All Forum Posts by: Nate T.

Not filling out the disclosure form opens you up to future liability unnecessarily, and is just silly IMHO. Just take the 10 minutes and fill it out. For the info you don't know, indicate that you don't know.  You can also add a note, e.g. "seller has never occupied property and has limited knowledge of the property."

Would you mind sharing some of the 12-20% activities you're involved in? 

We have done that type of transfer many times.  The banks do not know or care.  They do not have someone monitoring county records at all the counties in the country to see who is changing the title.  They just want their payments.

If the bank did threaten to call your loan they would probably let you put the title right back into your personal name and not be an issue.  It would be more of a concern if you've done a subject-to deal where you wrapped someone else's loan and you're not able to put the title back in their name.

However, I don't want to be cavalier.  If you do not have the means to pay off a loan that did get called, then you should think twice about it.  I don't think it's risky at all in the current environment, but if interest rates tripled or something then banks very well could become interested in calling loans.

@Steve Boianelli

When getting bank loans you can get them in your personal name and then change the title to an LLC. That way you have the better loan terms as well as the liability protection. Of course changing the title does violate the due on sale clause, but the likelihood of the loan getting called is minimal. So you can decide whether due-on-sale is a big enough risk to make it worth getting a more expensive commercial loan like you have been, or keeping the property title in your personal name.

In my experience the insurance premiums are not affected by whether you own in your personal name versus LLC. Of course there's a price difference for owner occupied versus investment property.

You need multiple lines of defense. Insurance is number 1. LLC is number 2. Not creating an LLC because you're unlikely to get sued is the same as not getting hazard insurance because you're unlikely to have a fire. Bad idea.

But regarding creating a single LLC for each property, that is fine for 5 properties, but with 50 or 100 that would be a nightmare if you have separate bank accounts and books for each one. And the legal fees and accounting fees could be quite onerous.

There is another option where you only need 2 LLCs. It is referred to as equity stripping. You have one LLC that owns the properties, and a second LLC that loans money on each property. Even though you are the owner of both LLCs, these are still legitimately separate entities and legitimate loans. The loans should be for the full amount of the property value or higher. If you have a bank loan on a property, you can set up a second loan from your lender LLC, to cover the equity above the amount of the bank loan. You can set up the loans so that the interest accrues, so you don't have to track payments.

Your lender LLC is unlikely to get sued, since it has no "risky" activity. Your property holding LLC is unlikely to get sued, because it has no equity. But if your property holding LLC does get sued, the creditor would have a tough time getting anything out of the LLC. In the case of a judgment, your lender LLC could even foreclose on the property and take the property from the property holding LLC, thereby wiping out the judgment.

We bought about 4-5 homes per year off sign leads until about 2015. Big fat zero since 2016. We finally gave up on posting about a year ago. The Phoenix market has been tight for several years due to shortage of inventory, so I guess people find other solutions before they get around to calling road signs. 

What Denny said. It's a forfeiture action. And it will follow your state statute. 

However, the forfeiture just cancels the buyer's ownership interest, it does not remove them from the property.  After the forfeiture you then have to file a separate eviction action to get them out. 

Sub2s are by no means illegal. However, FHA doesn't like their loans to be taken sub2, so title companies will generally no longer insure a sub2 transaction with an FHA loan.

There is really no way for a seller to insure that the payments are going to be made, so sellers don't normally enter into this type of transaction unless they were about to lose the property anyway and have a foreclosure on their record. 

I ended up hiring a local attorney.

It seems like the main reason to do a solo 401k rather than a self-directed Roth IRA is because you can contribute so much more to the 401K. But keep in mind that the max amount you can contribute to the 401K is a percentage of your earned income. If your earned income isn't going to be very much, then you might not be able to contribute much more than you would with the IRA. In that case I would go with the IRA, since it's more simple and straightforward to manage.

Also, keep in mind that if your self-employed business ended up having employees, you would be required to offer that same 401k plan to them.