All Forum Posts by: Chrystal England

As a CPA and investor, I recommend you structure ownership percentages based on "at-risk" amounts. Additionally, if you will be managing it on behalf of all owners you should be compensated by the "partnership" based in market rates... Usually between 6-10% of gross collected rents. I also recommend that you all be on the mortgage so that each of you has a vested interest in making sure the mortgage payments are made in the event your collected rents don't cover the payment and the owners need to make up the difference out of pocket. To protect yourselves I also advise putting this into an LLC, depending on your state that is.

If it were me I would simply go down to the planning/zoning office and talk to someone about it's highest and best use... Figure out if he/she is aware of another angle you haven't thought of, for example, if you owned both the vacant lot and the home, could it be re-subdivided or rezoned for a multi-family or 2 useable lots? I've had good luck with talking directly in person and not over the phone to planning and zoning vs trying to go it alone without their input... I was told once over the phone my property couldn't be used as an elder care facility... I went down to zoning, and the guy pointed out a rare loophole and I was able to get my use permit to use it as an elder care facility finally! Never would have happened without his expert knowledge of the local zoning laws...

As a CPA and a broker in AZ & CA and seasoned investor, flipper, etc. for the last 20 years in these states and others my personal opinion is that while the entry price point can seem attractive, I agree with many others on this thread... Your $ are generally tied up for a few years, the return $ in terms of absolute dollar value and not as a % of you investment are not large unless you end up purchasing the property at a deep discount less other existing liens, etc. Most times your return is simply the interest rate charged to the property owner in exchange for eventually paying the back taxes. The problem with this scenario is that your return is TAXED immediately once you receive it, at whatever your current tax rate is... So your overall return is reduced by taxes you must pay... Not nearly as attractive a scenario in my opinion as when you actually get the property and then qualify for all the tax benefits of actually owning the real estate (1031 tax deferred exchanges, tax deductions if you qualify, etc). Real estate ownership is one of the last true "legal" tax shelters... If you do it correctly and are savvy you may never have to pay any income taxes on the income generated from these investments. But, if you want to get your feet wet first, then Tax Lien investing, depending on the state, can be a good entry point, but longer term I think you can find much larger returns, more liquidity, lower tax impact once you invest in real property.

I've done both scenarios for my financing needs.... My preference depends on the deal. If the subject property has some complexities associated with it, for example if it's located in a more remote area away from a major metropolitan area, then the path of least resistance can be a small local bank that is located in that small town. If the property is located in or near a major city, and you have stellar credit (700 FICO or better) and uncomplicated income (e.g. You are a W-2 wage earner, steady income and not self employed) then I've had good luck with Wells Fargo, B of A and US Bank in terms of great rates and good processing/approval times that allow me to close escrow quickly which can help you look more attractive to sellers. While SFD's are an easy first time investment, I find with buy and hold strategies that my multi-family properties (duplexes, 9 plexes and mobile home parks) far outperform my SFD's over time AND the commercial properties don't count towards the Fannie Mae 10 property maximum that can stop you dead in your tracks when trying to obtain optimal financing terms (lower interest rates, etc). In closing... I suggest trying out both big box banks, and small town banks until you find a good fit... It's like dating... Once you find a good fit, a lender who tells you yes more than no, then you can commit to a long term relationship.

It's ALWAYS wise to purchase a title policy regardless of the property and regardless of whether it's an all cash deal. This is the single smartest thing you can purchase and worth every single penny! The title company's job is to research any and all possible liens, title issues, etc. they will then provide you with a title report, usually free of charge prior to you deciding whether to purchase the property. If you have questions about how to read the title search report, you can ask the title company directly, or if you are working with an experienced real estate agent, and this is "key" then your agent can help you determine whether there are red flags in the report and how best to deal with them. If your real estate agent is fairly new to the business, then be sure to run it by their broker too. Your title insurance (depending on the state and type of policy you purchase) will generally cover you if for example the title company missed finding a lien when they did their search, and they will generally cover you to the extent of your damages... But this is a state by state thing... So another option is to consult with an attorney for a 1 time small fee to get their opinion. Happy house hunting and investing!

In California you do not need to be licensed to manage your own properties, but I strongly recommend purchasing a landlord law book as the laws can be tricky here and they can vary widely by county and city. Also I recommend locating a local property manager to assist you on an as needed pay as you go basis for helping with move-in paperwork, and to be on call for those times when you are not available or out of state on vacation, etc. especially if you will have an apartment building which tends to be a lot more work due to typical more transient tenants. Go ahead and contact me directly by email at [email protected] and I can either assist you in the San Francisco Bay Area or refer you to someone if in other parts of Cali.

In California you do not need to be licensed to manage your own properties, but I strongly recommend purchasing a landlord law book as the laws can be tricky here and they can vary widely by county and city. Also I recommend locating a local property manager to assist you on an as needed pay as you go basis for helping with move-in paperwork, and to be on call for those times when you are not available or out of state on vacation, etc. especially if you will have an apartment building which tends to be a lot more work due to typical more transient tenants.