All Forum Posts by: Earl White

@Steven Catudal

If your partner's main role is finding deals on the MLS or manage tenants, obviously a real estate agent does this and is paid commission. A formal business built on this seems overkill as you're essentially paying someone for a service that already has standard model.

If you and the parnter have distinct business tasks/abilities (i.e. not what you would hire an agent or contractor for), such as off-market lead generation, that’s a different discussion. Perhaps if your partner was a general contractor or handyman type there may be some merit there to reduce costs / increase profitability.

If your partner enjoys deal sourcing, a better move might be for him to become an agent - so he could legally collect commissions from finding deals and managing properties for multiple people. Also be cautious for you partner certain activities do require a real estate license. If you make the person an LLC employee you can get around it, but partner does need to be careful. “No person shall engage either directly or indirectly in the business of a real estate broker, broker-salesperson, or salesperson without being licensed.” (N.J.S.A. 45:15-1). 

Also, the whole point of hiring a PM is to handle tenant, maintenance, and rent collection, so if your partner isn’t actively managing but just supervising the PM, IMO not worth having a two people essentially looking over the same tasks.

Contributing financially for one person and the other having no financial stake raises decision making questions, such as when to sell, how profits will be distributed, etc. You could create an operating agreement granting one of you the powers - but it is a fair amount of energy/time/activity for someone to manage and find deals.

@Steve R.  You do not need to give 30-day notice in cases of non-payment. New Jersey’s Anti-Eviction Act does not require any written notice for non-payment of rent. Partial or full doesn't matter (except see note below re: coming even on delinquent rent).

The statute regarding notice for evictions states: "No judgment of possession shall be entered for . . . except in the nonpayment unless the landlord has made written demand and given written notice for delivery of possession of the premises.” (N.J.S.A. 2A:18-61.2). As soon as a tenant fails to pay rent, you can file a complaint without waiting 30 days or issuing a separate notice (unless your lease requires one).

That being said, it could be a waste of time/fees to run to court because tenants in NJ may come even on rent (even after you win the eviction case) and then they won't be evicted: “The tenant shall have three business days after service of the warrant for removal to pay all rent due.” (N.J.S.A. 2A:42-10.16a).

If a tenant habitually pays late, you then can go to court more safely and not have to worry about them coming even at the last minute. The statute says: “Habitual failure to pay rent, provided that the landlord has served . . . a notice to cease.” (N.J.S.A. 2A:18-61.1(j)).  Here's how it works: you issue a written notice the first time they’re late, then another if it happens again. If they’re late a third time, you have a strong case for eviction for habitual non-payment—without risking the tenant showing up at the 11th hour with the money.

For your specific circumstances, with only a partial month behind, I would guess there is a decent chance they can come even on rent and it would be a waste of your time. Habitutal seems the better plan unless the amount owed to you exceeds what you expect they can pay.

 Let me know if you have questions.

Social security number is definitely not required for non-payment for eviction in NJ. As far as gathering SSN, there are skip trace services you can look into. In my experience, the good ones are expensive, typically require a subscription, and sometimes they even do a physical inspection of your premises to verify it is a legitimate person / business in US.

@Nicholas Haubner Contact Montvale's tax assessor and building department to see it is currently classified. 

If it is a legal 4-family, you should have it converted to a 5-family. Building department can advise on specific next steps - municpal hearing and presentation of plans will be required in most cases. This would improve the property value and also allow you to lease out the 5th unit. This would be the ultimate goal if you are house hacking to lease all the units once you vacate. When you go to sell, Montvale requires a certificate of occupancy so this issue has to be resolved in advance of a sale.

Although I am not a lender, I assume you will not be approved for an owner-occupied mortgage on 5-units if it is a legal 4-unit without some type of mortgage fraud whether in reported rents, units, or another legal document or representation (very very large issue from a legal perspective with multiple arrests in the last year for anyone playing fast and loose).

As far as the DCA, I would recommend coordinating your work with the city with the DCA. When you go to sell the property, if you produce a certificate of inspection for the wrong number of units, buyer unless you are giving them a great deal and they will throw caution into the wind, would insist on the correct designations. That said, green card is not a legal requirement for closing so buyer could waive this - though I don't see why they would unless deal is great for them. I also believe you have an obligation to discloss if property is being used inconsistent with DCA record - even if attorney/buyer fails to pick-up on the issue.

Welcome to the community!

My suggestions would be in this order:

(a) Determine the type of financing you qualify for - this will short cut the process considerably and save time on investment angles and next steps. Hopefully save time/money on deals that get cancelled.

(b) Once you know what you can buy, you would line-up a real estate agent that works with investors in the market you are buying.

(c) Submit offers - real estate agent would help with this. Market might be competitive but there is angles to stand out depending on what you are comfortable and able to handle, such as waiving an appraisal contingency, limitng inspection rights and time frames, closing time frames, allowing seller to stay-post closing, taking on difficult tenants, buying properties that might need repairs, etc. Obviously, each bears certain risks, and usually the agent would advise on these topics in the beginning.

