All Forum Posts by: Jake Wiley

It would help if you could share more about the space.    Is it big, small, underground, convenient to anything, in a building, standalone, connected to multi-family, office, store?   Who are the potential tenants you are looking to attract?   Sounds interesting. 

Probably a depends answer.

1)Can you economically take it and use it somewhere else?    If so, sure, if not go with #2.

2) Seems like a great option.

3) If you are giving notice to the tenant, then you likely don't need the code, they could meet you there or arrange to leave it off.    If its an emergency - its an emergency, the alarm going off is the least of concerns.    I wouldn't want the code unless it's a one-time or special use code that you can tell explicitly that you used it.   See below.  

4). Don't like this one, I'd avoid anything where you have added potential liability to you/your business surrounding safety, etc.    What happens if something bad does happen and the alarm didn't work, they may be after you.    What if you are the only other person with the code, so they say, and someone deactivated the system and allegedly took things from the property.    Don't sign up for that.   

@Nathan Gesneris right - It's hard to recover from rents getting too far behind.    There's definitely a balance here.    While it would probably work out naturally, you can test your hypothesis on one of the properties that is coming up for renewal.   If you let the tenant know early and then get the property on the market and get a ton of calls, you are on the right track.  A few months of vacancies will eat into that cashflow quick.   

You are right that is not an inconsequential amount of money and as inferred from above it's a compounding issue.   If it took you 5 years to get the rents right, that's another downpayment you don't have, and another 20k per year etc.  Its not hard to see how that doesn't turn into 100k of missed opportunity pretty quick.   When you find you are way off course on rents, starting fresh is best.   

Good luck and great place to be.   

While not really what you were asking for, however being that the underlying issue is both a legal and asset protection related question, I'd be leery of providing too much guidance in this realm other than the facts surrounding what is possible and the associated financial impacts.  

I know you likely want to be really helpful for these guys to go above and beyond, but always try to do that strictly in your lane, its enough.

Your role and what you are likely covered for is the lending piece.   If something doesn't go to plan, which happens, you don't want to be seen as providing legal/tax advice.    

Give them the facts and costs of doing business under the various scenarios and have them seek out the appropriate advice.    

Congrats and good on you for finding a path forward where the traditional strategy didn't pencil.    This looks like an amazing project.

Congrats again!

Jake

* What that mean stays in his name? Like what the consequences for that? Let’s say I would have a seller that I am explaining him how this process goes and also mentioning that only the mortgage STAYS in his name. is there any risk for him on that?

Yes - they could initiate a due on sale clause and make the loan due immediately.   If that is the case and you are not able to satisfy the loan, the property would go into foreclosure and that would be on his credit.  

* About that the foreclosing the bank chase me and not the seller, is this because I owe the deed or because I’m paying the mortgage?

If the bank knows that you have taken over the property and it is no longer in the possession of the person they signed the mortgage agreement, they would likely call the loan.    They are not in the business of sub to deals and messy titles.   They'd likely initiate the foreclosure process as quickly as possible to protect their rights and the property.   

* What’s the difference between the mortgage stays on the sellers name by me pruning the mortgage (if I would buy this house with a typical mortgage)?    

Not sure what this means, but it would take some really creative financing to have two different mortgages on the property with different owners.    I don't think this is possible.  

* if the due on sale clause does initiate and the required the money back in full, to which they go? To me or the seller? -

Seller.  The bank does not have a mortgage with you.   

* any other notes that you think I should know?  - 

Sub to deals are doable, there is a good deal of risk.   If the bank calls the note and initiates foreclosure, that is going on the sellers credit etc.    If you've put money in the property and it is foreclosed upon, its likely gone for good.    If you are taking over sub to and plan on just renting the property out  and paying the mortgage out of rents and not putting a lot of money into the property, its pretty low risk to you.   

It would be worth pulling down the census data for the area to understand the population, median income and employment trends to get a sense of whether there is simply going to be natural pressure on the market.   Stagnant or declining populations or less than ideal employment trends will give you a sense of whether the market is a good bet over time.    Right now, we seen the rising tide effect with low inventory and lots of capital that needs to go to work driving investors to secondary and tertiary markets that haven't seen the love in the past.    The expectation is that as the markets normalize, these tertiary market investments will likely be retraded to reconfigure portfolios back to traditional optimization strategies.    You don't want to be in a market that's being optimized out of.    

Then it's a matter of getting in with some good brokers that know the market, the micro-markets as mentioned above and what comparable type properties are trading at.    Once you have all of that information, you should be able to make a pretty solid decision.

Account Closed - You are probably looking for a partner in this situation as it is tough to borrow a down payment.    

I take a slightly different view on the property ladder, and this may or may not apply to you.  

With the primary residence, I am always on the lookout for a property that has room for improvement "worst house in the best neighborhood" type of deal.   We make the improvements, create the equity bump like a flip property, live in it for two years, and start looking for the next house.   The reason being is that once we've created that initial bump and done the 2 years' time the tax-free gain needs to go back to work vs sitting around, its also an issue when you start bumping up against the gains exemption limits. 

For example - I buy a 250k house with 50k down. After renovations and two years go by, it's now worth 400k. I sell and now have 200k for a downpayment, I could now do the same thing with a $1.0M house assuming my DTI makes sense.

If you are simply buying houses that are move-in ready, then it really doesn't matter too much as you are waiting on appreciation and one property is as good as the next, assuming similar neighborhoods etc.    The only thing to watch out for is the exemption limits.   

     

@Pavan Kovvuri - You'll find that if you think about it, there are always reasons to wait if you look for them.    Rising interest rates, runaway inflation, the potential housing bubble.   As long as you stick to the fundamentals and are making sound investments with the best information you have at the time, you've got to keep moving forward.