All Forum Posts by: Ken M.

I want to do fixes and flips, Nowadays, I connect with an investor-friendly real estate agent, and we have a good and informative conversation. He wants me to sign an Exclusive Buyer Agency Compensation Agreement. As I plan to purchase a property within one month, I hope to not just work with one agent, so that I can expose as many deals as possible. So I doubt whether I should sign, or it's a kind of rule that I have to sign if I work with agents to find the deals.

Thank you so much for your advice!

I'm not an agent and I haven't read the NAR requirements, but I believe it commits you to paying a fee to the agent. If that is so, it behooves you to understand how much that fee is and when it becomes due. It is not a trivial thing.

0 Votes

Quote from @Drew Mullin:

I have some experience in the south Florida area. I wanted to know if anyone had experience in the fix and flip market in New Orleans? Good market or not so much thx

Just as an aside, there are several much better markets between where you are and New Orleans.

0 Votes

Quote from @Michael Puwal:

Can someone explain something about the buy, borrow, die concept of avoiding income taxes? I understand that you don't pay taxes on borrowed money. What do you do with the profits from the company to avoid income taxes.

Ask your C.P.A. about stepped up tax basis. It will literally save you 10's of thousands of dollars in taxes.

1 Vote

Quote from @Account Closed:

Bigger Pockets Community -

I'm trying to plan for the future and have a question I'd like your thoughts on. In the past few years I've had some larger tax billed at the end of the year and I'm brainstorming ways I can reduce that burden.

If I'm able to pay of our primary residence or a rental property, which should I choose?

If I choose the rental, then all income generated will be taxable income moving forward, because none will be off-set by the interest I could deduct. Thus, my taxes should be higher because of the income I generate.

If I pay off the primary, I'll increase the amount I'm able to save monthly not having the mortgage, while also keeping the income generation lower on the rental because the mortgage remains open.

Any thoughts would be appreciated!

People with lots of equity are the ones that get sued. Attorneys don't bother people who have nothing. High end investors look at 3 things

1. Can I protect my equity
2. Can I reduce my taxes
3. Can I beat inflation.

Paying off a mortgage does none of those things.

I'd suggest if you are able to pay off a mortgage, you instead use it to buy another "cash flowing" property.

1 Vote

Nashville, Tennessee

Quote from @Don Konipol:

Quote from @Godsheritage Adeoye:

Hello, I’d like to know how investors typically handle Subject To contracts. Do they use a servicing company to make the payments directly to the , or do they make payments directly to the seller and hope they pass them on to the lender?

There are actually THREE kinds of subject to transactions
1- subject to existing mortgage without lender approval
2- subject to existing mortgage WITH lender approval
3- subject to existing mortgage as part of a seller financed wrap around mortgage.

with #1 and #3 it’s in everyone’s interest to utilize a third party servicer, who collects and then distributes payments. In the “old” days, people would have the seller pay the lender so as to not “alert” the lender that a property sale had taken place, so that the lender def wouldn’t trigger the so called “due on sale” that’s a part of almost every mortgage or deed of trust document. With online access to almost every jurisdictions property recordings, lenders today use software that automatically searches property transfers for transfers involving their loans. Whether the lender decides to do anything, and exactly what they decide to do depends on the lenders particular strategy, target ROI, risk tolerance, current interest rates, interest rate of subject mortgage loan, etc.
My experience has been that most lenders don’t immediately move on this, many don’t take action for 6 - 12 months. An investor who has participated in a subject to transaction without lender approval should NOT assume that they are safe from note being accelerated because a certain amount of time has passed. Often, lenders will not act until the differential between current interest rates and the interest rate on the subject loan reaches a certain point. So the lower the interest rate on the subject to loan, and the higher the prevailing rate, the more chance that a lender will initiate action.

I agree with @Don. There are a couple of things that come to mind,

if a payment is missed the lender cares, if the servicer goes out of business or misses a substitution of trustee, the lender cares, if the borrower goes to the lender to try to get removed from the loan (usually to buy another house) the lender cares, if the property gets caught up in a bankruptcy or divorce, the court cares and that means the lender gets involved. Life is not static for most people.

If the transaction has "hair", the feds care and financial crimes can be prosecuted for up to 10 years after the transaction.

