All Forum Posts by: Bryan Scott

@Jason Mendoza,

Hi Jason, I am licensed in Colorado, but have some insights on the issues you mentioned that will definitely be relevant in NJ.

For starters, if the seller does not wish to pay a buyer's agent, the buyer can certainly hire their own.  If the typical agent commission is objectionable, have them search "discount realtor" or "flat fee realtor" in their area and I am confident they can find an agent (paid by the buyer) that will work for 1% or less.  And, in the case of owner-carry financing, just make sure the agent understands these transactions, or that you have someone involved that does.

Concerning owner-carry, there are two primary types; one that passes title to the buyer and one that sits in escrow.  For a number of reasons, my preference on behalf of the buyer is the one that passes legal title to the buyer.  If title sits in escrow, this is usually called a Contract For Deed, or an Installment Land Contract.  With either, I would STRONGLY suggest your fam member seek advice from a knowledgeable RE Attorney, who will ensure they do not get into trouble.

With owner-carry financing of any type, I would require a qualified intermediary or equivalent in their state, who will make sure that payments are received and payments to any underlying mortgage company are made properly.  As well, any intermediary who understands private real estate financing, will handle monthly, quarterly and year-end reporting for both buyer and seller and will hold original closing docs in trust.  The qualified intermediary will pretty much handle anything not already being handled by the RE attorney or Title Co.

One more thing:  Most mainstream title companies will not close a Contract for Deed deal (because their is no title insurance involved), however, a knowledgeable real estate attorney will.  If seller financing involves passing legal title at close, then you can use most any competent title company.  If title insurance is not involved, make sure a title report is run in order to dig up any issues that may exist.  In the case of Contract for Deed, just make sure that someone officially records (at the county of jurisdiction) some form of Memorandum of Contract for Deed, or Land Contract.  Do not record the actual document, just a memorandum of the event so that it creates a "partial cloud" on the title.  Again, the RE attorney or Title Co will know about and handle this step.  As well, either will know the rules and law concerning reporting such a transaction to the county assessor and/or treasurer.

A couple more important points:  Make sure your fam member has a fresh market appraisal done on the property and pay no more that current value when using seller financing.  The age-old trick is that a more unscrupulous seller might add 10% or more to the value for the opportunity of carrying private paper.  And, it goes without saying the buyer should have the usual properties inspections done.

If done properly, using pros that understand how to handle owner-carry deals properly and legally, they work great.  If not, they can be a nightmare!  Good luck with it!

Oops, sorry about the double post.  It was not intended...

@Serges Lemo,

Though I am not an attorney, I am pretty sure any lease extension you create and execute on behalf of the prior landlord/owner, would not be legal.  As well, in a worst-case scenario, I suspect this could be considered fraudulent.  For legal, insurance and any other related purposes, I believe your attorney would strongly suggest you either let the lease go M2M, or replace the existing lease with your new lease (in your name or your company name), but do not create and execute an extension on someone else's lease.

Most leases contain language that turns a long-term lease into a M2M upon expiration. If the existing lease does this, then take the time you need to get your own lease docs prepared, then if you like this tenant and the terms, sign a new lease under you or your company.

BP has form lease packages for free if you are or become a Pro member, or you can search for a standard lease, lease addendum, pet agreement, etc., on the Internet.  Just make sure it/they were written for your state as landlord/tenant law is specific to your location.

Best of luck and Merry Christmas to you and yours!

@Melissa Dinas,

Like others replying to your post, I have done rehabs with and without utilities.

Let me answer your question by asking one:  If you were the contractor or sub, would you charge more for doing a job without utilities?  Will you provide a porta potty, or not (think trips back and forth to the nearest convenience store or gas station, or worst-case, they use a corner in the backyard, which leaves the wrong impression on your neighbors)?  If you have to use your own generator, which is a hassle and requires constant refueling, is this extra work?  In the absence of good lighting, as contractor, will you provide your own ancillary lighting, or will you just get by, which could impact the quality of work performed? 

Other challenges:  Tough to plug in security cameras without power, right?  After several break-ins on prior rehabs, I decided to install security at all projects for two reasons, keep my contractors honest and notify me when unauthorized parties attempt access.  Also, unless you use an electronic lockbox on the front door, you may want to use intelligent locks, which require Internet access, which requires power.

No question that there are many reasons why you should turn on utilities, not the least of which would be to better understand how the plumbing and electrical is working given the property has been vacant for a while, but I can't think of one reason why you shouldn't, including the one about saving money, because I am fairly confident that not having utilities will end up costing you alot more than you might think.

Best of luck on your project!

@Enyi Ajoku

From the perspective of a long-term landlord in Denver Metro area, were I presented with this particular issue, I would do the following:

1. Protect the anonymity of tenant #2 (Miss B and a 10yr old daughter).

2. Let the inevitable investigation by Police and Fire reveal what it will, then react as needed concerning the property damage and illegal activity (if any) that becomes evidence.

