All Forum Posts by: Chris Evans

@Clay Lingg Thank you very much for that information! Unfortunately, at the time the only source of information I had to go on (concerning "having to sell at appraised value," etc...) was coming from the seller's kids. So, your input is very helpful and gives me a direction to go.

I'll contact an elder attorney I know here in MS that helped my family to see if they can give me MS's interpretation of the rules.

Just to clarify, is it that the federal rules say that there will be a penalty if the house sells for ANYTHING below "fair market value," or the penalty kicks in once it drops below 50% of the fair market value (for example: no penalty if sold for 75% of appraisal)?  In others words, I can see why the kids want to sell at appraisal if parent/nursing home patient is penalized for anything less.

Again, you have been very helpful. Thank you!!!

Chris Evans

I've got an unusual situation I've never dealt with before. I was contacted by a seller trying to sell her mother's home AS-IS (mother is alive, but in a nursing home with severe dementia). The mother is on Medicaid to pay for her nursing home care. The daughter made it very clear she does not want to make any money on the sale of the house. The house is just a drag on the children's finances and is in rough condition. To make matters worse, the house will be taken for unpaid taxes if they are not paid this year. Honestly, I really don't even want the house, but if I can help this family out and make a few dollars too, I would like to work something out. I would consider wholesaling it, BUT....

...Here's the CATCH.

Any funds received from the sale of the house will go to Medicaid, and the house must be sold at or above what it currently appraises for.  So, the seller has to sell it for the appraisal price. Because of this, I know it would be very difficult to wholesale. The neighborhood it's in would not support a good fix and flip situation (maybe if really cheap products were used, but I try to provide quality with my fix and flips).

I'm not willing to pay cash for the whole thing for multiple reasons. So, the only option I could come up with is to purchase it with seller-financing as a buy and hold property. The seller is happy with that idea IF Medicaid will allow seller-financing. Basically I would be making monthly payments directly to Medicaid, if this is allowed.

My questions:

1. Has anyone ever dealt with Medicaid when purchasing a distressed investment property?

2. If so, do you know if Medicaid would allow a Seller-Financing deal, where I pay monthly payments to Medicaid (or through the seller)?

3. I've tried to reach the Legal department of Medicaid to get answers, but no response yet. Do you know how I could find this information?

I asked my attorney, but he did not know that particular answer.

I could walk away from this, but as I said before, I like to help people as much as possible...if possible.

Thank you in advance for any input!

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $90,000
Cash invested: $60,000
Sale price: $220,000

This was a JV project. I found the house and was negotiating some seller financing, but still trying to figure out how to fund the rehab. A local restaurant owner and acquaintance approached me while I was picking up some dinner. He had seen some FB posts of mine, and said, "I want to work with you!" Long story short, he funded the entire project, purchase and rehab, and we split the profits. The house was listed during a slow time of year (Christmas), but was on the market barely over a month.

How did you finance this deal?

JV. A local restaurant owner funded the entire project, I handled day to day operations (hired and monitored contractors, yard maintenance, holding costs, etc...). We split the profit.

What was the outcome?

SUCCESS! We split a hefty profit after agent fees and closing costs.

Investment Info:

Single-family residence fix & flip investment.

Purchase price: $90,000
Cash invested: $60,000
Sale price: $220,000

This was a JV project that turned out very well. I had found the house and was negotiating some seller financing, but still trying to figure out how to fund the rehab. A local restaurant owner and acquaintance approached me while I was picking up some dinner. He had seen some Facebook posts of mine, and said, "I want to work with you!" Long story short, he funded the entire project, purchase and rehab, and we split the profits. The house was listed during a slow time of year (around Christmas), but was on the market barely over a month.

How did you finance this deal?

JV. A local restaurant owner funded the entire project, I handled day to day operations (hired and monitored contractors, yard maintenance, holding costs, etc...). We split the profit.

What was the outcome?

SUCCESS! We split a hefty profit after agent fees and closing costs.

I agree with much of what others have posted.

