All Forum Posts by: Jeff Copeland

In most cases, a valid lease survives the sale of a property, unless there is a terminate on sale clause in the lease. 

Ideally, you'd need to see a copy of the lease to fully understand the terms and conditions. But it's fairly safe to say the tenant has the right to continue their leasehold until the term expires and proper notice of non-renewal is given. 

Another option is to negotiate with the tenant to terminate their lease early or "buy them out" of the remainder of the lease. 

They will primarily be concerned with the asset: Income, Expenses, NOI, and DSCR.

In real estate, it is not uncommon to create a new LLC for each property, so they will be less concerned about the entity itself.

More like 80% asset & DSCR, 20% borrower (credit score, cash reserves, etc).

The Fall, and the holiday season (Q4 in general), is the worst possible time to list a property. On top of this seasonal slump, you had the interest rate spike at the same time. So this isn't surprising. 

Has there been any change since the first of the year?

Things will definitely start to pick up more in the Feb/Mar/Apr timeframe if you can wait it out. You might even consider taking if off the market for a new weeks (61 days will reset the DOM), staging, and updating your listing photos.

Renting can also be a good plan B. Rather than paying short term capital gains tax, renting it out for a few months and possibly paying long term capital gains tax when you sell could offset some of the holding costs, etc.

Happy to help with a rent versus sell analysis if you're still stuck.  

You should connect with @Mary Beth Blackwell!

@Palmer Thomas - See my comment above and make sure you understand what a balloon payment means. I do not understand what you mean by "He is actually more interested in keeping the loan going after the balloon". 

Once the balloon payment is due, you pay him off in full and that's it. The note does not continue after that. 

The underlying point here is you will need to have the cash to pay off the full balloon payment when it comes due. This is often done in conjunction with a refinance into longer term debt. 

It's a bit more formal that an IOU. Seller financing normally includes a recorded mortgage, and a promissory note (or a deed of trust in some states). Realtor commissions on the sale are paid out at closing. The type of financing the buyer uses does not affect the realtor commissions. Bank of America could be the lender (n the case of a conventional of commercial mortgage), Joe The Seller could be the lender (in the case of seller financing), or Hard Money Mike could be the lender (in the case of the hard money loan or any other type of private financing), or the buyer could pay cash. None of this affects the commission. 

As a realtor, you don't really need to be intimately concerned with the state laws and types of documents used - These will be prepared by an attorney (often in conjunction with a title company) just like they are for any other type of financing. 

You just need to negotiate the seller financing terms in broad strokes. 

Check out https://www.biggerpockets.com/... for a more in-depth overview.

You simply need a commercial lender. They are not hard to find. 

Conventional Fannie/Freddie backed loan products are for individuals, and 1-4 unit properties. 

Commercial loans are more commonly utilized by business entities (such as LLCs and corporations), and, in the case of multifamily, more commonly used for 5+ unit properties.

@Dave Foster is our resident 1031 guru. I am not sure how the IRS views a second home that was mostly rented out for investment purposes. Dave can chime in on that. 

But the rule thumb is generally two tax years, which in most cases is a minimum of 366 days. 

A couple of thoughts:

1. The balloon payment at the end of the note is not optional. It's not there "in case he wants his money out then". Your balance will be due in full at that time. 

2. Yes, there is a market for note investing. It's very very common. The present value of the note will depend on a lot of factors (the age and performance of the note, the interest rate, the strength of the borrower (risk), etc.). There's plenty of info here on BP about note investing.   

@Alan Craft - Another thought occurred to me. We PMs find that a surprising number of people don't really understand how a thermostat works. 

It's a classic, almost comical, maintenance call that happens all the time:

Tenant: "My heat is broken. It isn't coming on"

PM: "What is the thermostat set at?"

Tenant: "70 degrees"

PM: "The reason your heat isn't coming on is because it's 72 degrees outside, and you have your thermostat set to 68. Your heat won't come on unless the temperature drops below 68".

You get the idea. 

It occurred to me that the burner in the oven is likely kicking on and off to maintain the temperature they have selected. The lower the temp setting (350, for example), the more often the burner will kick off to maintain the lower thermostat setting. 

Has anyone actually observed what the tenant says is the problem with the stove, and perhaps explained to them how the thermostat works?