All Forum Posts by: James Wierzba

Gabe,

The top theory from the reports I've read and contractors I've talked to is that water got in due to a graded slope towards the house, and a sump pump that was not functioning properly. The tenants did not report anything that alerted us to the ongoing water intrusion. We discovered the issue after they moved out.

Insurance was only able to pay out $5k. 

What the PM company did or not did do is hard to say. They claim to have done routine inspections, but I was never informed of this water intrusion issue. I can't help but think this should have been spotted sooner and I should have been informed by them.

Hi,

I have a rental property that I bought in 2018 in Indiana. It is a "turn key" rental property i.e. I bought this property from a company that buys distressed properties, rehabs them to prepare them for rent, and then sells them to a buyer. They then manage the property using their property management arm of the company.

The property had 3 beds 2 baths. One bed+bath upstairs, two beds + one bath in a finished basement.

Fast forward 5 years (after the long term tenant of 4 years left) and I get a report that the basement has been ruined from water intrusion, requiring the entire basement to be gutted and re-finished. Cost is $40k.

I can't help but think there is liability on the company for selling a property and not disclosing this. Maybe there is also liability for the managing company in neglecting to recognize this issue when it could have been resolved earlier, before the water destroyed the basement.

From my research, I would need to prove that the seller knew about the issue (water intrusion) and decided not to disclose. My intuition tells me that if they were rehabbing a property in poor condition, they surely must have known that water was leaking into the basement. I can't know this for certain, of course.

Not sure if this is worth pursuing with a lawyer or chalking this up to a lesson learned (be very careful buying properties in a wet area with finished basements, ensure it is suitably water-proofed). It is an extremely expensive lesson.

Hi,

I have been partners with my brother for the last 5 years on real estate investing. We own 8 units. Our partnership is a little complex:

- We both split the down payments 50/50

- We both own 50% of each property

- I collect and keep all the rent

- I am responsible for paying all expenses, including the mortgage

Since the properties are cash flow positive, I make more money. He is completely passive, hence his lower return. In hindsight the cash flow is not as strong as I projected and the effort is higher than expected and I am considering going off on my own in the future, but this is another topic.

My concern is that I am the owner of all of the properties. And this is basically a hand shake agreement between me and him. We have been ok with that until now, but we are starting to think it might not be the best long term strategy.

Some risks I can think of

- I get sued or divorced or go bankrupt and they can take all of the properties (including his half)

- We have a falling out and I try to take the properties myself

- I would technically be liable for all of the capital gains tax when we sell, even though we should be splitting it.

- If I die, there is no documentation that shows half of the properties are his

The properties are actually all titled under a LLC for which I am the sole proprietor. Originally, I added him as a co-owner of the LLC, but removed him because it added a lot of complexity and a lot of extra fees for tax filing.

My guess is that I will need to set up a real estate trust. Is that the best approach? I have heard that trusts are flexible. Would I be able to codify the rules I listed above in a trust ?

Hi,

I purchased a property with a partner. The deed was in both of our names. I transferred the title from myself to an LLC (via a warranty deed) because we want to own the property under an LLC for liability purposes.

However, I made a mistake -- since I transferred the deed from myself to the LLC, and I only owned half of the title, the county recorder now shows the property to be jointly owned by the LLC and my partner.

How do I transfer the remaining part of the title to the LLC? I assume I can just have my partner file their own warranty deed to transfer the title from my partner to the LLC. That way, the LLC now owns 100% of the title.

Am I missing anything? Would this end up with a weird situation of the property being jointly owned by 2 duplicate entities?

I have a few properties in Indiana and one property near Kansas City, MO.

I've owned them for a few years now. I bought all of these through turnkey companies that do the rehab and also do property management, and I hold on to them long term.

Recently, over the past few months, the PM for my Kansas City property has been communicating less and less. They failed to fill a vacancy over the past few months, were not responding to most of my communications, and recently they went offline (their site is offline, and their email domain is also offline, emails bounce back).

I have never even seen this property in person.( I hired my own trusted inspector when I made the purchase -- which gave me the confidence to purchase) -- but now I feel a little lost in this current situation.

What are my options at this point? Find a new PM? I will have to re-read the PM agreement I have on file with them to see what my outs are. I admit I did not consider this scenario (ghosting me) when I made the purchase.

TL;DR -- how transfer 50% ownership of my rental properties to my brother? The properties are financed by me and are Fannie May loans.

I'm trying to figure out how I can have me and my brother on the title as 50% owners (tenants in common) for my rental properties that are financed.

I have seen a lot of conflicting information from my research so far.

My loans (4 mortgages on 4 rental properties) are all Fannie May loans.

From my research, it suggests that until 2016, the name on the title of a property backed by a Fannie May loan must be in the name of the person on the loan, and no one else. In 2016, the guidelines appear to have been updated to allow ownership of an LLC, but only if it is a sole proprietorship (source).

I have also heard that changing the title can have implications on insurance policies.

Bonus question: I also have a registered LLC, and would actually prefer to own the properties via the LLC, with my brother. In this case, I would add my brother as a 50% stakeholder in the LLC. (I prefer LLC for the additional protection against litigation/liability).

I have been acquiring single family homes over the past 2 years. I have 4 right now. I basically just save money from my job and the cash flow until I have enough to purchase another with a cushion and rinse and repeat.

Question: After I get to 10 properties/loans, and I can no longer qualify for the standard Fannie Mae / Freddie Mac -- how can I finance additional single family homes? Is it possible to roll all of my individual mortgages into a single mortgage?  

I have a high paying job and very good credit score. Not sure if this helps at all, since it seems financiers don't really care about your 9 to 5, they care about the investment property itself.

Thanks for the detailed response. 

Question: what kind of lawyer do you suggest I search for?

I own a few long term rental properties. The titles are held by a sole proprietorship LLC for which I am a 100% owner. ( the LLC does not have a tax ID, i use my SSN)

My brother is investing with me now. He has paid me 50% of the initial down payment and we now consider him to have 50% ownership of the property.

Currently , it is an informal agreement ( nothing is in writing). We want to formalize it just in case of future disagreements. 

Question: what is the ideal way for us to officially record that my brother owns half of each rental property? Is it possible to have him own half of each title ? Or should I give him half ownership of the LLC?

Disclaimer: I plan to consult a lawyer but I just want to get some initial thoughts from experienced investors here. 

I appreciate all of the honest feedback.

The takeaway here for me is that I need to manage my financer better, and have backup/contingency plans.

Luckily the sellers agreed to sign a mutual release from purchase agreement. So I will most likely get my EM back. I will only be out 650 for the inspection with a lesson learned ...