All Forum Posts by: Jeff Copeland

One of the reasons there's no flow chart you can just buy or copy is there is a complex web of federal, state, and local laws you have to comply with when it comes to tenant screening (Fair Housing, Privacy Act, Fair Credit Reporting Act, HUD Guidance on Criminal Records, Section 8 Income Qualifications...just off the top of my head). You need to know a lot of stuff about a lot of stuff to effectively and legally screen tenants. 

There are some great automation tools for the logistics of responding to tenants, scheduling showing, etc (Tenant Turner, Show Mojo, and Rently are a few that come to mind). These can save you tons of time and automate a lot of the back and forth and tire kicking. 

But don't overlook the importance of knowing what to do and what to say once you actually get into the screening process.

It depends: Understanding Bankruptcy When Screening Tenants

(no affiliation, just great info that's exactly what you are looking for)

You would need to contact the Planning/Zoning department in the municipality where it's located (City government if there is one, County government if it's not inside City limits) and confirm the zoning of the parcel, and the permitted uses, setbacks, and density requirements for that particular zoning designation. 

Sometimes some of this can be found online. Lookup the zoning for the parcel, and then find the zoning matrix or land use matrix (nomenclature will vary from place to place) to see what the permitted uses are. 

The general consensus is often that a sinkhole home that was repaired correctly can be better than new. And the owner/seller often already has engineering reports/assessments showing what was done and that fact that it was signed off on by an engineer. 

However, from a valuation standpoint, it will always have to be disclosed and it will always be a black eye on the property. 

So if it cash flows and you can get it for the right price, the sinkhole repair may never be an issue. 

Just don't expect to buy it at a discount and then sell it at a premium. You need to buy it at a discount, because you will always have to sell it at a discount. It should still appreciate along with the market, but will likely never command the same price as a comparable home without the stigma.

If the seller already has an agent who has listed the property for sale, then the agent already has a contract with the seller (called a listing agreement) that guarantees them a specific commission, paid by the seller. 

In this scenario, you aren't "asking the seller to pay that", the seller has already signed a contract with the listing agent agreeing to pay it if the agent sells the property. 

The type of financing does not change the terms of the listing agreement. It could be cash, conventional financing, commercial financing, private financing, hard money, seller financing, or any combination of the above. The listing agent's commission is based on the sale price, not the type of financing. 

That being said, you may certainly have to factor into your offer the fact that the seller is contractually obligated to pay the listing agent's commission, and the way you make your offer more attractive is by offering more money or better terms, not by negotiating the listing agent's commission. 

If the listing agent reduces their commission, that would be a negotiation between the listing agent and the seller, you aren't a party to that agreement. 

You may find this post helpful: https://www.biggerpockets.com/... 

You might consider speaking to to the City's zoning and building departments where you are located first and confirm whether zoning, setbacks, density, and other requirements will permit you to do this. It's often referred to as accessory living space (without cooking facilities) or an accessory dwelling unit (if it has a full kitchen).

Unfortunately, there are a lot of contractors that will just take your money and build it without permits, leaving you with an unpermitted and illegal addition that you might have to remove later on. 

See https://www.biggerpockets.com/...

A HELOC can be a great source of low-cost capital for value add projects, with the goal being to refinance into long term debt, pay off the HELOC, and repeat) - essentially the BRRRR method, while paying 5% interest on your HELOC instead of 15% interest on hard money.

But a HELOC is not intended to be a long-term debt instrument.

As usual, the answer is "it depends". 

My first question would be Do the zoning, setbacks, and density requirements for the parcel permit you to build an ADU? If the ADU wasn't already there and you asked the City to permit it, would they say yes or no?

If the answer is no, then your likelihood of getting the illegal one permitted after the fact is very low. And making the City aware of it by asking them to permit it could just result in a code violation, hearings, fines, and headaches, with a worst case outcome of you having to demolish it. 

If the answer is yes, then the next question is Was it built up to code, or are you going to have to tear it down and start over anyway to get it permitted and approved? Garage conversions and other unpermitted DIY projects are often not done correctly and safely, so again the worst case outcome is having to tear it down and start over. 

If it was built up to code and it conforms to zoning, setbacks, density, and other requirements, then obviously getting it permitted could result in a huge value-add for you. Baked into this statement is the fact that you need to be buying it at a discount in exchange for taking on this risk. 

Finally, my last questions would be How likely are you to get caught if you just keep renting it, and does the property make sense even without the ADU? 

Obviously, many people get away with renting unpermitted ADUs and additions for years, or even decades. But if there is ever a code violation on the property (often the result of a neighbor or an angry tenant complaining to the City), or you need to pull a permit for something else, which results in the City poking around out back, the gig is up and you need a Plan B.

While you are not wrong, your answer has nothing to do with the original poster's question about wholesaling his own listing.

No. But you don't need to as a licensee.

 First of all, this is a question to run by your broker. Remember, the brokerage represents the seller. and you are an agent of the brokerage. You don't get sued personally when things like this go South, the brokerage gets sued. So always run odd situations like this past your broker. 

Secondly, as a broker in Florida, my take on it this is: There are legal and ethical ways you can make very good money in a situation like this (where you have a seller and a buyer, and you are the middle man bringing them together) - In fact, that's sort of your job as a real estate agent.

But what you are describing would likely be a violation of the code of ethics and possibly state law, which requires you to use skill care and due diligence as a fiduciary for your client (depending on the brokerage relationship). It would be hard to convince a judge this was in the best interests of the seller. 

Standard 1-5 of the NAR Code of Ethics states:

REALTORS® may represent the seller/landlord and buyer/tenant in the same transaction only after full disclosure to and with informed consent of both parties.

Here's the thing: If you were doing this with full disclosure and informed consent of the seller, you could just charge them a higher commission for bringing the end buyer. You would already have a listing agreement so you would not need to "buy" the property yourself and charge to the buyer an assignment fee (so your hypothetical scenario above suggests you'd be doing it without the seller's awareness or consent, which is illegal and unethical). 

In fact, you could also legally charge the buyer a commission and represent both parties as a transaction broker (as long as you had full disclosure and informed consent). 

Many common practices involved in wholesaling only exist to get around the fact that the wholesaler is unlicensed and cannot legally be paid a commission. Having your license eliminates the need for all the shady practices designed to skirt state laws, but it also holds you to a higher standard when it comes to representing the best interests of your client and protecting consumers. 

Note: There have been instances in the past few years where realtors got in trouble for buying their own listing at a reduced price and actually closing on it, and then reselling it later for a higher price (I wish I could find the article. If I do, I'll post a link). No matter how you spin it, there's just no way that was in the best interest of the seller.