All Forum Posts by: Greg Scott

Trevor:

I am not a lawyer, but most of what you describe seems to be more related to what is your and his contractual obligation, not whether or not it is legal or illegal.

For example, if his lease says he can make you mow the lawn weekly, and if you don't he can charge you $50, then, it is completely legal.   If the lease says you must maintain the lawn, and he has a right to do it on your behalf and charge you for it, that is a gray area.  If the lease says nothing about it and he sends you bills for this or that, even then it may be more of a contractual issue.  All of that is disputable in court.    

Regarding the electricity, if it is included, unless the lease states otherwise, he doesn't have a right to tell you to turn off the fans, but it doesn't sound illegal.  He sounds like a jerk and a terrible landlord, but might not be breaking the law.  

Now, if he cuts off your utilities, that is illegal.  The garage / attic issue might be as well, unless noted in your lease.

Congratulations on taking the plunge!

Hmmm.  Not enough here to give you too much advice.  I would say there are several major failure points to watch out for:

1) Buying it right.  If you overpaid, you can be cooked from the start.  Not sure where you are.

2) Right tenants. Easiest way to fail is to do a poor job screening tenant.  

3) Right ownership. You "went in on the deal" scares me.   Who makes the decisions?  How are out-of-pocket costs divided up?  If you get in a fight, how are issues resolved.   Ideally you put all this in writing before buying.  If you didn't, try doing it while you are still friends.  If you wait until there is a problem, you may be toast.

4) Managing right.  Get educated.  While you may never have a problem, you want to make sure you are on the right side of the law.  I've seen landlords with leases that are illegal.  If they got in a lawsuit, they would have gotten crusted.  Be smart.

You have already taken the hardest step.   Keep going.

Those of you living in Metro Detroit, I'd encourage you to check an upcoming education event this weekend.  I get no financial benefit if you go or don't go, but I do think it is the best value for the money in real estate education, so like to let people know its around.  

The largest real estate education group in the country, with literally thousands of members, is coming to Detroit.  There will be about 80 active investors there with people driving in from Columbus, St Joe, Chicago, and even one guy flying in from Houston to attend the event.   Its like drinking from the fire hose.   

I posted more details to the events page. You can also find info here:  givemetotalfreedom.com

@Lucas Mills

I think the lack of formatting in my note added confusion.  I have no issues at all with using a portfolio loan for the right reasons.  Hopefully this will clear things up.  Here are your options

• Buy and rehab using a hard money or private loan then do a rate & term refi
• Pay cash the cash-out refi
• Refi-out into a portfolio loan
• Wait to season the loan then try to refi

Each option has plusses and minuses

Is this a Roth IRA? If it isn't, you may want to reconsider using a self-directed IRA to hold real estate.

One of the great benefits of real estate is that it is tax favored.  If you do it right, it can be 100% tax-deferred.  If you also use 1031 exchanges it can be tax-deferred indefinitely.  And, if you die while owning the property, your heirs never pay capital gains.

Take that same property and put it into an IRA and then you pay taxes on the gains when you pull the money out. Plus IRA rule force you to take distributions and you have many restrictions on when / where you can use the money. I'm not sure you can do things like build a house on land owned by your IRA.

A Roth IRA is a bit different because you pre-paid the taxes. Still, I've been pulling money out of IRA's, paying the taxes, and then investing in real estate. I find I have great freedom, flexibility, and I can use the cash whenever I want.

Wow, is this your very first deal?   If so, you jumped in the deep end on your first property.  

You have a lot of moving parts there.  To minimize the risk, I would look at wholesaling it to another investor ASAP.  If you can make a few bucks, great.

If you don't have experience rehabbing and a solid team of contractors, an 1885 burn-out could be a very expensive way to learn.

First question you need the answer to is what is the house worth vs what's owed?  Let's say the house is worth $200K but their loan is $180K plus all the new foreclosure fees they are racking up, then I would walk away.  If there is a big spread there, then it gets interesting.

To get this deal done you will need to be able to get cooperation from the husband and the wife (not necessarily cooperating with each other, but both must cooperate with you.)  You would need to understand what each wants from the deal and then solve their problem.

I had a killer wholesale deal once where a hoarder mother left her house to her hoarder son but her estranged husband actually owned the house.   The husband wanted to sell, but couldn't push his son into moving out.   So, that became my job.  I had to help him locate an apartment and hire a moving truck, and find someone to garage sale some of the junk.  Only then was he comfortable leaving.

You must become part counselor and part super-hero.    Good luck!

The banking industry got hammered by creative financing that allowed people to do cash out refis, so many of those options are gone. A cash-out-refi typically requires seasoning of the loan and may not allow 80% LTV. That said there are other ways to go about doing effectively what you want.

1) Start with a private loan or hard money loan. Those people will often lend against the ARV not the purchase price. Then after it is all fixed up, you replace with a conventional loan in what is known as a rate & term refi. In other words, you aren't changing the amount owed, just the interest rate and the amortization schedule. This strategy requires you to pay higher interest up front and be smart about your rehab costs and ARV.

2) Pay cash for everything.  Then you can do a cash-out refi.  I have never used this strategy but I understand that if you pay cash, you can do a "delayed financing" withing 6 months and the bank pretends that it was the same as if you financed at closing.   This one has some risk if the appraisal doesn't come back as high as you hoped, your cash may get stuck in the deal.  I would only use this if I were very well capitalized.

3) Dont go with a conventional loan.  If you do a portfolio / commercial loan (meaning the bank holds the note and doesn't resell it) they basically make their own rules.  They typically have higher interest and while you can get a 30 year amortization, they often have a 5-10 year balloon.

Good luck.

I'm not familiar with this variant, but I do know that the HUD-1 form was discontinued a few years ago. All my closing docs now use a Closing Disclosure and ALTA statement. Are you sure this form is still in use?

If you don't want seller to see your wholesale fee you can always do a double close.

Every basement has moisture issues.  Every house has mold and mildew.  The real question is how significant is the problem? 

I would be unconcerned about the utility room.  If it is unfinished, you should be able to see everything that is going on.

I would be far more concerned about the finished portion of the basement because you can't see what was done behind the walls.   If they did not install a vapor barrier or have foundational leakage, you could have moisture trapped there and it could be developing into a bigger problem.   It is nothing you can't fix by tearing out the walls and starting the re-finish over, but better to know before buying.

Have it inspected.