All Forum Posts by: Jennifer Wilson

@Karl McGarvey The majority of our investors were not accredited.  Our syndication attorney had a form for all investors to indicate whether they were or not.  If they weren’t, they had to sign off that they were either “sophisticated investors” and give educational and/or background experience to show they were competent adults, or indicate that if they had used a professional advisor.  Our attorney knew our plan to help friends and family, so it wasn’t too strict. 

@Austin Guzman My husband and I are the ones backing the loan, essentially taking the risk. Although we purchased the property in a brand new LLC, our personal credit and other business deals were also taken into account with us as the guarantors of the loan.

In regard to investor money and raising funds, we acquired the funds prior to closing.  We knew what property we wanted, so we knew how much we needed for the down payment, closing costs, and how much money we wanted in reserves for capital improvements.  From there, we started reaching out to investors with the business plan, property info, and to ask for money.   We had all the funds we needed to purchase and start running the property before we closed.  The closing essentially shut down the opportunity for other investors from getting in.

I agree with Melissa and Karl that you should form an LLC for the property/project. In addition, before you purchase the property, make sure you have a solid contract in place to ensure that everyone understands their portion of the total investment, what is expected of them, what their potential profit split will be, what will happen if you refinance or sell, etc.

My husband and I have purchased two properties with outside investors, but we went about it a little differently.  We ended up doing a syndication where we have investors, but they are silent partners.  They contributed funds into the project in exchange for an ownership percentage of the property.  They then get that percentage of the profits each quarter.

We went about it this way as our investors either didn't have much experience in real estate investing or were located far away from the property.  As my husband and I are the more experienced investors and the ones living near the property, we are the ones that found the deal, analyzed it, purchased it using our own credit, and run the day to day operations and any renovations.   Without getting into all the details of how it works, I'll just say that for taking on that additional risk and work, we are compensated for that in addition to our percentage of the profits.

So, if you think that your partners may not be able to be as hands on as you with the property, this may be an option! 

Good luck!

As of today, Decempber 7th, 2020, Fannie Mae and Freddie Mac put out new Resort Condo Guidelines that determines if a condo project will be considered ineligible for their standard financing options.  From the rough outline that I have been provided, it appears that a condo complex will be ineligible if any of the following apply:

- Is transient in nature, offering hotel type services (including those offered by the HOA or management company) such as registration services, rentals on a daily or short-term basis, daily cleaning, central key systems, etc.

- Is professionally managed by a hotel or resort management company that also facilitates short term rentals for unit owners

- Has obtained a hotel or resort rating for its hotel, motel, or resort operations through hotel rating providers including, but not limited to, travel agencies, hotel booking websites, and internet search engines.

- Projects or HOAs that are licensed, or have a designated licensed agent, have a permit to operate, or are registered, as a type of transient housing for the rental of non-HOA owned units.

- The HOA receives revenue from, or pays expenses for, hotel type services including a registration desk/rental registration desk, or an onsite rental operator's desk, or a rental website/hosting platform

I would imagine, just like in Destin, FL, that there are plenty of cities across the country where there are front desks and management companies running a large majority of the STRs in their complex. Am I reading this correctly that if the owners of these condos decide to sell, that their buyer will either have to pay cash, get private financing, or use a local bank with a portfolio loan? Fannie and Freddie won't allow an FHA or Conventional loan on them? If so, how much do you think that will impact the market for any/all condos, whether short term rentals or private residences?! This could be huge... :(

As of today, Decempber 7th, 2020, Fannie Mae and Freddie Mac put out new Resort Condo Guidelines that determines if a condo project will be considered ineligible for their standard financing options.  From the rough outline that I have been provided, it appears that a condo complex will be ineligible if any of the following apply:

- Is transient in nature, offering hotel type services (including those offered by the HOA or management company) such as registration services, rentals on a daily or short-term basis, daily cleaning, central key systems, etc.

- Is professionally managed by a hotel or resort management company that also facilitates short term rentals for unit owners

- Has obtained a hotel or resort rating for its hotel, motel, or resort operations through hotel rating providers including, but not limited to, travel agencies, hotel booking websites, and internet search engines.

- Projects or HOAs that are licensed, or have a designated licensed agent, have a permit to operate, or are registered, as a type of transient housing for the rental of non-HOA owned units.