Don't get me wrong, buying subject to is legal, but you actually do need to know what you are doing. Any guru (or group) you follow that shows you how to do the negotiating and paperwork is only telling you half the story. The fun part.

It isn't jumping out of the plane that hurts, in fact it's a pretty nice view, it's hitting the ground that does the damage.

1 Vote

Quote from @Dwayne Rowe:

Quote from @Ken M.:

Quote from @Dwayne Rowe:

How do I access equity spread across multiple properties? I currently have about $600K in equity spread across seven properties. Is any bank offering a HELOC based on the combined equity?

It may be tempting to treat them as one property and do what is called "cross collateralization" in order to maximize the amount you can borrow. But it is very risky and you can lose all of your properties if things go wrong. It's a domino effect.

Ken, I would prefer to do that, but I wasn't sure if any banks would offer that type of loan or line of credit.

I think you don't want a bank, you want a mortgage broker.

0 Votes

Augusta, Georgia

Quote from @Brian Willie:

Hi. I own a property near Birmingham. I bought it subject to. I owe about $289K and it's worth about $310-320K. I want to sell it on a wrap but not sure how to structure the deal or if there would be buyers for this. The total payment is about $2200 with PITI. Interest rate is 6.25% Nice house, nice neighborhood. Trying to figure out what I can/should expect to charge for 1)Purchase price; 2) Down payment and; 3) the spread per month if any on what I pay per month. Thank you in advance.

One very important point, in a subto that you sell on a wrap, you no longer own the property. If the bank calls the loan due, you are stuck. You can't sell the property to satisfy the bank, because you no longer own it. You can't refinance the property since you no longer own it. You can't foreclose on the guy you sold it to since he is paying on time.

So, a couple of years down the road, your seller gets tired of being on the loan and contacts the bank to get off of the loan. The bank then understands that their borrower no longer owns the property and calls the note due.

You can't resolve the issue unless you pay off the loan, the bank sends the property into foreclosure and your original seller sues you for breach of contract and ruining his credit.

Lawsuits run a year and a half or so. You get tied up in court and every deal you've ever done gets reviewed to see if there are any other "fraudulent" transfers. Subject To isn't by it's nature fraudulent, it's just the hammer the attorney will use to try to win his case. You have to prove it wasn't done illegally, And, if you can't pay it off to solve the problem, and at the same time, pay for an attorney, you've already lost.

0 Votes

Birmingham, Alabama

Quote from @Dwayne Rowe:

How do I access equity spread across multiple properties? I currently have about $600K in equity spread across seven properties. Is any bank offering a HELOC based on the combined equity?

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Augusta, Georgia

Quote from @Portia Dampier:

Quote from @Ken M.:

Quote from @Portia Dampier:

Hi BiggerPockets community,

I’m fairly new here and somewhat new to real estate investing. I have every intent to complete my very first fix-and-flip project in 2025!
As I look to grow, I’m considering joining a coaching/mentorship program like Partner Driven or something similar. These programs often assert to guide you step-by-step through the process, provide assistance with funding, and connect you with contractors. However, they also come with a significant upfront investment.

Before I commit to anything, I’d love to hear from those with experience:

Are these programs worth the investment?

Have you found them to be genuinely helpful in advancing your real estate goals?

Are there other, more cost-effective alternatives to gain similar support and knowledge?

Any insights, advice, or personal experiences would be greatly appreciated! Thank you in advance for helping me navigate this decision.

I have a long history of fix and flips in several states and the first thing I want to point out is that you make your money in the "buy". You have to buy right, know where the market is headed, know ALL of your expenses and know what your various "outs" are before you commit to a property or you will lose your shirt.

Thank you so much for this advice! I thoroughly understand what you mean. I've been an excellent student of calculating repair costs and ARV. I worked adjacent to a couple of rehab teams on the admin side. I feel I'm finally ready to spearhead my own project. I just wondered if working with one of these mentor groups would add an extra layer of expertise, or if it wasn't worth the hassle. Once again thanks so much for your reply. I'm trying to learn all I can possibly ingest!

The right investor can you give practical insight into your project. Most mentors are more oriented toward the positive mental attitude of slugging through finding a property, which can be trying to a lot of people. I'd join a REIA and find someone doing what you want to do and pay to take them to lunch for a conversation.

