All Forum Posts by: Paul B.

Are you saying that the HOA's lien for past-due assessments and attorneys' fees lives on after the foreclosure? I do not think that is correct. Perhaps it is different in Florida, but I know first-hand (as an HOA board member) that in Georgia foreclosure wipes out our lien.

If the lien does live on, then no, I would not expect them to negotiate. Why would they? They have a secured lien, and the property can't be transferred without paying it off. That's sort of the whole reason you get a secured lien to begin with, right? Again, though, I would be surprised to learn that this lien lives on after the foreclosure sale -- assuming that we are talking about a true foreclosure and not just an auction. Since you said "courthouse," I'm thinking these are bona fide foreclosure sales.

As for the attorneys' fees, it could also be that the HOA has paid them already, so they are looking to be reimbursed. Although some lawyers will bet paid on the back-end (ours does this in collection matters), many do not.

I will say this. You have guts buying properties on the steps. I could never buy a property that I had not been inside or that I did not inspect. Too risky. It seems to me, however, that if you're able to tolerate those kinds of risks, you should be able to stomach past due HOA assessment and fees.

Go find deals.

Network.

Don't waste time with posers and wanna-bes.

The money will find you.

Google Chrome -- or nothing!

I can't see how any seller would take one of these letters seriously. From that company's site (emphasis added):
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If we have an established business relationship, you can now present your offer with our Proof of Funds letter to help you stand above the crowd, proving you have a reliable funding source in place.

Subscribe now for only $9.99 per month for the ability to generate UNLIMITED Proof of Funding letters.
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This does remind me, however, of the go-do days a few years back when my mortgage broker gave me a Word file with their letterhead and a signature image, and they basically told me I could write any pre-approval letters for myself that I needed.

Why, is he not planning on being there?

I live 10 minutes north of Buckhead, and while I don't claim to know that area very well, I do not think you can find a nice rental there for $50K. Same for Lenox. I don't know anything about College Park, but my perception is that it's a different market altogether than Buckhead.

Having said that, I would never, ever buy a condo for investment, anywhere, any time. I prefer to look at SFHs or small multi-family properties (duplexs, tris, and quads).

On appreciation, the question you have to ask yourself is, "Is the market actually depressed right now, meaning that values will increase at rate faster than normal over the next few years, or are we just where we ought to be, meaning appreciation is really going to keep up only with inflation?"

I know I'd love the answer to that, because I've had my eye on a duplex that is on the market for $72K, and I sold its twin one block over in 2006 for $177K. If I thought we'd be back in the $170s in the next few years, I'd snap that duplex up in a minute, but I'm not sure that is what's going to happen.

There's a "Georgia Investors" group here. You might want to join it.

This is a question that comes up often. Do I trade what I perceive to be more tenant headaches and less appreciation for cash flow today? Or do I deal with "nicer" properties, and presumably "better" tenants, and sacrifice cash flow for less hassle and more upside appreciation?

And if one assumed that the second plan would really pan out as expected, I think many people might sacrifice that short term cash flow to near break-even, if we thought we'd end up with nice house fully paid for by someone else, at which time we're just collecting rents. (And in some markets, that's almost your only option. The 2% rentals just aren't anywhere to be found.)

For me, I think you have two things figured out before you decide which route to go are these: (1) Know your exit strategy before you buy a property. If you have no plans to sell, ever, why focus on appreciation? Appreciation just means higher property taxes. If you plan to sell at some point, though, you need to know what kind of buyer that is, and then ask yourself if your property will have appeal to that kind of buyer. (2) Become a master at tenant selection. This is where you'll determine whether you're going to have a headache or not, regardless of the property's value, location, condition, etc. I've had tenants in "sketchy" neighborhoods that pay on the 1st of the month like a Swiss watch, without bothering me for anything. They are out there if you know how to find them.

I have a "nicer" rental that is as close to hassle-free as it can get. The tenant never bothers me for anything. He pays five days early each month. And even on that rental, over the last 29 months (since it became a rental), my expenses, including a capital expenditure for replacement of an A/C unit) are running at 30% of my rent. If I add in 8% for vacancy and 10% for property management, BOOM, I'm right at the magic 50% number that is talked about here -- and I'm telling you, this is the easiest rental property I have ever had.

It sounds like you're going to be highly leveraged (you're borrowing the down payment), so your strategy is likely, "Try to keep this sucker cash-flow neutral while I pay off the loans, then enjoy the property debt-free later." I don't know what your cost of funds is, but you might be able to do that if you choose the right tenant.

Figure you're renting it for 12% of its value each year. Back out a vacancy expense equal to 1% of its value, taxes equal to 1% of its value, insurance at 1/2% of its value, and repairs and maintenance at, say, 2% of its value, and you have a 7.5% ROI. As long as your cost of funds is less than that, you should be able to break even cash-flow wise when you add in principal amortization.

I know there are those who will think this is a loser, but if you can get good tenants in and manage your expenses, you could be sitting on a house that is fully paid for in 15-20 years using someone else's money. And that ain't all bad.

Lily, I just want to say that I really respect your professional nature on this board.

In reading these posts over again, you've really been beaten about the head, neck, and shoulders, and never once have you resulted to being defensive or overly sensitive about it.

If we all could take constructive criticism in this manner (something I know I need to work on), we'd probably all be better off for it.

My hat's off to you.

I have little to add to J. Scott's excellent replies, but here's what I have...

First, you need to know what lenders will do what kind of loans. You probably should have known that BofA was not going to take any collateral that even had a whiff of needing repairs. To my knowledge, they are just not in that business. You might have pressed your client a little harder and told him that, despite what he thinks, BofA is not the lender for him.

Second, why on Earth is any buyer putting 20% into escrow? The only thing that should have been at risk here was earnest money, and that should have been as little as $50 or maybe $500 to $1,000. You don't put 20% into the hands of the settlement attorney; you bring it with you in good funds at closing.

Hopefully there's a distinction in your contract between earnest money and the down payment. I can see your client losing earnest money (that's what happens when closing comes and goes and you don't show), but 20% of the sales price as damages is not reasonable. If that's how the contract reads, though, that's how it's going to be.

Well, of course he said that. (Are you even sure he knows what an interest rate swap is, though?) It's the local guys' job to slam the big banks, and it's the big banks' job to slam the little banks. That's the way the world works.

In the event that a big evil bank could do a credit swap for you, though, they wouldn't rake you over the coals. (That's just little-bank-speak to remind you exactly how evil the big evil bank is.) Would they make money off you? Yes, of course. Isn't that what any bank does?

In any event, it's not going to happen, so let's move on to something else.

How about shorting enough Treasury notes so that if rates go up, your gains are enough to curtail your principal so that your net interest expense stays the same? Have you ever modeled that out? I guess you'd have to structure this in such a way that if the short position moves against you, you're still breaking even net-net.

With respect to Bill's comment, I see where he's coming from, although I don't think there's any harm in trying to figure out how to create synthetic fixed-rate debt from floating. And the fact is, if someone figured out how to do that for investors having, say, $500K or more in debt, that person would probably make a pile of money -- or go broke!

It's these kinds of "what if" discussions that keep the brain in shape, not to mention you never know what solutions might be uncovered.