then searches for a buyer.  The wholesaler charges a fee in the amount between the two prices, and its negotiable.  

At least in NJ, I BELIEVE the law is something like its misrepresentation for the agent, at the very least, to take/present an offer where the buyer can't perform.  One example is writing multiple simultaneous offers when the buyer can only afford to make one purchase at best.

So... Would this new regulated wholesaling "contract" basically be a "pocket-type listing" since the wholesaler is really just going to go through their list of investors and potentially find the best, probably just the 1st, price that they can get for the seller?  

On a different note, any inexperienced person can cause a whole lot of harm.  having taken/passed a real estate licensure course doesn't change the inexperience, certainly not the knowledge in my opinion.

In terms of "...less unsuspecting sellers getting ripped off," isn't that the grey area with wholesaling? If the seller had adverstised somehow, that investor may have seen the ad and given that price --- no need for a wholesaler. Maybe if the property was listed, the market price is higher --- sort of by definition since the investor is buying off-market specifically to buy low. So..... this is sort of like shutting down wholesaling??? If they are "like agents" (to be determined) AND if they are a member of NAR (eye-roll please..lol), then the wholesaler needs to act as a fiduciary to the seller.

The barrier to entry is still so low, you'll get "poor" wholesalers, just like agents, joining the fray.  Many bad/poor agents aren't breaking any rules --- they just aren't good salespeople.

I don't know.  Like I said, I'm just confused mostly like from lack of info.  Thanks for reading... :)

@Hussein Myr

Much of this doesn't quite make sense...

What is this "inactive" LLC? Did it have work before? If so, it might be better to start a new one to separate the liabilities...

You state that you are going to have the LLC bill yourself for renovation so it can be eligble for loans... Investors use brand new LLC's to get loans all the time. You'll have to sign as guarantors of the loan, but that's normal. So, you don't need to "make up" income for the LLC...

"Making income" for the LLC is extremely tax INefficient. For money you didn't really profit, you are going to pay tax on it (when it passed through onto your personal returns). So, you signed up to double taxation of yourself, including the 15.6% self-employment tax. Meanwhile, if you think you are going to use this for a loan, you'd need to show a pretty fair amount of profit for two years. remember, its profit, not income...

To protect your corporate veil, you should have all the documentation in place, such as a contract especially since its not an arms length transaction. 

The corporate veil is really a legal matter, so consult with a qualified professional...

If you are going to use the LLC for renovations, you may / should not be taking Title in the same LLC. So far, you've only discussed your friend's primary residence. But, if you did anybody's property, aside from your investments, you'd want to separate the liability.

If you are doing a mix of rentals and flips, you'd want different entities to hold Title in the end.  It separates the liability.

I'm not sure what you are getting at with "If it goes well, the home title can be transferred to an LLC." You mean your friend's primary residence?

Anyway, I'm confused on the operating plan.

@Eric Andrekopoulos

Nope…what do you think I am… liquidating my portfolio LOL.  I sold a 1bdrm for $37k over asking!!makes it similar to a 2bdrm.  Actually, I had an offer for $50k above asking but wasn’t so sure of their financial ability to close.

That and this tired landlord have favorable “financial” options, as we see it.

I still have a super hot market.  I think you said the investor was looking to sell in five years… who knows what the market will be like then.  Maybe he changes his mind…

Maybe you work on your financing if your like his properties so much.  Maybe this person is willing to do a master lease potentially with option to buy (no, I wouldn’t but that’s me).  Again, I don’t what is this person’s “problem.”  I’ve heard from others it’s been taught as finding their “pain point” — whatever floats your boat as I’m not into fancy names.  As in regular working life and this sort of investing, it’s about solving problems otherwise you are doing some sort of factory line job or a checkout clerk or something.

@Eric Andrekopoulos

Let me be more “clearly constructive.”  Creative financing is about “solving” a seller’s “problem” with nontraditional methods

Nothing in this thread addresses what is this seller’s problem (maybe if I reread I’ll see something).  You have a solution looking for a problem

Maybe this guy is savy enough, or had his accountant run the numbers, and taxation isn’t a problem like my personal example.  You guys put that stuff to me looking to buy my properties, I’d try to politely laugh you away…

What’s supposed to be rule#1 in trying to do “creative deals” is finding a person with a problem that can’t be solved with the traditional sale, and solving it.  All I see here is everything from your perspective.  Your perspective is really immaterial in my opinion.

You need to find out from the seller’s perspective.  If there isn’t a “problem,” then as an “investor looking to do creative deals” you basically move on.  If you want to make a “deal,” that’s a different story, but doesn’t seem to be the one here

Good luck

@Account Closed I might be getting you confused, so I'll apologize up front.

But, why are your for wholesalers getting their real estate agent license?  It sounds like you think it will make them more professional.  Yet, haven't you posted about the few times you've used real estate agents and how crappy they were?  getting an agent license doesn't make somebody more professional...

@Eric Andrekopoulos I'm offloading my portfolio and I don't want seller financing.. You why?  I am NOT a lender in that regard.  I'm not going to extend hundreds of thousands of dollars in credit, really to anybody.  I can't pay my bills with a Note, or Title for that matter either.

Also, I think people seriously don't understand the possibilities in the sale.  Even in NJ, I'm paying VERY LITTLE tax on my sales.  I think my eff tax is 5%-10% approx.  Will people tell you how and why (I didn't do anything fancy, its just how the tax code works)?  Of course not.   they want to SELL you on various other deals and techniques.

"Creative deals" only "fits" when the seller "needs" it.  Honestly, I find it annoying how investors seem to think that doing a creative deal is some sort of right that sellers should accept.

Anyway, sorry as iI find this annoying.  nothing personal.  Good luck.

@Tom Server

I agree that installing on top would be a huge pain to undercut everything.  Plus, your baseboard would probably have to be redone..  and kitchen cabinets / countertops and just everything would be off a bit.

Plus, installing over top is NOT "replacing" in my opinion.  

I think the issue is how much is the job?  Even if $5k doesn't cover the job, is it worth it to you?  Also, they are looking for "sound proof flooring insulator."  I'm GUESSING that is why they are making you replace the subfloor.  Never dealt with sound proofing so be good to check that out.

Good luck.

@Bobby Eastman  Are you working with local / regional banks?  I know their charter / business practice is that they only do business in their local / region...

I'll ask my lender in the meantime...

Good luck.