3 Votes

Atlanta, Georgia

Quote from @Dan Deppen:

Quote from @Ken M.:

Quote from @Jennifer Turner:

Has anyone ever sold a property with seller financing then later extended the repayment period or modified the terms of the loan with the buyers? Or even refinanced it to them?

I’ve been searching for a form or contract I could use to recast or modify the terms of a loan that I seller financed a few years ago, with the intention of lowering the monthly payment for the borrowers and extending the repayment timeline. We also need to add in escrowed taxes and insurance to the new terms, as previously the buyers were responsible for paying them, but we’ve recently had to take that over.

Context:

Subject property is a mobile home on land in the state of FL that is owner occupied by the family who purchased it from our LLC. They have had a difficult year and are struggling to make their payments on time each month. We know they're hard working and would like to continue working with them rather than move toward foreclosure, but we know they're in over their heads if we continue under the current terms of the mortgage and don't want to set them up for failure. Our current mortgage terms include a late fee after 5 days, so they're already paying extra each month and have to split the total monthly payment up between 2-3 payments when they get their pay check. The monthly payment is only ~$720 and the interest rate is fixed at 8% fully amortized with no balloon. I know they would be worse off refinancing at today's rates even if they could find an alternative lender able to lend on older mobile homes. And given their recent late payment history, I don't know that they'd qualify with another lender.

We have an upcoming meeting with them to see how we can extend the loan a few more years to make the total monthly payment including installments for the annual property tax bill, which we’ve had to pay for them this year since they were late the last couple years and had to pay interest to the county.

This is the only property we’ve ever seller financed, in case that clears up any questions you have about Dodd-Frank compliance implications. They hold title, and the mortgage and promissory note were attorney drafted and filed at our local county.

I do plan to consult my real estate attorney who handled the closing but this is his busiest week of the year, so I definitely don’t want to bug him with something that isn’t extremely urgent until after the New Year. In the meantime I would love to have some helpful information or ideas to share with the buyers when we meet and ideally an agreement/contract we could fill out together once new terms are agreed to and then share that with the attorney so he could draft up the formal instrument for recording.

If you have experience with this type of scenario, I’d love to hear any recommendations you have or any helpful resources you could point me to for the appropriate paperwork.

Under foreclosure laws, you have to send appropriate notices and try to work with the borrower and offer a loan mod before foreclosure anyway. That is not a particularly hard thing to do, but you need to put it in writing and execute a new note for the loan mod.

HUD does a non interest bearing 2nd that you might want to consider doing. That is, they take the arrears, the late fees and any legal fees and they create a 2nd. The borrower simple starts remaking payments at a given agreed upon date. You could set the date out a couple of months to give the borrower some breathing room. That way, you can or choose not, to make a change to the original note.

You aren't required to offer a loan mod prior to foreclosure. Is there a particular state or scenario that calls for this? I know PA has a process to go through before you start a foreclosure, but have never seen a requirement to offer a mod.

Sure, https://legal-info.lawyers.com/bankruptcy/foreclosures/delay...
Under the Dodd-Frank Act, the bank must first wait until the payment is more than 120 days overdue.

"Once a complete loss mitigation application is received, the servicer must review that application before starting the foreclosure process."

"during the 120-day waiting period. If the owner submits a completed application before the servicer starts the state foreclosure process, the servicer can't foreclose until the following occurs:

the borrower doesn’t qualify for, or rejects, the lender’s loss mitigation options, or
the borrower accepts a loss mitigation offer but fails to fulfill its requirements."

Okay, let me reword what I posted ;-) IF a borrower submits an application, the bank must review. My experience is though, that any fed backed loan, automatically is offered a chance to do a loan mod.

0 Votes

Gainesville, Florida

All Forum Posts by: Ken M.

Ken M. has started 57 posts and replied 757 times.

Post: Should I sign an exclusive agreement with agent?

Post: New Orleans fix and flip market?

Post: Can someone explain the Buy, borrow die concept.

Post: Paying off Rental or Primary

Post: How to takeover Subject to loan

Post: Accessing equity from multiple properties

Post: Selling Property Owned Subject To On Wrap-How To Structure?

Post: Accessing equity from multiple properties

Post: Seeking Advice on Coaching/Mentor Programs for Real Estate Investing

Post: How to modify terms of a seller-financed mortgage?