All Forum Posts by: Ben Zimmerman

This is false and easily verifiable as such since HOAs are able to foreclose on homes even though they obviously are not the ones holding the mortgage. 

There is no circumstances under which a seller has no legal recourse if the buyer has failed to make payments in over 4 years.  Even a second year law student would be able to successfully argue this case in court.  There are always consequences under contractual law for failing to fulfill your promises.  It greatly helps if those consequences are explicitly stated within the contract to speed up the process and make things easy, but even if they aren't it doesn't mean that one party can unilaterally fail to perform with no repercussions.

 Who says you can't foreclose on a sub2 deal?  Any half way decently worded contract will give the seller the right to foreclose it the buyer does not perform.  If the contract wasn't vetted by an attorney then that's a huge party foul for the seller to sign their house away without understanding what is in the contract.

Financing for rentals can be difficult.  Lenders typically want a decent down payment and the interest rate is usually at least 0.5% higher than normal.  

Therefor the easiest way is to buy the property for yourself as opposed to a rental. FHA loans only require a 3.5% down payment with the downside that your PMI never goes away and you can buy up to a 4 unit building with this loan, live in one unit and rent the other 3, or usually your lender will have loan products for 5-10% down where the PMI leaves once you eventually achieve 20% equity. If you already own a house for yourself then it can often be tricky to get an FHA loan, however the 5% down options still apply assuming that you 'actually' intend on moving in and occupying this new house, then simply turn your existing house into a rental.

If you are a first time home buyer and intend on living in the unit then often times there are a variety of special programs offered at the state level that make ownership affordable either by low interest/down payment loans, or by grants to help you purchase a home.  Some of these programs stipulate you need to live in the home for a certain number of years, but you could easily convert it to a rental after that period is over.  https://housing.az.gov/homeown...

Do it the same way sub-2 deals handle it, put your LLC as the primary insured, and name yourself as an additional insured on the same policy. That way when your insurance company sends the updated notice to the bank your name is still on the policy and typically won't raise any red flags.

However for the vast majority of people an LLC isn't worth it and provides very little if any benefit.  A $1-2m umbrella insurance policy is almost always a better route than putting things into an LLC.

I guess my first thoughts are why do you care what room your tenant sleeps in?  I don't care if they sleep in the bedroom, the couch, or the garage so long as they pay the rent on time and don't trash the unit.  I would be much more worried about a roof that leaks than where my tenant decides to sleep.  

Unauthorized additional tenants is a separate (albeit unconfirmed) issue.

Are we talking about real estate on a micro, or macro level?

On a macro level given a long enough time span home prices will ultimately track inflation rates.  This has been demonstrated by the Case-Schiller index for which the authors won a Nobel prize.  But it also logically follows because if home prices were under inflation rates for a long enough period then homes would become trivially priced, and if home prices were significantly above inflation rates for long enough then everyone would be homeless as nobody could afford a home.

But nobody buys real estate on a macro level, we buy at a localized, micro level in our geographic area.  Within that geographic area prices may or may not keep up with inflation depending on localized conditions.  We are seeing a migratory shift on where populations choose to live.  Thanks to technology, a farmer can now farm thousands of acres by himself.  As a result, there are fewer and fewer people that actually farm because 1 person can farm the same acreage that used to require 20 farmers.  As a result rural America is being decimated and these small towns are slowly dying and the real estate located in these locations will eventually become relatively worthless.

Transportation and manufacturing is being revolutionized.  Major towns used to spring up based on key railroad intersections, waterways, or interstates.  Now growth tends to be in areas that is aesthetically pleasing such as Colorado, or the coastlines, as well as areas where the weather is warm thanks to the invention of air conditioning.  Northern cities like Cleveland that heavily relied on its geographic location for transporting goods are relatively flatlining in terms of population growth, while Texas, Florida, Arizona, and others are booming.

The bottom line is that while real estate on a whole will follow inflation rates, individual properties can significantly underperform or outperform the average inflation rate.  There is only so much "prime" real estate, whether that be beachfront properties, properties sitting on a hill with a scenic view, or properties in cities that people naturally tend to want to move to.  I'm sure Milwaukee is a fine city (I've never been there), but I've never met someone that was like "my dream is to someday move to Milwaukee."  On the other hand people have dreamed about moving to California for decades.  These types of properties will continue to meet or exceed the rates of national inflation for many years to come.  So as with most things in real estate, its all about location, location, location.

Have the loaned serviced. It costs maybe 25-50 bucks per month and the servicing company will provide all of the required documentation for their new lender. For the first 12 months only 25% of the debt is counted towards the DTI, after 12 months none of it counts towards their DTI.

If someone is desperate enough to sell their home sub-to, chances are good that they aren't buying a new property within a year anyway.

None of the services you subscribe to will tell you the correct credit score that lenders will use.  A mortgage will generally use your FICO2, 4, or 5 credit score while the free services typically show you your Vantage credit score, or possibly something like your FICO 8 or FICO 9 score.  All of these scoring models calculate your score differently and scores can vary widely between the models depending on your particular circumstances.  For example FICO 9 completely ignores collection accounts that have been successfully repaid, and doesn't give very much weight to medical bills that are currently in collections.

My point is don't make a financial decision based on what these sites are telling you will happen to your score.  Your score might go up, but it also might not; or at least not by as much as you hoped it would.  If your personal loan charges less interest than your credit cards, then the loan may help you repay your balance faster but I would take the suggested score with a grain of salt.

Do you live at that location?  If so then most fair housing laws do not apply.  So for example if you only want to be roommates with other males then you have the right to turn down every female applicant regardless of how qualified their application may be.

If its purely an investment property and you're renting by the room then all laws apply.

With a 3.5% FHA your mortgage insurance never goes away regardless of how much equity you build up as opposed to most other loan products where you can drop it once you reach ~20% equity. Adding PMI to your monthly payments can often increase your mortgage payments by 10-15%. This ability to drop PMI was especially useful in recent years when homes were skyrocketing in value, thus you would reach the 20% equity rather quickly.