All Forum Posts by: Brian Pellerin

I'm trying to close on another deal next week, and it involves another deceased elderly and an inheritance chain. I think what I've learned from this is to audit the tax history and help the county see their mistakes and get them to correct their mistakes BEFORE I close. As long as the seller is paying, I'm ok with that. It's certainly better than passing on a deal.

What I'm seeing here is that the county is fast to remove exemptions on sales, but doesn't always notice deaths or more likely doesn't take action until they have concrete data that the inheritors no longer qualify for the exemptions. For instance, Dad could die and Mom not be on the deed, but have rightful interest and therefore still be eligible for the elderly exemption. I can see it being difficult to track.

Besides, my sellers probably won't notice a bump in their already $40K back taxes and penalties!!!!

Here are the weasel words in my policy: "We do not cover title risks that first affect your title after the title Policy Date." But, this clause states that it does not void the following clause:

It also says under covered items: "There are liens on your title for labor and material which have their inception date before the policy dated. However, we will not cover liens for labor and material that you agreed to pay for."

I read this to mean that mechanics liens filed late and due by the previous owner would be covered by this example policy. However, I'm sure I have another policy in my desk that would possibly exclude this same coverage. As you said, read your policy. In the case of Steve's original request, he might want to shop around based on covered risks and exclusions.

In addition, you made another pertinent point regarding lien validity. Assume Steve buys the property and his hit with a lien after closing. When it is his turn to sell, the title company will review the liens for validity and only pay those deemed to be valid. Invalid liens (such as your credit card example or an old and expired lien) will not affect him. However, this is a bit scary as you won't truly know your exposure until you have a title commitment statement. I imagine that the liens' validity would be subject to interpretation by the risk-adverse insurer.

I think the moral to the story is to "buy it right", because there are financial risks in addition to your rehab risks.

I've personally written off my taxes as a loss in my head, because I don't think the title company will pay, but I'm working to pursue any kind of recovery. I'll have to post my results when this all wraps up months from now.

I was just speaking with my attorney about this last week. He said that in Texas, there was a time limit on how long the mechanics liens could be filed, which was different for subs vs general contractors. If I remember right, it was in the neighborhood of 30 days. So, my exposure for an after-closing lien had a finite window. Your state rules will surely differ, but if you think about it, it's reasonably fair for the contractors whom have recently done work to be able to file for unpaid work regardless of the closing date.

However, you mix-in government into this question and they don't seem to have any rules (as Steve also noted). I was just slapped with $4K in back taxes because the previous owners failed to remove the elderly exemption after the father had died. We paid all outstanding back taxes at closing and had a $0 balance until about one month after closing. I was NEVER at fault, nor did I know any family history about the sellers. At this point, I've paid these taxes and we're pursuing the previous owners (which I doubt will pay) and then the title insurance, which the closing attorney thinks will pay, but I remain worried about it.

The title company is there to protect both the buyer and seller. Imagine how sad you would be if I sold you a house that I did not own, or if you paid for a house, but I didn't give you the deed (or title) to the property.

Title company checks to make sure that the seller actually owns the house. Checks the sellers proof of Identity. Verifies that there are no unknown liens against the house. Makes sure that the taxes have been paid. Makes sure that any liens that are blocking the sale are paid off at closing. And lastly gives you an insurance policy promising that they did a thorough job in the whole process. (I'm in the middle of filing a claim against one of my title policies for unpaid taxes).

Lastly, between the title company and any necessary lawyers, the paperwork is drawn up and presented for signatures. When it's all done, the deed is recorded showing that ownership changed hands and money is paid to the seller. And if a lender is involved, they ensure that the lender's paperwork is signed by buyers (with whom they've verified identities). Again, they are the middle-man ensuring that the entire transaction is executed fairly and accurately.

And when all of the above is checked and passed, you end up with what Paul referred to as: "Clean Title".

And much more and with exceptions, but this is a reasonable summary.

Your item #2 is correct.

Wow. I'm sorry to hear this.

You might want to post your address and the address of the properties. Then a few BP folks local to your rentals can pound you with yellow letters offering to take this mess off of your hands! :-) Category: Distressed Out-of-state landlord. (A little bad humor for levity).

This could certainly have happened locally, and it would still be a horrible mess. Compounding this by being remote is certainly less pleasant.

I'd start by reading your agreement with the property manager. Did he have the legal right to enter into lease agreements on your behalf? If he did, you have contracts that need to be sorted out and likely need an attorney to help.

If he entered into agreements that he was not authorized to make, then you might be in the clear and the defrauded tenants would have an action against him.