- The HOA receives revenue from, or pays expenses for, hotel type services including a registration desk/rental registration desk, or an onsite rental operator's desk, or a rental website/hosting platform

I would imagine, just like in Destin, FL, that there are plenty of cities across the country where there are front desks and management companies running a large majority of the STRs in their complex. Am I reading this correctly that if the owners of these condos decide to sell, that their buyer will either have to pay cash, get private financing, or use a local bank with a portfolio loan? Fannie and Freddie won't allow an FHA or Conventional loan on them? If so, how much do you think that will impact the market for any/all condos, whether short term rentals or private residences?! This could be huge... :(

@Chris Taylor  It is my understanding that you cannot do a 1031 on a home that you will eventually make your primary residence without paying the taxes.  I believe people were able to do that at one time and were able to save on taxes, but the IRS figured it out, and now you will have to eventually pay. 

If you plan to make the home your PR in a year, you may want to look at the cost of doing a 1031 along with the stress of meeting the 1031 guidelines, and compare that to what you'll potentially be saving in taxes, Not to mention, any ramifications for turning a 1031 into a PR.  Will the savings be worth the stress?

@Arnold Finkelstein  I am unsure what state you are in, but in Florida we have to pay deed doc stamps which is essentially a sales tax on real estate purchases.  It is a percentage of the purchase price, so the amount varies with each transaction.  However, it does seem like some states have a transfer tax, so maybe where the house resides has different rules than where you've purchased before?

Here is a link that may help clarify things: https://www.bankrate.com/mortg...   

Hello!

We have two apartment complexes that are having issues with people from neighboring homes and complexes dumping their large items and furniture outside our commercial dumpsters.  According to our tenants, it is people driving by that just leave their stuff.  Each time that this happens, we get a hefty fine from the garbage company.  We posted a "No Public Dumping" sign, but it didn't deter anyone.  In addition, there's not really any other location that we could move the dumpsters to to try and "hide" them from passersby.   I am wondering if anyone has tried putting a fence up around their dumpsters and if that worked?  Or, if you have any suggestions, I'd love to hear them!

Thanks for your help!

Jen Wilson

Hi @Michael Archard,

I have been a Realtor for over 7 years and I haven't heard of agents recommending higher commissions in order to get higher purchase prices.  While a higher commission rate at closing is nice, it should definitely NOT be a determining factor for an agent or a buyer!  Realtors should be facilitating a sale, not "steering" a buyer toward a home because they could get a higher payout. If they are, then they aren't keeping their buyer's best interests in mind, and could see themselves in a lawsuit!  Most buyers likely don't know what the payout to their agent is until the end, so it shouldn't be a determining factor for them either.   Worst case scenario that I'm picturing is that if a buyer wants to put an offer in on your home, then their agent may recommend that they come in higher than they would otherwise recommend so that the offer is accepted, and they get the nice paycheck. Which, in the end, is still not in the best interest of the buyer...    I'm not saying this is what's happening, I'm stating worst case scenario!

Things may be very different in your market than they are in mine, but I'd recommend that you ask around to other sellers that you know in your market to see if they are getting the same advice from their Realtors.  I would hate to hear that Realtors are giving you this advice for their own personal gain.  

On the flip side, some agents offer full service for a certain percentage and take away some services like professional photography, walk-through videos, open houses, additional marketing options, etc. for a lower commission rate.  By taking away some of those services, you may not get as much attention with your property which may cause it to be on the market longer (ie. price reductions) or not facilitate multiple offers.  If you're opting for the reduced commission but sitting on the market longer, you may be hurting yourself in the end.

Hi @Lucas Dubs,

I have used the Cozy.co site to do background checks before.  You can market your home, do the background check, collect rent and more on Cozy, so it's really convenient!  To make sure we were getting the most traction and attention on our rental, we listed it on sites like Zillow.com and at the end of the description, gave a link to our Cozy page.  From there, tenants can apply and do the background check at their own expense!  You can compare tenants and then choose the best one.

Good luck!

Hi @Maricela Chavez,

I'm sorry to hear you're going through this.  We are feeling the hit on some of our properties as well and it's really quite frustrating knowing that people are taking full advantage of the system while we as landlords are still expected to pay the mortgage, insurance, repairs, etc.

I know it's a bit of a long shot, but are you sure that your properties fall under the CARES Act?  We have a couple properties that are portfolio loans with our local bank, so they weren't ever sold off to Fannie/Freddie and therefore aren't government backed loans and don't have to follow the rules of the CARES Act.  We had 2 tenants that took complete advantage of COVID and didn't pay for 6 months or more.  Once our deadline hit for the moratorium, our property manager was able to post notices and start the eviction process. Even if the courts aren't hearing cases, there may be ways that you can start the process in hopes that your tenant gets scared and moves on on their own.  If not, maybe it'll help you get your claim into the court system earlier than others so it's addressed sooner rather than later.

Good luck!