All Forum Posts by: Jeff Copeland

At a glance, not really. 

It sounds like the lender has held up their end of the bargain, and has even been very generous with a 3 month extension at the original terms. 

You have to realize the lender is losing money every day their capital is tied up in your project. 

This is a common contingency you should have planned for. And it's not the end of the world, especially when you look at the numbers. 

You're talking about an extra month? Is $900 really going to ruin the outcome of your project? It's a rounding error. 

Even if it takes an additional 90 days beyond your three month extension: Is $2,700 really going to ruin your deal? It's the equivalent of a minor surprise in the construction budget. 

The secret is out, LOL. 

But in reality, the concept of strategic refinancing has always been one of the core benefits of real estate investing:

Buying a property, enjoying the double-edged benefits of appreciation and debt reduction, then having the option to "withdraw" some of your equity with no tax implications through a cash-out refinance has always been one of the game changing benefits of investing in real estate. 

The BRRRR Method is simply one variation of this where (usually) the buyer compresses the timeline by using forced appreciation. It was never really that much of a hidden secret or a hack. 

Hi Mohammed, 

I see you already contacted our office via the Agent Finder tool. I look forward to connecting!

As far as a local lender in the Tampa Bay area, I highly recommend my friend and colleague Tracie Mayo with Savvy Mortgage. I'll PM you more info. (We are not an affiliated business and there is no financial incentive. I just know they'll take great care of you). 

It's highly doubtful that there is a deal with $274k (65%) spread needing only $35k in rehab just sitting unsold on the MLS. If it looks too good to be true, it probably is. Your job, as a potential buyer or wholesaler, is to find out why. 

The other harsh reality is you just can't buy a $425k property with $1k liquid cash. You would most likely need a money partner to take down this deal. 

Even to wholesale it, the seller is likely going to want to see proof of funds, and no hard money lender is going agree to fund it at 99% LTV.

My advice would be to seek out an experienced local partner who can help you 1) analyze the deal, and 2) fund the deal if it is in fact such a home run. 

Don't get me wrong: Finding and analyzing deals like this is the fun and exciting part! I'm not trying to discourage you, just urging caution and suggesting a way forward. 

Kevin Bupp out of Clearwater is a guy you might want to sit down with. I'll send you a PM with more into. 

You can buy whatever you want, with or without a real estate license. 

But in order to take full advantage of your real estate license (earn/save the commission on a property you purchase, for example), your license must be active with a broker in most states. 

Real estate commissions are not paid to the agent. They are paid to the broker/brokerage. The agent's compensation thereafter depends on their compensation plan with their broker. 

There may be slight variations from state to state, but generally speaking: Yes, you can buy a property without an active real estate license. But no, you cannot earn a commission if your license is not active with a broker. 

This is not unique at all. Getting applicants with low credit scores is something that happens all the time. 

Obviously, you allow and consider co-signers (otherwise, why would they have one?), and the cosigner meets or exceeds your criteria. So what's the problem?

Your tenant screening criteria should be crystal clear on what your requirements are, and they should be applied consistently to all applicants in order to avoid fair housing and discrimination complaints. 

The fact that you are asking us to interpret your screening requirements is cause for concern. (I'm not knocking you, simply pointing out that you may want to tighten up this process), for the following reasons:

Let's say you ultimately decide to deny these applicants housing because you just aren't comfortable with the whole cosigner thing and don't want to deal with it. And let's say they are of Asian descent (of course, I have no idea, I'm just making up an example). 

Then another month goes by, and you get a similar application from a couple who are not Asian. Low credit scores, but an otherwise decent application with a solid cosigner. After losing another month of rental income to the vacancy, you're under pressure to get the place rented ASAP, so you cave in on the cosigner thing and rent to them. 

The first couple now has reason to believe (and possibly evidence to prove it, even if it was never your intent to discriminate) that you denied them housing because of their race. After all, you rented the exact same unit to the other couple in the exact same circumstances - The only thing different was their race. 

You end up in court, and the judge asks you if you have published screening criteria ("Yes your honor", and whether you understand and apply them consistently with each and every applicant ("Yes your honor"). 

But then the plaintiff's attorney shows the judge a printed copy of this thread from Bigger Pockets, which suggests you were winging it and asking for advice in a public forum about how your own criteria should be interpreted. This makes it very hard to claim that you always apply your screening criteria consistently, especially when you literally didn't apply your screening criteria consistently.

