All Forum Posts by: Christopher Stover

@Bruce Lynn: The individual I'm speaking with is paying closing costs, mortgage during holding period, rehab, sales costs, and anything else that comes up. They told me they have some cushion as well, which I need to verify, but I'm bringing the 20% to the table to help them get the mortgage so they can do the flip. This is their first one on their own, minus a JV deal before it. I don't think I'll be able to get a deed of trust since there will be a mortgage company involved, and there's no guarantee I'll get paid back, hence my question to all of you about vetting. I'm all ears if you have a better recommendation over the promissory note.

@Account Closed: Thx for the kudos. :)  I already bumped the holding time up to 4 from the 2-3 they expect (they're not doing anything too crazy rehab wise).  However, your point is well taken, and I'll re-look at the numbers with 5 and 6 months.

I wasn't familiar with the JV agreement; however, it appears it would give me some percentage of ownership in the venture. The sample I looked at appeared it would make me liable for a percentage of expenses in the venture as well as profits. Is this always the case? I'm only asking for 15% interest (APY).

As for the NOI, I found something that says, "This NOI now has to be 'released' as a lien on the property before the title can be transferred..." How would this work since I think I'd need to release the NOI before my partner could sell the property to be able to pay me back with interest. Would I basically be a party at the closing and the title company or closing attorney would give me a check for my principle and interest at the same time I release the NOI? Good tip on not providing funds directly to the borrower as well.

I'll continue to do some reading on the JV and NOI but thanks much for those tips.

Summary: I'm looking for guidance on what information I need to vet someone I'm planning to provide gap funding to.  Full details below.

I joined a Meetup.com group in my local NJ area. The person running the group does HML, and I mentioned I may be interested in providing gap funding if he comes across anyone. My intent was to invest some cash while I look for buy and hold deals. He passed me someone last week, I spoke with this individual a few times, and I feel like he's got a decent deal. I worked in wiggle room on the expenses below, i.e. longer hold time than he thinks he'll need and an extra 10% as things come up in the rehab.

I'd be putting down the 20% for the loan at 15% interest. The individual I'm working with is pretty confident the ARV will be $400k+.

The plan is to do a promissory note.  However, I'm having trouble even finding a real estate attorney who will help me draft a note.  Most seem to say they don't do it, and I literally had one tell me today he wouldn't do it because he thought it was a bad idea since I don't have a close relationship with this person (we didn't go into detail like anything from above).

Aside from the promissory note, I'm looking for some expert guidance on what I should do to vet this individual and what type of information I should collect.  I almost feel like some type of application is warranted so I have SSN, bank account numbers, etc. in case things go south.

Your collective knowledge would be appreciated!  P.S. I did search the forums, but I didn't see much related to this topic, most were people asking for funding.

@Mark Gee - Thank you!

@Ryan Goldfarb - Thx for your reply and your opinion of me being priced out of 3 & 4-family properties is very helpful.  Can you share a little more about the "upcoming tax reval" you mentioned?  I googled but didn't really see anything specific to it.

@Diana Tian - Thx for your input as well.  I wouldn't mind something a stop or two away from Downtown JC on the Lightrail so I'll give it some consideration, but I really don't want to be too far from Downtown JC, Newport, Hoboken, etc.

Would it make sense for me to try to connect with wholesalers, agents, etc. to see if they can help me find a good deal on a 1 or 2-family place or just stick with Redfin, MLS, etc.? I get the impression wholesalers and such would want people that will buy more than one property from them.

Hi Everyone,

I recently moved to JC, and I’m hoping to get some advice from those familiar with this area, to include Hoboken, etc. I really want to house-hack with a multi-family property, but I want to know if I’m wasting my time even considering it given the local market. My criteria are pretty strict in terms of location for a place I want to live:

• Walking distance to Newport or ~20 min via public transit
• Near to PATH (<= .75 mi) to be able to get into Manhattan

Everything I've seen in the forums leads me to believe any properties in areas meeting these criteria are going to be highly competitive, and I only have about $100k to put down on a purchase. Am I living in a dreamland thinking I'll be able to find something with these criteria and the amount I have for down payment that will make any financial sense? Based upon my research of the area around the Grove PATH so far, I think $1500-2000/mo is reasonable rent for a unit, which puts me at a cap of around $725k for a property (FHA PMI is killer…). The rough $725k assumes the $100k down payment and close to a $4k/mo mortgage.