(d) If you strike out on landing any on-market deals, you can search for off-market deals. This tends to be more time intensive and more for someone that has a lot of time and limited income as you may find a "home run" type deal with some effort/energy. You could also look into seller financing. Head-over to the marketing and financing section of BP and you can learn everything. 

However, if you're a W2 high income earner or business owner, I can't imagine it makes any sense to flip houses, mail mass post cards, wholesale, or build lead gen websites with the value of your time being better spent other places (such as learning about real estate and increasing your income through proven means), such as at your 9-5pm or growing your business, and your real estate is a long term process and you don't need "home run" deals to qualify or make it work. Really about growing a strong portfolio of solid deals.

Now that being said, if you are a high income earner, well qualified, and can't find reasonably good deals: 

(i) you can connect with a well connected real estate agent for off-market deals; 

(ii) you might do a very narrow cost-effective cold call or letter writing. Narrow it down to like a very small amount of properties and just give the people a call, write a letter, or have your assistant do the same. Some of my clients in this scenario literally just pick-up the phone, tell the seller of their specific property they are interested and they are well qualified, and see if there is some kind of fit. If that is a stretch as to your qualifications, I would not recommend this as it would with relative quickness go to the attorneys to move forward with drafting, inspections, title search, etc. In north/central NJ, 95% of serious arms-length real estate deals (i.e. not wholesales or  family/friend), attorneys will be assisting. South Jersey that 95% probably is 50% (higher price points will still have attorneys).

@Elizabeth L. You can definitely evict a tenant in a few months. Hearing dates are presently around 1-2 months presently (though obviously that can change). If you have a written lease, this should be a straight forward matter to process the eviction. If it's a verbal tenancy, you have to show a practice of collecting rent that the tenant is no longer abiding by (or perhaps tenant shows up, and honestly states they were obligated to pay rent and haven't done so).

When the eviction case is submitted, you give the tenants names, e-mail, phone, address. The courts will handle service via e-mail and delivery to the unit. Should tenant fail to response, you would request a default judgment and under the proposed facts it would be granted in all likelihood. Lock-out, should they continue to not come even, would be typically less than 14-days.
Unless the tenant comes even with the rent (which would result in dismissal of the non-payment of the case), there is generally limited defense to this process. If tenant raises factual defenses such as falsifying the lease or claiming they paid rent, there would be a brief trial which you would be prepared to testify against. They could make legal arguments about hardship and/or off-sets for non-compliance by landlord, but this would require posting rent or coming even with rent.

@Jake Handler 

Always a great idea to raise rents! Two notes:

Big number might not enforceable - rent increases must be conscionable to be enforceable. ("Unconscionableness under N.J. Stat. Ann. § 2A:18-61.1(f) is an indefinite standard and difficult to measure. It is defined in terms of actions which would not be acceptable to any fair and honest man, or conduct which is monstrously harsh and shocking to the conscience. Although the percentage of the increase is large, the determinative factors are whether the resulting rent is so great as to shock the conscience of a reasonable person and was effected for the purpose of compelling the tenant to vacate." Fromet Props., Inc. v. Buel, 294 N.J. Super. 601, 604 (App. Div. 1996)".

Increases must comply with rent control. (f. The person has failed to pay rent after a valid notice to quit and notice of increase of said rent, provided the increase in rent is not unconscionable and complies with any and all other laws or municipal ordinances governing rent increases.") NJSA 61.1f.

This would depend on whether your property is overvalued by the tax assessor and in turn you are paying additional taxes on that additional valuation. As mentioned earlier in the thread by @Chris Seveney, real estate prices have been going up particularly in Northern New Jersey, so a lot of tax appeals are pointless or do not make any sense. The amount you spent on renovating is a consideration - but really if it's is assessed at $500k and the market value as-is is around $500k there is nothing to appeal.

Many great responses I won't reiterate. 

Of course it's reasonable to ask for proof of funds for the down-payment. Particularly in a multiple offer situation, buyer should be happy to prove they can complete the sale. As mentioned though, it is just a random PDF that could be doctored. If you really need to resolve this issue: (1) get on the phone with their lender to understand the situation; (2) cash deal - you could get something on letterhead from bank and call to confirm, or get an attorney representation for the same.

In my opinion, this issue can to some degree resolved by contract terms. If a buyer is coming down with a high-down payment and quickly making a large deposit into escrow fighting tooth and nail about proof of funds may be a red herring.

Credibility is also a factor here. If the buyer has proof of completing multiple projects and their real estate agent has a documented business history they are probably not wasting their time playing a game about a POF as failing to perform is just a waste of everyone's time (may have legal fees incurred as well).

If it's an unknown newly formed LLC, an offer with minimal cash to escrow, with a shady attorney and realtor, I'd then be taking a hard look at proof of funds.

Contact the local zoning department (construction, building, whatever designation the municipality uses). Explain to them your plan and see if it is something that would be entertained and if so what the process will be. You can even set-up an in person meeting or go down in-person. City staff normally has a good expertise on these issues and are helpful in my experience. If the project seems like it has potential, then follow the steps they give you. You could also contact a local attorney - but that is probably pointless early in the process if the city rules it out.