All Forum Posts by: Joe Splitrock

In general it is a bad idea to let the old owner stay as a tenant. I would be even more concerned in NY that things go sideways and they stay there for years. You would be better to increase your offer by $12,000 and hold that in escrow, charging them $1000 a month. Rent free deals may even make a lease hard to enforce or could run afoul of the IRS rules against leasing for under market rent. You always want some exchange of monetary interest in a lease contract.

I think there are misconceptions about a housing crash and what causes it. That seems strange, given many people in these forums actually lived through one. There is difference between living through something and understanding it. This is why people say "what goes up must come down" or "we are due for a crash". The fact that we had a major crash actually makes another crash LESS likely, not more likely. That is because economic events "thin the heard" and the weaker investors / businesses cease to exist. It also causes the "system" to heal in a way that resists another crash. Between 2008 and 2015, over 500 banks failed and the remaining banks were subject to new liquidity and lending standards. Something similar happened with home builders and developers. Many went out of business, but the remaining builders became more conservative. We were left with conservative lenders and lower new housing supply.

It is also worth considering that the word "crash" usually implies sudden, like a car crash. In the case of the housing crash, inventory started building late 2005 and didn't peak until 2009. Prices hit a peak in early 2007 and a bottom in 2009. Prices and inventory stayed low for another 2-3 years until we finally started seeing recovery. So this "crash" really started in 2005 and ended in 2012. In fact many markets were worse in 2010 or 2011 than they were in 2008 or 2009. This was really a slow moving event that had warnings and time for people to prepare. The problem is people ignore information that is counter their preferred narrative. If you are a house flipper, you want to believe that the market will keep going up. If you are an investor, you may want to believe a crash and buying opportunity is coming. The need to support your preferred narrative clouds reality.

In the end, there is only one thing that matters, which is supply versus demand. Demand is driven by people who want to live in a certain area, which is driven by the local environment, economy and employment. During a recession, housing inventory increases and prices flat line or even dip. When our economy contracts, our housing demand will contract. Just to clarify, contraction can be a slight pull back or flat line on prices for 12-24 months. That is not the same as a crash. 

The trouble with waiting for a pull-back or crash is missed opportunity. You miss the ride up in prices and you miss benefits of holding the investment. The other problem is fear. The same fear that scares people out of an appreciating market, scares them out of a depreciating market. 

 Basically you just need add a header board when you cut the door opening. Header is usually just a couple 2 X 8 boards that span the opening to carry the load. If you are talking 48", there are small garage doors or double doors may work. You also need to deal with the foundation blocks if there are any.

No this has fraud written all over it. It doesn't help you either.

Whomever told you this is a bad source of information. You are legally required to claim expenses in a business. If you fail to claim expenses, such as depreciation, you are still required to recapture and pay taxes on it when you sell. There is a difference between "tax profit" and "actual profit". The main difference being depreciation which is a phantom expense. Lenders understand this. That being said, if your property loses money due to high expenses or low rent, it could hurt your DTI.

@Rudy Ferrara you are twisting this into something it is not. There is no conspiracy against wholesalers and they represent such a small percentage of transactions that they are not even competition for realtors. And nobody is going to ban together to "save the wholesalers", haha.

Real estate licensing is controlled by the state for the protection of its citizens. We wouldn't need any licensing or laws if we could trust people to do the right thing. We can't. Real estate licensing requires you take classroom training which includes legal and ethical components. This is to protect the consumer from predatory action of uneducated and unlicensed individuals. There is also a consequence if you don't follow the law, your license can be revoked. 

Following your logic, we shouldn't need a license to drive a car or practice medicine. I am sorry, but having talked to hundreds of wholesalers on BP over the years, I have found a high percentage know nothing about the law and worse they don't care! Many have no money or experience.  Some don't want to "trouble themselves" with taking a $500 real estate class and having to pass a test. It is not a few bad apples, it is a profession that attracts bad apples. This is directly due to the low barrier of entry. All it takes to be a wholesaler is to declare "I am a wholesaler". Download a contract off a website and knock on a door. That is literally it. That is where the risk is.

There are plenty of legit wholesalers who have their license. There are others who do actual buy and selling of real estate by taking title. It doesn't even take cash, just finding a partner willing to finance you. If you can't convince someone to finance your operation, you probably have financial or credibility issues. 

 I am going to guess because you are basically guaranteed a job making $200-400K per year and you can live basically anywhere doing it. Most doctors retire young, so there is a continuous shortage. I personally would have no interest in medical school, but EX military should absolutely take advantage of the the free education. Investments can fail, but investing in your education is something that can't be taken away. 

@Ab John people have offered some good suggestions. My comment is for future to make sure this never happens again. Setup ALL your bills on auto payment and keep enough money in your bank account to cover a couple months worth of bills. That way if something unexpected happens, your bills will automatically be taken care off. Keep in mind that payments have two aspects and ability to pay is only one. Responsibility is the other aspect and that is where you fell short. Being out of the country doesn't stop you from paying your bill, either before you leave or while you are gone. I am just sharing how a lender views this. Talk to the mortgage company and see if they will remove it. It is worth a try, but they are under no responsibility to do so. 

Inflation affects disposable income, which is what people use to take a vacation. If you have a choice between paying your housing bills, putting food on the table or going on vacation, you will prioritize the first two. 

Also keep in mind that COVID caused hotels to fall out of favor, because people didn't want to packed in with other people. That is starting to get back to normal. Hotels offer breakfast, convenient locations, house keeping, gym, pool and loyalty rewards. I like hotels because of flexible cancellation. Some STR offer this but some are very strict, even having me sign a contract. It can be pretty intense, especially if you think plans may change.

That all being said, inflation and gas has had minimal effect to date. Yes there are lots of people complaining about it, but it is only starting to have a real effect. Economy is strong and people are working, so people are getting by. If that changes, then you will see a real hit to the vacation market. 

  I think what he means is get prequalified for financing in general. Not on a specific property, but just prequalified to buy an investment property. They will tell you what dollar amount you are approved for. THEN use your cash to acquire and rehab a property, knowing you have been approved for financing. For example, you get pre-approved for a $200K rental property with 25% down. You pay $60K cash for a house, put $40K in with expected after rehab value to be $200K. You know you were already approved for $200K, so when the property is rehabbed, you apply for a loan. 

This assumes you have cash or access to cash to make an "all cash offer". If you don't have cash or line of credit, you can't make a cash offer.