All Forum Posts by: Jeff Copeland

The best way to protect a private lender is for a mortgage and promissory noted to be prepared by an attorney (the title company or attorney handling the transaction can usually handle this in house if needed). The mortgage gets recorded at closing, which creates a lien on the property. 

All funds from the buyer and lender get sent into the title company (or attorney's office closing the transaction) for clearing and disbursement to any lienholders and the seller. 

The logistics of private money are generally the same as any other type of real estate financing, including seller financing. There's a great overview of the process at https://www.biggerpockets.com/...

All other things being equal, a single family home with no HOA fees will generally be worth more than a townhome or condo with a mandatory monthly HOA fee. If nothing else, the monthly expense reduces a buyer's buying power compared to the SFH.

But all other things are rarely equal. It also depends on a lot of factors such as location, age, build quality, floor plan, square footage, amenities, curb appeal, etc...

As well as what the HOA actually provides for that fee. Are they just policing paint colors and parking? Or is the HOA covering exterior maintenance, roofs, landscaping, security, pool, clubhouse, insurance, utilities, etc.?

It's not about what you profit. It's about what you save on taxes. 

Three scenarios:

1. You flip a house you held for less than one year for $100k profit, and you are in the 28% tax bracket. Your tax bill is $28k, leaving you with $72k in profit remaining. 

2. You sell a house you held as a rental for two years, and you sell it for $100k profit. For most people, long term capital gains tax is 15%, so your tax bill is $15k, leaving you with $85k in profit remaining. 

NOTE: If you need the cash, you can stop here. These are your options. But it you are using the funds to invest in more real estate:

3. You sell a house you held as a rental for two years. You sell it for a $100k gain, but you roll that gain into a 1031 exchange for a larger property (or multiple properties) worth at least as much as you sold. YOU. PAY. NO. TAX. ON. THE. SALE.    None!

When you project that out over decades of buying and selling properties as an investor (and perhaps millions of dollars in gains rather than a measly $100k), it can be HUGE. 

There are some great resources here on BP, including 1031 guru @Dave Foster. I'll also PM you some additional info. 

You would need to talk to your broker about this, and it will depend on several factors, such as what kind of listing agreement and agency relationship does your brokerage have with the seller?

If your brokerage is a single agent for the seller, you are morally, ethically, and legally bound to get them the highest and best offer for the property, and represent their best interests in a fiduciary capacity. 

You can't do this while also taking an assignment fee. 

Remember, your brokerage (not you, personally) represents the seller. You represent your brokerage. Deals like this often end up in the paper and make the brokerage look bad, for the above reasons. 

To be fair, if you have no brokerage relationship with the seller and full disclosure, it can technically be done. But only with your broker's blessing and full disclosure to the seller. 

But why wouldn't you just charge a higher commission rather than complicate the transaction with an assignment fee, unless you were trying to hide it from the seller or your broker? And is your broker entitled to a split on the assignment fee?

Not really. They may give you some indication of market value, but they are not good comps. 

One reason is condos and townhomes often have monthly HOA fees in the hundreds of dollars per month, so that has to be factored into their market value (it usually decreases the value).

To be fair, some single family homes have HOA fees too.

But you need to compare apples to apples. 

Yes, they can sell it. 

But they cannot convey free and clear title without paying off the mortgages and any other liens. So they would need to sell it for more than they owe.

In order to buy it subject to, you would have to bring the mortgage that is in default current, meaning paying off any late payments, penalties, interest, late fees, etc to bring the mortgage account current again. Often, these are extremely high after accumulating long enough for the foreclosure auction to be imminent. 

Another challenge can be even figuring out what this amount is. The mortgage servicer will not release this information to anyone but the borrower, and will often require a written authorization to release information signed by the borrower before they'll talk to you about the loan or the current balance. Many borrowers who are this far down the road to foreclosure stopped being responsive long ago, and are often in denial. 

I am not familiar with Denver, but in most cities, "spot rezoning" (meaning rezoning a single parcel to suit a single owner) is never going to happen. 

Cities rezone neighborhoods or tracts of land to meet their long term planning and land use goals. Not to suit an individual buyer who wants to convert their basement and add an ADU.

This would be more of a variance request in most municipalities, and it's still very often a long shot, requiring actual support from the neighbors and a long and laborious pile of red tape. 

It's not unethical if you don't have an exclusive arrangement. 

But it is impractical, and I'd even argue it's unprofessional. 

Real estate agents are not some interchangeable commodity (like any professional, each has their own specialization, background, education, experience, etc) and treating them like one is not going to win you any popularity contests (or get you a sneak peak at their best deals). If you are "picking out the ones [listings] you like" from Zillow, Realtor.com, or another public site, you are already a day late in many cases. 

An approach much more likely to end in success is to actually put in the leg work to meet with and interview a few agents, share your goals, objectives, experience, and expectations, and figure out who would a great agent for you to work with the for the long term. Then treat them like the invaluable team member they are. 

Note: I do believe you need a different agent for different markets, or different specialties (multifamily vs industrial or office, for example), but trying to pit multiple agents in the same market (who are looking at the same inventory) against each other is just asking for trouble, with the potential for commission disputes, ethics complaints, etc.

Finally, note also that realtors have a code of ethics that, among other things, prevents them from working with another realtor's clients. That's why one of the first questions we often ask is "are you working with another agent?"

By the way, what does any of this have to do with assumable VA loans?

One of the main items that falls to you as the buyer is to hire a home inspector, and complete any inspections and negotiations within the inspection contingency or due diligence period defined by the contract. 

Almost all real estate contracts require the buyer to receive free and clear title, so the title work will fall to the title company or attorney closing the transaction. 

It gets a little more complicated with tenant occupied properties, because then you also need to review the leases, get tenant estoppels, verify security deposits and prepaid rent, etc. 

Note that most of this happens after you go under contract. 

If you are talking about underwriting a property for income, expenses, cap rate, and other metrics, then that is really just a matter of collecting accurate income and expense data, from the seller or elsewhere. 

As a general rule, you can't can't offset active gains (from flipping, other short term gains, or from  employment) with passive losses (from real estate, stocks, or whatever). 

 In order to take passive real estate losses against active gains, you would need to qualify as a "Real Estate Professional" in the eyes of the IRS. The requirements include the following:

- Real estate has to be your primary job

- You have to do it for at least 750 hours

If you have another job, it becomes difficult to qualify. Because however much time you spend in your other job (let's say it's 20 hours per week, which equates to 1,040 hours per year), you have to exceed that in real estate (because it has to be your primary job). 

The most comprehensive guide to qualifying for REPS I've found is at https://www.therealestatecpa.c...