Again, I'm not knocking you - You haven't done anything wrong and this is all hypothetical. We are all here to learn and exchange ideas. I'm just pointing out how these things could be interpreted in a worst-case scenario, and highlighting why consistency is key when it comes to tenant screening. 

BTW - An increased security deposit is a great way to mitigate the risk with these applicants, as noted above. But that too needs to be spelled out in advance and applied consistently to all applicants. 

Both are obviously important, but I often tell my clients, "Great property management can turn a mediocre deal into a home run, while bad property management can turn a home run deal into a nightmare!".

Similarly, Engelo Rumora (can't find him, not sure if he's still active on BP) made a great statement here on Bigger Pockets back in 2018 (so much so that I printed it, framed it, and hung it on my wall:

"The stats and the demographics are not going to make you money. It's the people. It's the team on the ground who you are going to trust with your hard-earned money...You want to work with someone who is going to have your best interest at heart for 5, ten, or fifteen years".

In my experience, the investors who are most successful are those who establish long term, mutually rewarding partnerships with their team (broker/agent and PM in particular), rather than transactional relationships. 

This bleeds over into the PM understanding the investor's goals and objectives for the property, and thus screening tenants, maintaining the property, minimizing expenses and vacancy, and maximizing rent collections accordingly. 

Mortgages are a type of lien, and they get recorded in the public records for this very purpose. Mortgage liens and other types liens (municipal liens, tax liens, etc) are the main things they are looking for in a title search, because liens create a "cloud" on title.  

Typically, both the buyer and the lender also purchase a title insurance policy, which insures them against any undiscovered liens, encumbrances, and other clouds on title. Because of this, the title insurance carrier conducts a thorough lien search, and reviews all previous title transfers, looking for anything that could create such a cloud, before issue the title commitment, which is basically a document stating under what conditions they will insure the title. 

These conditions include things like "pay off the previous mortgage" and "record a satisfaction of mortgage from the lender that is being paid off", and sometimes may include things like "provide evidence of satisfaction of this old mortgage from 1988 we found in the public records". This is part of what the title company or attorney's office does between contract and closing to convey title from seller to buyer.

When you sell a property, almost all contracts require you to sell it with clear title: Meaning free of any liens or other clouds on title. That means all previous mortgages and other liens have to be paid off at closing. 

While this all often happens simultaneously at closing, the true order of operations is roughly:

1. Seller pays off all pre-existing liens and delivers the property with free and clear title. 

2. Buyer buys the property from the seller and title is conveyed to them via a recorded deed. Note that this could be with cash, and the process would stop right here. Otherwise:

3. Buyer borrows some money from the bank, and pledges their new property as collateral for that loan. 

4. Lender creates a new mortgage lien on the property to protect their interests (if the borrower doesn't pay, they can foreclose and take the property, and if the borrower sells the property, they get paid off - because the owner can't deliver free and clear title until their mortgage lien is satisfied).

Note also that these last two steps could happen at the closing table when the property is first purchased, or at any time thereafter. The latter would be called a refinance. 

With regards to Property and Casualty Insurance:

If you can truly afford to self insure, great. But understand that the risk you are assuming includes everything from $20k in roof or water damage, to a catastrophic loss. If you can absorb the complete loss of the building (for example, burned to the ground, gone, not salvageable, rebuild from the ground up) and you are comfortable with that level of risk (few people are), then by all means save your money and self-insure. 

A middle of the road option to is insure only against catastrophic loss - By keeping your deductibles extremely high and/or waiving certain coverage options, you can reduce your premiums, but also transfer some of the more excessive risk to the insurance carrier. 

(Of course, if you ever finance (or refinance) the properties, your lender will require certain coverages and deductibles)

With Regards to Liability Coverage:

Liability is a different animal. With this coverage, you are insuring against death, permanent injury, or scarring of a person (doesn't matter who) that occurs on your property. The landlord is ultimately responsible for everything that occurs on their property. 

A water damage claim or roof claim may be in the tens of thousands of dollars, but wrongful death or injury claims are often hundreds of thousands (or even $1M+). 

Even if you want to self insure for property and casualty, most insurance pros and attorneys would advise you to at least carry liability coverage. The coverage is often capped at around $300k for homeowners polices, and then an umbrella policy would pick up from there, usually up to $1M or $2M, which covers multiple properties and vehicles for the insured. 

I'll send you a PM with some additional info is that's okay.