All Forum Posts by: Denise Evans

There is a very active legal services group in Madison County. I do not know their official  name or contact number, but you can probably find them on Google, or by asking some of the clerks at the court house. Your mother should not wait to be sued, which will hurt her credit. That trickles down to also cause increased auto insurance premiums, homeowners insurance rates, and credit card interest rates.

That being said, have you read the entire lease very carefully? There might have been an automatic renewal clause unless certain notice was given. Automatic renewal clauses are enforceable in Alabama.  If her lease automatically renewed for another year, then the landlord might be doing her a favor by letting her cancel on 60 days notice, instead of holding her to the entire renewal term.  Or, her original lease term several years ago might have renewed on a month to month basis, with a requirement for 60 days notice to terminate.  It all goes back to the lease.

If your ultimate plan is to build a portfolio of income producing properties, then make sure you write your business plan accordingly so you don't run into IRS problems. 

Flippers are considered "dealers" by the IRS and are treated the same as WalMart. They have an inventory of products they buy and sell.  Tax treatment advantages for investors, such as long term capital gains tax rates, depreciation, 1031 exchanges, seller-financing advantages, etc. are not available to flippers.  Flippers must pay ordinary income taxes on their profits and must also pay self employment income on flip profits. 

On the other hand, if you have some other source of income to pay ordinary living expenses, and are truly flipping largely to build up cash for buy and hold investments, then you can treat your property transactions as investments.  It is critically important to have (1) a business plan that says that; (2) some source of other income to support yourself; and (3) the dedication to stick to your plan.  Fine-tuning changes are okay, but you can't just write a plan and then ignore it, and expect the IRS to be fooled. 

If you do some flips to generate living expenses and other flips to generate down payment and rehab money, then you might want to segregate those transactions into two different LLCs.

Finally, it's not all bad to be a flipper. Flippers get to deduct mileage and other business expenses that investors must capitalize.

Exactly, Hollie. The owner is your tenant, and the person occupying the property is the subtenant. You are legally in possession.

This is a good situation for a TRUE sublease. Most times, when a landlord has a tenant who wishes to move out, and that tenants finds a replacement, the parties call it a sublease. It's not, really.  It's either an assignment, in which the old tenant assigns all of his rights to the new tenant (and the landlord approves it) or it's a cancellation of the old lease and replacement with a new lease.

In a true sublease, Landlord rents the property to Tenant A.  Tenant A then rents the property to Tenant A is the landlord for Tenant B, and owes all of the landlording obligations.   If the toilet gets clogged up, Tenant A is supposed to get the phone call in the middle of the night.  This is the situation you will have if you sign a lease with the taxpayer.

I don't see anything indicating that a due on sale clause is relevant.  Maybe I'm wrong. Did the original note maker and property owner sell the property?  Or maybe Brian meant to say a power of sale clause, but auto correct changed it to due on sale.

Judicial foreclosures in Alabama are usually done only if the note/mortgage holder believes there will eventually be litigation. Such as, the borrower has threatened to sue, or maybe there is a question about priorities among competing mortgages. In that case, a mortgage holder will file a judicial foreclosure action in order to just get it all out in the open at once and let a judge rule.

Most foreclosures in Alabama are non-judicial. If the mortgage contains a power of sale, then you can do a non-judicial foreclosure.  I would recommend hiring someone in Sirote's foreclosure department to handle it for you. They are very efficient and knowledgeable.

Timing will depend on the note and the mortgage, which might include requirements regarding notice and opportunity to cure.

Once past those things and ready to foreclose, here are the two statutes relevant to timing.  Foreclosures are very technical in their requirements, and doing something wrong can have very expensive consequences for you.  Please hire a VERY experienced attorney to handle this. 

Notice of said sale shall be given in the county where said land is located.

Notice of all sales under this article shall be given by publication once a week for three successive weeks in a newspaper published in the county or counties in which such land is located. If there is land under the mortgage in more than one county the publication is to be made in all counties where the land is located. The notice of sale must give the time, place and terms of said sale, together with a description of the property.