Just speaking from my own personal experience, letting things slide will only lead to much bigger problems that are harder to correct. I've often tried to be nice and let a little junk go ignored, or some food left out on the patio for a day or two pass, or even $100 less rent go unpaid for the month (with expectation of them catching up next month). In other words, I consider myself a nice guy that wants to do good for other and give them the benefit of the doubt, but I cannot think of a single time that it has turned out well for me. Every time I've been burned and had to end up dealing with a much bigger problem, bug/rodent issues affecting surrounding tenants, city notices, tenant skips town after giving their sob story of being behind on rent, etc...

All that to say, if the lease is month-to-month, let the tenant know what has to happen or she has to go. As others have already posted, make some changes in any future leases...in fact, I saw some suggestions I'm going to implement in my own lease.

It's one thing to be nice and easy to work with, but it another to be taken advantage of with your own property.

Thank you for the advice!

@OmarKhan Thanks! I do have Quickbooks, and will be meeting with my accountant to have it tailored to suit my business better for my overall finances. However, i did not know I could potentially take it and use it for keeping my partner updated on and individual project without muddying it up with my other unrelated finances. I suppose I could talk to the accountant about that as well. Thanks again!

I am about to partner with with a local business owner with little real estate experience. He has no interest in being involved with the day to day activity, coordinating of contractors, etc... Basically, he wants to fully fund the deal (purchase of the house and all rehab), and I'll make the magic happen. He is even fine with me/my LLC being the owner of the property during the project. Obviously, I will be talking with my attorney to make sure all documents are good and we know each other's responsibility. I want keep a good relationship with him for future projects by keeping everything completely transparent.

OK, finally my question...

I'm not a pro when it comes to spreadsheets, even though I have basic spreadsheets I use for myself when determining whether a project is a good deal, tracking rents, and so on. Does anyone have any input on whether there is a good template for giving my partner a good, clear, and concise weekly or bi-monthly accounting of what is going on with the project, and most of all how the money is being spent? I know if I build one from scratch it may be clear to me, but could also be over complicated.

Any advice for this, OR any advice concerning this partnership overall would be very helpful. Thank you!

Thank you everybody for the feedback! I'm fairly new to BP, and can already tell it's going to pay off. I 100% agree that I need to get more private lenders in my corner. I should have started listening to you and the podcasts a little sooner. The cart was definitely put before the horse in my situation. My looking for deals networking paid off faster than expected, and I should have been more focused on building relationships with private lenders and other investors first. Thankfully, I have recently met some great people at my local REIA group that are getting me back on track.

Concerning this particular piece of property... I spent about an hour with the sellers this afternoon, and it looks like they may actually entertain the owner-financing idea. So, that is a good sign. 

Thank you again for all your input! It is greatly appreciated! Now, on to making more friends.

I've been a real estate investor, mostly rental properties, for the past 11 years in Clinton, MS, but only since January of this year have I become really aggressive with growing my portfolio. Long story short, I've bought 3 houses in the past 4 months (two rentals and one flip currently in progress). I have found a house with acreage in my personal neighborhood that I truly believe could be the best deal I've found so far. It's a 4/2 in an excellent area of town with approximately 1,900 sf (according to seller's estimate) but is stuck in the 1970's. I will be taking a closer look at it tomorrow, but I believe I can get it for less than $100,000. With around $30,000 for rehab, it would have a $200,000 ARV.

Bottom line is I have the bulk of my cash in my current rehab project. My bank is excellent to work with, but they are more interested in approving more rentals for me instead of fix and flips. I'm only in the beginning stages of building a relationship or two with potential private investors with little to no real estate background. So I do not feel like I'm ready ask them to make that leap yet. I plan to make an owner-financing offer, but I don't get the feeling they will be interested in that option.

Does anyone have any suggestions for my particular situation, or will I potentially have to kiss that one goodbye?

Much to my surprise I've had more positive feedback and activity from sellers than I was expecting this year.

Thanks in advance for any advice!