All Forum Posts by: Jeff Copeland

The owners can't sell their house if they are dead. 

This will likely have to go through probate, and/or foreclosure (it's not uncommon to see both happening simultaneously), which can take months, or even years. 

These usually get listed on the MLS with a realtor once the estate, or the bank, has free and clear title.

There is a small chance that the owners had a will, and the heirs just need some help navigating a more simplified probate process. In which case, you'd need to figure out who the heirs are (one possible approach is to simply ask the neighbors, you could also search local court records online) and see what they know. 

It's not uncommon for their to be multiple heirs, none of whom agree on what to do with the property (or how much it's worth), so often the juice is not worth the squeeze. But you never know. 

One common approach is to form a company, such as an LLC.

You each contribute capital and own a percentage of the LLC, then the LLC buys the properties, and your LLC operating agreement dictates how to handle distributions, capital gains, etc. 

In other words, the two of you own the company, and the company owns the properties. 

It depends on a lot of factors. California Code, Business and Professions Code (BPC) 10131 addresses this, and states that the following activities constitute the practice of real estate and thus require a real estate license:

A real estate broker within the meaning of this part is a person who, for a compensation or in expectation of a compensation, regardless of the form or time of payment, does or negotiates to do one or more of the following acts for another or others:

(b) Leases or rents or offers to lease or rent, or places for rent, or solicits listings of places for rent, or solicits for prospective tenants, or negotiates the sale, purchase, or exchanges of leases on real property, or on a business opportunity, or collects rents from real property, or improvements thereon, or from business opportunities.

(there are more, I intentionally left out the rest, which are mostly related to sales)

However it also states:

(a)  Subdivision (b) of Section 10131 does not apply to (1) the manager of a hotel, motel, auto and trailer park, to the resident manager of an apartment building, apartment complex, or court, or to the employees of that manager, or (2) any person or entity, including a person employed by a real estate broker, who, on behalf of another or others, solicits or arranges, or accepts reservations or money, or both, for transient occupancies described in paragraphs (1) and (2) of subdivision (b) of Section 1940 of the Civil Code , in a dwelling unit in a common interest development, as defined in Section 4100 of the Civil Code , in a dwelling unit in an apartment building or complex, or in a single-family home, or (3) any person other than the resident manager or employees of that manager, performing the following functions, who is the employee of the property management firm retained to manage a residential apartment building or complex or court and who is performing under the supervision and control of a broker of record who is an employee of that property management firm or a salesperson licensed to the broker who meets certain minimum requirements as specified in a regulation issued by the commissioner:

(A) Showing rental units and common areas to prospective tenants.

(B) Providing or accepting preprinted rental applications, or responding to inquiries from a prospective tenant concerning the completion of the application.

(C) Accepting deposits or fees for credit checks or administrative costs and accepting security deposits and rents.

(D) Providing information about rental rates and other terms and provisions of a lease or rental agreement, as set out in a schedule provided by an employer.

(E) Accepting signed leases and rental agreements from prospective tenants.

(b) A broker or salesperson shall exercise reasonable supervision and control over the activities of nonlicensed persons acting under paragraph (3) of subdivision (a).

(c) A broker employing nonlicensed persons to act under paragraph (3) of subdivision (a) shall comply with Section 10163 for each apartment building or complex or court where the nonlicensed persons are employed.

Is this a single family home? If so, why aren't the utilities in the tenant's name?

Obviously you do whatever works best for your business model. I'm not here to tell you how to run your business, but I think there's something to be said for having local professional property management who could've checked the tell-tale on the meter and confirmed the leak on Day 1. 

And I can't imagine jumping in the car, driving 17 hours, and missing a week of work (or leisure, or whatever) to go check on a plumbing leak. 

I'm not knocking you, we're all here to learn and deconstruct these events to see what we can do better next time (and believe me, I've jumped in the car with an "if you want it done right, do it yourself" attitude many times, lol!). 

My point is I don't see how self-managing from halfway across the country is actually saving you any money. 

That depends on what your criteria are for picking the "best".

There are arguments for and against both approaches. But the ultimate downside risk to you as a landlord or PM is an applicant claiming that you denied them housing because they were a member of a protected class. This is a violation of Fair Housing laws and can come with hefty fines, legal fees, bad press, and all sorts of other problems. 

If you have clear, published qualification criteria (for example, income 3X rent, 650+ credit, no evictions), and I meet all of those requirements, and I apply ahead of a non-minority person (and I'm minority, or a member or a certain religion, or other protected class), then it's pretty easy or me to claim (and for me to truly believe):

1. I was qualified for that rental,

2. I applied first,

3. The other guy got it,

4. I got denied because of my membership in a protected class. 

It's pretty easy to see how this could become difficult to defend in an investigation or hearing. 

Processing them in the order they are received, and then working through a flow chart that's more like:

1. Complete Application: Yes/No

2. Qualified: Yes/No

3. Wants to move forward: Yes/No

4. Signs lease and pays deposit within 24 hours of offer? Yes/No

Protects you from the scenario above.

There's a lot to unravel here:

1. Would you be able to take a home equity loan against a rental property?

A home equity line of credit (HELOC) is a long shot. The vast majority of banks don't like to do them on rental properties, and most are further tightening their belts as they gear up for a possible recession.

A cash out refinance, on the other hand, is very doable. Especially as the low LTV you are talking about, most lenders would have an appetite for that.

2. Can you use the proceeds to buy another property in Mexico?

Technically, you can use the cash you pull out to do anything you want. But you might not want to put "Buy a house in Mexico" on the line of your application that says "Purpose of Loan?" - It simply raises a lot of questions and potential red flags for lenders and underwriters. "Invest in more real estate" is also true, but sounds a lot safer to an underwriter!

3. Can you sell the SFR and is that permitted by the IRS?

I assume you mean the house here in the US that is the source of the equity? Yes, you can sell it any time you want, and the IRS has nothing to do with whether or not you can sell it. 

There are some major factors to consider, though. Such as:

When you sell it, all of the debt will have to be paid off. 

If it was your primary residence for 2 of the previous 5 years, you normally would not pay capital gains tax on the gain of $1.2M. This is huge. And it will dictate when you should sell, not whether you can sell. 

(Capital gains tax is 15% for most people, so there's a potential $180k +/- difference in your tax burden here. Definitely worth sitting down with a CPA and discussing!)

 I have no idea. I was just answering the original poster's question.

But, to be fair, just because someone reinstated their mortgage after a looming foreclosure doesn't mean they'll never want to sell the property. It could be worth staying in touch.

I'm not sure what kind of advice you are looking for. The owners names and address are a matter of public record. You could send them a letter or a postcard, or knock on their door, and ask them "Do you want to sell your house?"

That's pretty much it. 

In many cases, they have been ripped off. 

Your best bet is to just be honest with them from the start.

Zoning will likely be your biggest hurdle. Most cities will not permit multifamily development in neighborhoods zoned for single family homes.

However...this concept is not too far removed from the coliving trend we are seeing in many markets.