All Forum Posts by: Everett Fujii

Location is always going to be important.  That will never change.

However, the type of location can and will change as you are seeing.  What you are describing is nothing more than a change in the definition to the rule "location location location" applicable in your area.  

Personally, I think that your strategy will continue to be a good one, but you might have to adjust the price point of the properties you are looking at.  Subways will always be cheaper than Uber and Lyft.  So perhaps a $400k property now means that person can afford the convenience of Uber and Lyft over the cheaper price of the subway.  And now perhaps those who can only afford a $200k property still have to take the subway.  

I'm not as experienced at buying in cities with subways so I can't be much help here.  

But I would say that instead of considering the location rule dead, you might just need to adjust your thinking of what makes the location rule applicable in your area.   Something always does, you just need to figure what that something is. 

Look into a series LLC.

Cuts down the cost of the paperwork (not the filing fees) and each sub LLC provides the full LLC protection.

I put each investor into a Series LLC and each property into its own sub LLC.

@Nicole Heasley Beitenman

Keep in mind that the answer/solution to some of the issues I brought up boil down to you just have to trust the person(s) you are partnering with.

But by bringing those potential issues up, I'm hoping that I can help you see and vet your potential partners in a different light.  

I would agree with @Greg H.

Cash for keys in Texas is truly a VERY last resort.

The joke about Texas is that we have a fast lane for evictions.  It's a very landlord friendly state that enables eviction proceedings to be done very quickly, assuming you have followed the law and all associated notification requirements properly.  

I wouldn't extend the timeline.  It is far more likely that this renter will continue to be late and/or you'll have to evict them at some point anyway.

And if you do have to evict here's some info to know. Once you receive the order from the judge allowing you to evict you need to find out how many people the Sheriff is going to require you have onsite to move the tenants belongings out of the house (assuming it comes to that). It is absolutely imperative that if the Sheriff says they want 5 people, you have 5 people. I have personally seen it (with the REIT I worked for) where there was 1 less person than required and the Sheriff canceled the eviction order and we had to go through the process again.

If the tenant fights the eviction hard or you believe they might try to break back into the house I would recommend being onsite when the eviction takes place, and with the police as a witness, giving a formal trespass notice.  In other words notifying the tenant(s) that they are not allowed on the property and any subsequent attempts to enter the premises constitute trespassing.  Guess why I know this....

I unfortunately have more experience (and therefore lessons learned) to give on this subject than I care to admit.  But here's my recommendations, suggestions, and opinion.

It's pretty standard that whoever you partner with should have the same qualities you have.  Honesty, dependability, and respect.  Someone who is constantly late to meetings with you or others does not have the same level of respect for time (yours and others) that I would be comfortable with.  

The next one is to make sure that your goals and your partner(s) goals are the same.  Do not partner with someone looking to build a rental portfolio if you are looking to do flips.  Or you need to have a very clear understanding of how much time and money will be spent on each type of deal. 

Have very clear dispute resolution procedures.  Every partnership has a honeymoon period and it usually lasts from when you begin discussing the partnership until the first major problem.  No one thinks things will go wrong.  But the simple fact is that things will go wrong.  Addressing this fact head on will make working through the problems that come up significantly easier.  

My mentor told me that partnerships blow up when the company is either losing money or making a lot of money.  I never understood the latter part.  Why would there be issues if everyones making money?!  Well, I can say that the answer is it's because people get greedy.  I had a partnership blow up because I wanted to sell some properties that we had legitimate offers on and would have resulted in a 130%+ return in less than 12 months.  It was a development deal where we had bought the land and got lucky.  I ran the numbers and figured that for us to make more money the finished product was going to have to be sold at a price that I didn't think was realistic, at least not for another 5+ years easy.  Got into an argument with my partners because I wanted to take that profit and move on.  This is just anecdotal to the dispute resolution procedures paragraph above.

Each partner needs to have an equivalent amount of risk in the company.  This is much more difficult when one partner is basically the money guy.  But the question that must be asked is.  What keeps each partner from just walking away and leaving the remaining partner(s) holding the bag?  Related question is if you bring investors in the deal.  If one partner brings in an investor using their reputation and relationship what stops the other partner(s) from walking away and leaving you with egg on your face?

The  biggest lesson I've learned with partnerships is to be courageous enough to ask the hard questions up front.  To address the hurdles that are almost guaranteed to come up head on.

@Zachary Feldman

The cost to fully replace is the cost to completely rewire the building.  It's very hard to estimate as the cost depends on panel location (how far units are from the panel), how big the units are (how many plugs in each unit), and the space the electrician(s) have to work with (is there a crawlspace they can get through, or do they have to thread the wires which takes much longer and is much harder).  

The cost to do the remediation varies by the type of remediation.  CO/ALR remediation is a decent fix and can run $50-100 in my experience.  Copalum Crimps are the 2nd best solution next to rewiring and is considered a permanent and complete fix.  That method usually runs $150-300 per outlet.  The cost varies based on how many wires run to the outlet (i.e. 2 pairs, 4, 8 pairs, etc.).  

Ok, let me answer your questions here. As pointed out previously, it depends on whether you are talking preforeclosure before the foreclosure auction), foreclosure (auction at the courthouse or other location), or REO (bank has repossessed and taken over the property).

1- The first thing is do a title search to see what liens are on the house. Any lien (HOA, mechanics, tax, etc.) must be filed and put on the record. A title search will tell you what and how much.

2- The answer to this relies on a few things. The primary one is what liens survive foreclosure in your jurisdiction. Most HOA liens and mechanics liens do not survive foreclosure, but tax liens do. If you are buying it preforeclosure then all liens must be paid off. If you are buying it at the foreclosure sale then only the liens that survive are your responsibility. If it's an REO the bank has already paid off the liens (or they will show up on the title search and be factored in to the price on sale).

3- No liens that have not been filed are your responsibility.  However, one COULD be filed while you own it.  You would then have to fight the lien from being placed on your property and while it would take some work you would more than likely be able to fight it successfully. 

@Ryan Kinsella

I understand.  It can be incredibly nerve wracking.  

But try not to worry to much.  It really is up to you whether you want to respond or not.  I've had lawyers suggest both options.  Really just depends on whether they were a real pain in the butt when buying it or not and whether the response will even do anything or not.  

What will more than likely happen (with or without a response) is they will send you another letter or two then go away. 

I wouldn't worry about it.  Even if the letter came from a law firm on their legal letter head (which can be done for a couple hundred bucks) if the buyer had the opportunity to conduct inspections there is little to nothing they can do.  

If an inspector came through and they had every opportunity to request repairs and you allowed them reasonable access to conduct inspections you have nothing to worry about.

It's been said many times and will probably be said even more.  Caveat emptor (buyer beware) applies here.  

This is more than likely, what you suspect.   A buyer who got some nutcase GC in there to give them an inflated bid.  And here's the rub.  Even if there was a leak that required ripping up the slab.  As long as they cannot prove you knew about it and hid it from them, and they had inspections done, there's nothing they can do.  This is more than likely a scare tactic and I would ignore it or send them a nice response saying to go pound sand.  

@Lucas Cole

Ahh ok I get it.

My response would be the same. Look into a Series LLC. Which is sort of having an operating agreement for each property between existing LLC's, but also combines forming a new entity for each LLC (since each sub LLC is considered a separate entity).