HOWEVER, if they have the keys and are living in your houses, whether or not the lease is technically valid, then you really have a mess. If they are tenants, then you have to follow the law and clean this up properly. You either need an attorney or good local expert advice. Which state are your rentals located in?

Thanks Trevor. I'm not really using a yellow letter, but a more formal typewritten letter and using mail merge to personalize each letter with the recipients name and address and the property address (as they might be different). However, to avoid the same addressing confusion, my greeting says "Dear Homeowner". This may be in bad form, but I could easily change it to be "Dear " if I moved to a single name model. I guess I partly worry about excluding one of the homeowners too.

I sign each letter with red ink and hand-address each light blue A6 envelop with the same red ink and place a return address on the rear flap.

Thanks to these forums, there's plenty of information regarding the letter content, so I felt more confident in the letter itself. But I had not seen anything regarding addressing and I felt that anything as stiff as those examples I posted would be spotted immediately as junk mail, thus seeking this guidance.

I'll see if I can figure out how to send you a copy of the letter directly.

Thanks Matt. I appreciate the quick and insightful response.

I've been searching for information on this topic far and wide and cannot find any best practices. While Matt's reasoned response seems to be sound advice, I'm in no position to judge (I'm just the student). Are there any other pearls of wisdom regarding addressing from you other seasoned marketing experts?

What do you find to be the best method of addressing letters, given the complex name structures I find on my mailing lists? The goal is to get it opened and read, so I would think we need to clean it up.

For example, consider the following (fictitious) names:

1) LEMONS WALKER E & CAROLYN COX MUNROE
2) THOMAS MARTI LF EST CURTISS & M THOMAS LIV TR
3) BLANKENSHIP JOESEPH F & PATSY K BLANKENSHIP
4) ELLS JIM BOB & MARY ANN ELLS

How much effort do you put into demangling these names? What would a yellow letter writing company do with these? Especially, the 2nd is tricky. Here's what I think is right.... Note, this question is asking about the process more than these individual names.

1) Address both individuals (dropping middle names): Walker Lemons & Carolyn Munroe OR
1b) Address only one: Walker Lemons

2) Anything has to be better: Family of Martin Thomas OR
2b) Address main character: Martin Thomas

3) Simple, Combine: Joseph & Patsy Blankenship

4) Keep middle when name seems to be a combo: Jim Bob & Mary Ann Ells OR
4b) Simple Combination - Jim & Mary Ells

Thanks.

--brian

The apartment that we're currently looking at is only 7 units, but for now, this question isn't about the deal evaluation. I'm strictly seeking advice for the partnership terms. We might find a different deal, while still using this basic partnership structure.

I'll contact you directly to discuss other opportunities.

Hi, I do SF rehabs and rentals, however, an acquaintance has suggested that we team up for a MF deal. He's already got 4 properties with 32 doors and a management company. I'm seeking advice on how to fairly setup a mutually beneficial partnership to purchase multi-family. My goal for now is to get started being a passive partner. I'd be involved in the upfront analysis and would keep an eye on the investment, but don't expect to do any of the day-to-day management. My partner is a RE agent, who's providing the deal, and experience. I'm providing the money (or down payment).

Here are the simplified proposed terms for me ("Money") and my partner ("Manager"). Partnership is 50/50.

1) Money to provide 100% of the down payment / acquisition costs

2) Manager to provide property management - no fees except for marketing / supplies

3) Net income split
40% to cash reserves to $20K (assume reserve value is accurate)
10% to Money (cash flow)
10% to Manager (cash flow)
40% to Money to repay the down payment (~5-6 yrs to 0 balance)

4) Any remaining Cash reserves at sale are first allocated to down payment, second loan principal and 3rd equally split 50/50%.

5) Cash reserves to be replenished as used at 40% of cash flow.

6) Any assessments to be split 50/50% should the reserves not be fully funded

7) Upon sale, mortage and down payment to be paid off, then any profit / loss to be split 50/50%.

8) Buyout of partners possible should one decide to sell (using pre-determined value)

9) Other partnership boiler plate stuff that attorney throws in

In addition, Manager is also requesting a 7% fee once the down payment is paid back, stating that I no longer have skin in the game (all money returned) and so his sweat equity for 6 years has earned him the 50%. It would take about 17 years of management fees to equal the down payment. Maybe after 10 years we kick in the management fee.

Is this a fair arrangement? Realize that there is no deal without the money. I also value my partner's experience. I could take a run at this alone, but won't. I was planning on investing in another passive partnership for a bigger deal. Comparing the ROI's on this little deal vs the bigger 88 unit with multiple partners (~10) and a much more experienced lead partner and a predetermined partnership structure.

Thanks in advance,

--brian