3. Do a property inspection right away, or within the notice guidelines stipulated in your lease.

4. If you find any infractions after performing item 3, such as obvious evidence (smell or other) of smoking of any kind, start the eviction process according to your own lease terms, with careful attention to landlord/tenant law in your state.

5. Modify your lease as needed for future tenants and move on.

I agree with @James Wise that, as landlords, we are not investigators, but as property owners, we need to be diligent and involved to protect ourselves.

Best of luck to you.

Hello @Lisa Shankus.  As the property is new to you, assuming you used a home inspector to inspect during the inspection period of your purchase contract, are there any discrepancies noted on the report that relate to this issue (assuming it actually is an issue)?

If the tenant you apparently "acquired" with the property purchase is a great tenant, we typically want to hang onto a great tenant!  Because, as you might imagine, a tenant turnover will cost considerably more than $225, but as @Thomas S. mentioned, the actual insulation bill for an attic will be considerably more than $225.

Go to www.homewyse.com (I love this website by the way), select "Installation", then, "insulate attic" and see that their rough estimate range is from $1.59 to $3.08 psf (labor and materials), but then it depends on whether they are insulation batts, or blown in type insulation.

In any case, if the existing attic insulation is inadequate, then maybe this "upgrade" might be warranted, regardless of how long the tenant has been there.  As well, and assuming necessary, once done, you can advertise this upgrade and the positive resulting heating and cooling bills in future marketing when the need arises.

For straight rentals (not a property sold via Lease Option, CFD, or other Owner Financing), I never pass large expenses on to my tenants (pretty much anything over $300, unless their fault), but assuming this is a defect or need that I did not see in my pre-purchase home inspection report, I will just deal with it out of my own pocket and earn a bit of positive "good landlord capital" in the process.

Good luck with it!

@Amandeep Sawhney.  Among the "magic words" you mentioned include, "... and we have a video of that too.  She had also given us a reference letter..."

Two other questions:  1) Did the landlord and yourself do a "move-in checklist" for damages and other discrepancies?  2) Did you also do a "move-out checklist" for same purpose?  If yes, wonderful!  If not, then if you have a complete and revealing walk-through video, along with still pictures, you likely have this landlord where you want them.  In other words, if they have no proof, but you do, then you win as most states have landlord/tenant law that favors the tenant.

As was stated above, keep your small claims court date and be prepared to take your proof, as well as a VERY detailed account of everything you can remember from conversations and other occurrences between you and the landlord, or the landlord's rep, to court with you.

In Colorado, for example, the landlord must return the deposit in full, or issue a check and a detailed statement covering the amounts not returned, within 30 days.  Some states are different, so Google Landlord/Tenant Law in your state and you will find the answers.  As well, I do not believe you will need to lawyer up, because if you prevail in court, I suspect the judge will just award you treble damages, but check your local laws online to be sure.  And, if there are doubts, engage an attorney in one of the usual 30 minutes FREE consultation sessions.

Sorry you are going through this!  It surely doesn't make the complexities of moving any more fun!!

Hi Matt, When I mentioned 1099 type tenant, I am just referring to self-employed tenants with cash flows that might vary widely at times depending on their receivables aging.  I have a client right now who is nearly exactly the same type.  He makes really good money doing commercial tenant finish, but his clients pay about every 60-90 days.  His issue filters to me in the form of late payments for 2 months, then he catches up.  To eliminate both our frustrations, we agreed on quarterly payments, which works fine by me and solved his problem as well.  Since making this adjustment, he has not missed a beat and has saved a ton in late charges.

Good luck with it!

Taking a quote from your post, "Hey BP, So I have a tenant in a SF property, since April 2017. Chronically late, normally gets caught up, and takes pretty good care of the property."

This is a pretty good step in the correct direction.  Having been a landlord for 20+ years, this is a good start.  Paying late, but paying, is a nail-biting relationship for sure.  Rather than giving this tenant the final boot, which undoubtedly will cost you (and him) an expensive turnover, why not ask him what he thinks would solve the problem?  In the past, I have adjusted the due date, set up 1099 type tenants on a quarterly payment schedule, requested (and received) 2-3 months rent in advance, sold the property via lease/option, etc.

I get that the norm is rent due by the 1st, late fee accrues on the 6th, but this tenant's situation apparently doesn't fall into the normal category, so ask the question, then evaluate whether you can live with (and accommodate) the answer.

Good luck!

PalacePros, Bryan Scott, a Denver area Independent Realtor: We exist to serve the needs of property sellers, buyers and landlord/property managers in the Denver Colorado metropolitan area. Offering service that will exceed your expectations w/ experience & negotiating skills that inspire confidence. SELLING? 3.2% total commission -buyer-agent side included. Full service - agency/fiduciary. BUYING? Rebates of at least 1% - more if buying a new home! Full service - agency/fiduciary. Investor friendly with tons of rehab & landlord experience. Visit www.PalacePros.com, or call (303) 807-4802, to learn more.