If no newspaper is published in the county where the lands are located, the notice shall be placed in a newspaper published in an adjoining county. The notice shall be published in said adjoining county for three successive weeks.

(a) When the notice is required to be given for a specified number of weeks, it must be given by consecutive weekly insertions for the number of weeks so specified. When the notice is of a proceeding to be had or of an act to be done on a specified day:

(1) If the publication is for one week, the insertion must be not less than six days before such day;

(2) If for two weeks, the first insertion must be at least 12 days before such day;

(3) If for three weeks, the first insertion must be at least 18 days before such day;

(4) If for four weeks, the first insertion must be at least 24 days before such day;

(5) If for five weeks, the first insertion must be at least 30 days before such day;

(6) If for six weeks, the first insertion must be at least 36 days before such day; and

(7) So on at the same rate of increase, the time to be computed as provided in Section 1-1-4.

(b) When the time is specified in days, two weeks' notice is equal to 15 days' notice; three weeks to 20 days; four weeks to 30 days; and six weeks to 40 days.

(c) A newspaper publishing a notice shall also place the notice on an Internet website operated by the newspaper, if the newspaper publishes a website, and on a statewide website established and maintained by an entity having the capacity and ability to receive and upload legal notices from the majority of newspapers in this state as a repository for the notices. Posting on the Internet shall begin on the first day of insertion and run continuously until the expiration of the specified time. All newspaper notices required pursuant to this section to be placed on the Internet shall remain valid for all purposes, and the legality of the newspaper publication shall not be affected by the failure of the newspaper for any reason to upload legal notice publications to a statewide website or to another Internet website or to accurately post the notice publication on any website.

Hi Hollie!  Have you gotten any good properties already?

Hi Katie, I used to teach FI331 at UA, but it was a different perspective from the typical PhD class.  I really loved it, and so did my students.  Send me  a pm and I'll give you my contact information. Will be glad to help. I teach some investing classes in Tuscaloosa from time to time, and will be happy to comp a ticket for you. Truly I loved teaching Principles!  It would be nice to talk to you.

In Alabama, the tax sale certificate "trumps" the mortgage. The  mortgage lender must redeem from the tax sale in order to be able to foreclose, or to correct the title defect (of the tax sale) if it has already foreclosed. The lender pays the same redemption charges as the property owner. See my blog articles on  this subject.

Let me know when your meeting will take place, and I might be able to come. I'm several hours away. I specialize in tax sales, foreclosures, and residential rentals, and am happy to share information.

@Anastasia Jordan, you can call the state, ask for Shelley Tice, and ask her for an estimated time frame until a quote. She might tell you she has not yet obtained a quote from the county, and has no way to estimate how long it will take them. Or she might tell you there are 4 people in line ahead of you, and each person will add another 20-30 days to the time line, assuming nobody ahead of you buys it. This is information you need to know. If you are first in line, you might want to wait for your quote. If you are 5th in line, you might want to also start looking for some other properties in the meantime.

If you  have only a tax certificate, it is sometimes hard to get property insurance. PM me if that is the case, and I can give you some pointers.  If you have a tax deed, insurance is not a problem.

Remember that in Alabama the former owner still has redemption rights, for up to 3 years after you take possession. If they redeem, they will have to pay you for the VALUE of your "preservation improvements" (plus taxes, interest and insurance) but not additions or upgrades. So, be careful about those things, and don't upgrade counters or cabinets or add bathrooms or carports, etc.

Sandy, if you need general advice, I can help you. If you need an attorney to draft documents or file lawsuits, I recommend Henry Walker or Joel Blankenship, in Birmingham.  My law license is in Texas, although I've lived in Alabama for many years.  So, I can't do things that technically a lawyer must do, but I'm probably the most knowledgeable expert in this field, bar none.