All Forum Posts by: Bill Hamilton

Sadly, I must agree with @Rick H. here. While it would seem fair and equitable that during the course of a divorce agreement, one party agrees to give up their equity (quit claim) and therefore should be excused from any further obligation when the other party agrees to make payments and acquires the rights to any equity in a property, this is not the reality. When you sign a note saying you owe a certain amount of money, giving up your equity position in a property does not relieve you from your obligation on the note. Sorry, too many big words from having worked in the mortgage industry for a long time. When you sign a contract saying you will pay so much per month for so long, or pay off the balance in full, just saying you want nothing to do with it any more and giving up ownership doesn't mean you don't owe the money. Think of it as buying a car and getting a loan on it. If you were to cancel the insurance (just to take that out of the equation) and then got in a crash and totaled the car, you couldn't just give the car back to the bank and say you didn't owe the money anymore. Won't work. Also a good reminder for all that if you co-sign a loan for someone, if they stop paying, you owe the money. Doesn't matter that the car etc is not something you own. You still owe. Same way you would go after a cosigner for someone renting your house or apartment. Just because they weren't the one living there, it doesn't mean you won't go after them for rent.

You can choose not to rent based on any non-protected criteria i.e. as mentioned above, they like the Raiders and you are a Denver Broncos fan. You don't like the way their car looks, they are too short/tall. Many of these seem silly but are all legitimate. The US armed forces will not accept you if you fall outside of certain height/weight parameters, as do police and firefighters. It is not considered discrimination. Write your non-protected criteria for rejecting the applicant on the back of the application. While it might annoy someone, it's not illegal. Although continue to do as you did and verify the HUD/Fair Housing stuff. That can bite you big time if you cross them.

I am wondering @Joshua Andrews what you consider stellar returns. I am not trolling nor making a dig at you. I am just curious and if there are really stellar returns on notes, how do those occur? Not that I am saying a 12% return on cash is poor performance, I just don't know that I would consider it stellar. Keeping in mind that I am new to the REI side of things so my opinions may be of limited value in this case.

I am going to jump in on @Bill Gulley 's side. Even though I am a noob to RE investing, I have a great deal of experience as a mortgage broker and wholesale lender. If you look up Equity Stripping you will see a whole ton of info show up in fairly recent statutes about how deeply protected people are when they have gotten an NOD. I have not tried it yet but personally would only approach them from the point that if they have sufficient equity in their house, I can purchase it. And I actually would have that ability. But if I in any way indicate that I can help them with their foreclosure problem by doing anything other than buying the house, then I have to be registered as a Foreclosure Consultant. And that severely limits the things I can do and say. But if instead I am an "Equity Purchaser" (i.e. buying the house with equity in it after and NOD but prior to auction) if the terms are "unconscionable" the courts can still overturn the contract and go after you for losses etc. I am sure I am simplifying and I am not an attorney, but I would tread very carefully here. Prosecutors love to find test cases for new laws. You know what happens if they lose? Nothing. They try again with someone else and move on. Way different than what happens for you if you lose. I can also almost guarantee that it would permanently end your ability to function in Real Estate in any form as it would probably constitute financial fraud. Meaning no RE license of any type ever. And also spreading to Mortgage license, Series 7 FINRA license etc, etc. For me, personally it's so not worth it to be a test case. And this is only at the state level. The Feds now have a whole new series of laws that they really need to test out against somebody to see how the courts will interpret them. Those willing to volunteer should raise their hands now. That could save the rest of us a bunch of grief.

Get a new appraisal. An appraisal done that long age is worthless.

@Jay Hinrichs Thanks for sharing. That is quite the tale. I am not sure what my takeaway is yet in terms of moving forward. I actually share some of your experiences, even including being in the timber business, and getting my rear handed to me in the great 2008- whatever debacle. I was a mortgage broker then and kept thinking it would bounce back soon. Ah well.

Jay, do you primarily consider yourself a real estate broker or an investor? And if you had it do over would you start as an investor or an agent? Or some combination? I am just curious. You seem to have a wide range of experience(s) and would love some insight. I have a great deal of experience in the mortgage industry (although somewhat outdated currently) and am trying to figure out which path to take to get back into the RE industry.

@Jay Hinrichs

Yes, a 20 year term with a 30 year am means the note comes due in 20 years and will have to either be paid off or refinanced. In most businesses, if you can't pay off the loan in 7-10 years then you should not be taking out the loan. Unless your business model is buying commercial properties and leasing them out and you need to leverage for more properties. The margin seems reasonable but is in some ways almost irrelevant without the other needed info i.e. what is the cap rate (max % the loan can go to) and max adjustment rate (how much it can adjust by each period) and how long the adjustment period is. The lock deposit is probably non-negotiable and is also reasonable unless this is a major institution using their own funds. Otherwise if they/you lock and then don't go through with the loan, they will have to pay a penalty. Odds are they are just passing the buck along to you so you know locking rates is a serious play.  Also, on a $15,000 per month loan, the $600 per month you save is probably not how I would choose to pick my rate. Depending on the other terms (cap rate etc) you will be in a much worse situation if you go with the lower rate/term and interest rates jump by 3-5%.Which could easily happen at which point your payments double. Just food for thought.

If you own those properties free and clear  or with substantial equity (as in you only owe 40% of the value) then you might be able to work a deal. I know lenders that do Foreign National deals but honestly I don't know what their cash out policies are. Otherwise you might have to go a Joint Venture or Equity Partner route. See if you can find an experienced mortgage broker in Florida that understands hard money, private money etc.

I see what you are saying @Richard Dunlop but I was thinking that if I were to wholesale and go this route, I would not be acting as the listing agent (where I would have a fiduciary responsibility to the seller) but rather act as a buyers agent for my LLC and then selling it to whatever buyer I find. Although maybe this creates other problems I am not thinking about or aware of yet.