Alternatively, I can go back to looking at SFR if that's a more viable solution. Worst of all, I could just rent since I may only be in the area for one to two years but it could be longer.

Thank you all in advance, and I look forward to hearing some of your thoughts.

Chris

Check out olddebts.com. You can pay to have someone call them, if you want, but for a small price you can have a letter sent to them and the balance filed with the credit bureaus.

@Jeffrey H. Unfortunately, I cannot give you great detail.  I looked through my emails, and I must have received the guidance over the phone because I cannot find anything in email.  However, as I think about it, I think part of the issue may have been that every time the tenant provides any amount of money, it resets the clock and you have to provide a new 3-day notice to demand payment.  With that said, in reading through the lease with the tenant at the time, I think it reads pretty well.  Here are a few excerpts:

LEASE. [...] Upon termination date, Tenant shall be required to vacate the Premises unless one of the following circumstances occur: ... or (iii) Landlord willingly accepts new Rent from Tenant, which does not constitute past due Rent. In the event that Landlord accepts from Tenant new rent, a month-to-month tenancy shall be created.

DEFAULT. If Landlord determines that the Tenant is in default of this Agreement, Landlord shall provide Tenant with a notice of default, and Tenant shall have a limited number of days to cure the default unless otherwise excepted: (a) for the failure to pay rent when due, Tenant shall have three (3) days to cure; ... or if the default constitutes a subsequent or continuing default within twelve (12) months of a written warning by Landlord of a similar violation, Landlord may deliver a written notice to Tenant specifying the default and Landlord's intent to terminate this Agreement. In such event, Landlord may terminate this Agreement, and Tenant shall have seven (7) days from the date that the notice is delivered to vacate the premises. In addition, if this Agreement is terminated pursuant to this paragraph, Landlord may, at Landlord's option, declare the entire balance of rent payable hereunder to be immediately due and payable and may exercise any and all rights and remedies available to Landlord at law or in equity.

LATE CHARGE. [...] Any payments received will always be first applied to outstanding balances, late fees or other charges, with the balance of the payment then applied to the rent due.

In regard to @Jeffrey H.'s comment, I recommend not giving out your account number for tenants to deposit money.  I used to do it until I had a problem tenant and my attorney advised me not to do it again.  Depending upon how your lease is written, you can get yourself in a sticky situation if you're trying to get rid of a tenant.  If the tenant sends you a small amount of money direct to your account, you just "accepted" money from them whether you wanted to or not.

Hi Everyone,

I purchased my first home in 2007 when I got my first job out of college. Since then, I picked up a couple more homes when moving with work and rented them after I left the area. I manage everything long-distance myself after having a bad run in with a property manager when trying to rent my first house. There are bad apples in every bunch, but for the most part, I've had great tenants and built a reliable network of people to call when things go wrong.

Initially, my goal was to buy a house every time I moved with work, which has turned out to be about every three years. However, after discovering BP last week, reading Ultimate Beginner's Guide, a few forum posts, and listening to a couple of the podcasts, I see there's a lot more I could probably be doing. In the end though, I’d like to have enough property to live comfortably through passive income (vague and without numbers, I know).

I'm going to transition my intro into asking a bit of advice and guidance from the community as well. I just relocated to Jersey City with my job, and I’d love to buy something here or in Manhattan, especially a two or three unit building. I’m interested to hear your thoughts on whether I should look to find something here or if I may be better off trying to buy something elsewhere in the country. The benefits to me of buying locally are: I’m building equity every month instead of paying rent (which I hate), I get a lower fixed, owner-occupied mortgage rate, etc. The biggest benefit that comes to mind for buying elsewhere in the country, based upon my reading over the past few days, would probably be the opportunity to buy more properties at cheaper prices resulting in higher cash flow. Each option has its pros and cons, of course, but I lean toward continuing my trend and finding something local in the Downtown, Hoboken, Newport, etc. areas that are PATH and Lightrail accessible. I look forward to hearing your thoughts and if you see things differently!

Chris