All Forum Posts by: Jack Barkow

Are you buying cash and then wanting to do a HELOC? You could just cachout refi (6 months & 25% equity stays in) or delay finance (anytime after purchase and 30% equity stays in).

If you're planning on staying for a while and like the area I would recommend to get a 2-4 plea and rent out the other half/units and self manage it.  Should be living for free/profit.

Good Luck

Hey BP,

Here is the background before I get to the main problems and why I am now feeling "uncomfortable."

I closed on a property in January of this year.  It was a cash deal and everything went smoothly.  I am now in the process of doing delayed financing on the property.  The appraisal is done and the bank has everything done that they need to do.  My mortgage broker called me yesterday and said that the title company (same one that I used for closing) sent back the title information with liens still on the property.  The previous owner had done a "quiet title" and the title company saved around 45k at closing to clear the title since they were insuring it.

So today I hear that the title company will send back new title information saying that the title is all clear now so that we can proceed with the closing of the mortgage.  This has already delayed my target closing date about a week, which was locked in with the interest rate.

My main concerns are as follows:

1.  This seems really sketchy.  Why are they going to say there were still liens then the next day say that there are none?

2.  Why didn't the title company do the work to clear all the liens on the title already since it has been about 2 months since closing.

3.  Should I still move forward with closing on my own "lien" knowing that the title might not be free and clear yet?

4.  I'm calling the title company tomorrow to try and see what is going on.  Is there anything specific I should be asking/saying to them (maybe to put some pressure on them, but also to ensure that everything will be alright)?

5.  Is the title company liable for any "damages" considering that pushing out the closing on the loan will require either the mortgage company or myself to incur some cost in extending the interest rate lock.  Its probably only 1-200 bucks but still.

6.  Is it odd that the seller isn't bugging the title company to get the title all clear so that they can release the remainder/leftover money that they held to them since they are still waiting on that money from the sale?

@Dan Carver

Thanks dan! So since the property is not in an LLC "yet" is there much of an issue with how things currently are? A separate bank account that is still in my personal name may make things cleaner for tracking, but it's still a personal bank account.

I will 100% open bank accounts etc for my LLCs once I get that far into things.   Does that make sense?

To update on some questions.

The money is going to the management company first.  I'm just getting what is left after management fees, water/electric bills, and repairs.

They are not talking about co-mingling security deposits.  Just business income with personal income from W2 job into one checking account.

The manager is holding all security deposits on their end.

Thanks for the feedback everyone. Sounds like for the time being I can stay "lazy" and not open up a new bank account just yet. Of course once I make an LLC(s) then things will be different.

Hey BP,

So I just started with my first property in January of this year. I have it in my name currently (No LLC or anything else just yet). I'm having this property managed by a professional property manager. I'm getting feedback from friends that I need to open a separate bank account ASAP for them to deposit rents (minus management fees and expenses) into since co-mingling in my personal bank account is a bad idea.

Could anyone shed some further light on why this is such a problem? I know its not good if you have properties in an LLC, but I'm not fully understanding the problem currently. Additionally, what is the damage in already having had deposits of profits direct deposited into my personal checking account?

If/When (more like when) I open up a separate bank account for my rental income to be deposited into are there any specific rules for transferring it back to my personal account?  My personal account is going to be the account I'm going to use for funding new deals with anyways.

Any help is appreciated.  Thanks!  

Thanks for the feedback everyone.  I should note that I will have 30% equity on the 130k loan.  So if insured for 160k or so then it would have to cost over 70k to raze or repair for me to have to come out of pocket assuming it burns down the day after I get a loan on it.

Its an $1100 annual difference, or a difference in 6% COC. This city has no rules on demolishing a property with regard to % damage. Just to cap the water and sewer lines etc.

I think I'm probably going to opt for the extra COC return.

Hello BP.  I'm just starting out and closing on a rental 4-plex soon.  I'm currently weighing the different property insurance options and there is a huge difference in costs/coverage between insurers.  The background on this property is that it will be financed at around 135k through delayed financing.  I already have a 2MM Umbrella for liability's sake.  My main questions are the following:

Should I only be insuring the property for 150/160k or so in the event that it burns down so that I can pay off the mortgage and spend some money on the cleanup so that I can just sell the land and move on?

Should I be looking at policies that cover me for rebuilding the property in the event that is totally destroyed?  (350k+ rebuild value per insurance companies)

The differences in these two kinds of policies are around 1500 annually 1200 vs 2800.  They both have the standard 1MM/5K liability coverages, lost rents, and broad perils.  In short, I don't want to be throwing away 1500 in annual cashflow if I really don't need to, but I also don't want to wreck myself for an extra 1500 annually.

If you're going to be losing money on it at a rate of 5-700 a month then I would sell it.  Sure it might help with your tax return, but thats like spending a dollar to save a dime.

Why do you want to sell?  Could you just continue to live there or even get a roommate to offset costs?

If it was me I would look at why I want to move first and go from there, but definitely not keep an asset that is losing money.

Hey BP,

I got set up with an agent and am getting all new houses on the market in my target areas with target specs sent to me as they come up.  I've noticed a 4-unit property that has been reducing its price by $100 each day.  I'm assuming so that it will get repeat visibility due to price changes.  The listing also specifically mentions that the seller wants cash offers only.  This 4-unit has recently been fixed up based on the pictures and I'm assuming has no tenants at the moment.  Currently listed over 100k.

My questions are.  Why would someone care about cash offers only?  Why wouldn't they take financed money since its all the same to them.

What is the reasoning behind the constant small price reductions or is it exactly what I assumed above.

Thanks!

@Dan Turkel , Thanks for the response.  Very good things for me to further follow up on/work towards compiling.

With regard to the property taxes I did manage to find them, but they aren't making full sense to me.

Here It would seem that the total tax liability from 2016 to be paid during 2017 is right around 2900 dollars.

Here it looks like the owner is only having to pay about 2k total.  Why not the 2900 as listed earlier?

Lastly this is the tax information for 2015.  The gross tax liability is comparable to what I am seeing for 2016 (although around $250 less), but the net tax was around $1000 less, which we see the state asking for above.  What would this tax credit be that I'm not exactly picking up on?

This tax liability history is nice news though since the tax I estimated was higher than what the state is asking for (although I assume it will continue to rise).

EDIT:  In re-reading the tax assessment it looks like the tax would be that $2900 value, but it is capped at $1754 as a certain percentage of the assessed value (I'm assuming this is done federally).  Looks like they paid the Spring assessment late and then theres a $180 addition for the local city split between the two payments.