All Forum Posts by: Ken M.

Quote from @T. Alan Ceshker:

Quote from @Account Closed:

I did a loan assumption that is currently a GIANT pain in the ***. I’m here to share my story for whatever that’s worth.

Over a year ago I did a wrap around mortgage on a place here in Phoenix at 3.5% over 27 years. Everything was smooth until it wasn’t. 6 months into it the tenant called and the toilet had failed in an upstairs bathroom. The house was flooded to the tune of $70,000 in repairs. 

No big deal, I worked with insurance and contractors to get the repairs done. Six months later my insurance dropped me and here is where it gets sticky. I got a new insurance policy at a higher rate. I let the original borrower know they needed to update the lender on the new insurance policy. 

The higher insurance premium required a higher escrow payment which the original borrower didn’t let me know.  A few months go by and unbeknownst to me the escrow account had now drawn negative which triggers the lender to no longer apply what’s considered a “partial” payment to them, given that I’m now paying less that what’s due given the escrow increase required but not relayed to me even though I expected it at some point.

Last month I’m on Zillow looking at the value of my properties. One of my properties says it’s going to auction in March because it’s being foreclosed on. My heart rate goes through the roof as I have about $90k in equity in that house. I reach out to the original borrower and ask them what’s going on. They weren’t paying attention to it, and why would they, it’s not their house anymore. 

They send over 3 months of notices from the bank. $10,000 has been collected by the lender and is in an “unapplied” status due to the short payments. They are foreclosing and are not open to discuss it. I call them, they won’t speak to me about the loan at all BECAUSE ITS NOT IN MY NAME. 

I have to sell it, but guess who has to request the payoff amount from the lender….thats right, the ORIGINAL borrower. So I am at the mercy of that person for basically EVERYTHING.

I am still waiting on that payoff amount 9 days later and am up against a clock where they have scheduled the home for sale at auction come March.

Take it all for what it's worth, I've learned plenty of lessons and made my share of mistakes. One thing is for sure, if I ever wrap another mortgage I am getting a POA to access the docs on the original loan so that I am never again at the mercy of that borrower to relay information. If it wasn't the insurance it would have been the property taxes. FFS

THE END. 

Let me know what you would have done differently?!

You are correct re the POA. Actually, to allow access it is an authorization. We use the POA to allow for signing escrow refunds and claim checks.

A couple other notes.  You also need to change all contact information to you - all email, phone, address.  Another thing is the insurance is sent to the bank from your insurance provider and the seller should never be needed as long as the documentation has been completed correctly.

This is why you must vet the law and title office you are closing with to make sure they know how to handle these transactions.  A law degree does not mean you know anything re wraps.

If worse comes to worse, you can stop the foreclosure with legal action - it costs some but you will not lose your equity.

I would not throw the baby out with the bath water re doing wraps and I do hope all works out for you.

Reach out if you need a referral to a good AZ attorney to help

Be careful out there guys

Alan 

Not to be too blunt, but you are handing bullets to a six year old with a gun. He obviously will only get himself into more trouble because he now knows 1% more than he did, but not nearly enough to keep out of trouble. And, in my opinion, more importantly, the lurkers who never comment, now believe they have the "golden key" of information.

As you already know, there is so much more to this, in order to stay out of trouble over the long term. 

He believes he can find all that he needs to know on the internet. Which of course he can. You can find everything you need to know in a grocery store to make 

Pumpkin spice loaf with almond praline dessert, too. But that doesn't mean you know the right ingredients or can assemble it without disaster. And it might not look very tempting when put together.

This part is for anyone reading this who never comments:

My humble advice to anyone attempting to do creative finance is:

Creative finance is for experienced investors who have access to capital if everything goes wrong.

1. Learn the laws
2. Don't use a contract "off the internet", laws vary by state and are also regulated on a federal level
3. Learn the financing techniques correctly
4. Don’t skip parts of the process
5. Don’t ever do a “kitchen table” closing
6. Use the proper deed
7. An attorney can help you with the legal work, but the rest you are on your own
8. Your guru will not bail you out
9. “Investing” in someone else’s deal by providing a small 2nd loan so the “investor” can pay for “cash to the seller” and for “closing costs” so he can do the deal is a very bad plan
10. Know what problems can arise
11. Learn the responses and solutions to problems before they are needed
12. Know everything there is to know about Title and what that means
13. Know who a "protected class" individual is
14. Learn the "back doors"
15. Learn human nature
16. Understand timelines
17. Understand regulation enforcement (some of these "mistakes" have a 10 year statue of limitations ( they can charge you 10 years AFTER you do the transaction) and carry hefty fines and possible imprisonment
18. The court doesn't accept "I didn't know" for an answer"
19. Know that the source of the lead plays a serious role in some states and federally
20. Know how much of a "profit" pushes the boundaries to invite an investigation
21. You can be sued by the seller if you don’t do things correctly
22. You are automatically at fault if an investigator or attorney or regulator gets involved. You have to prove you did everything right and then because of “empathy” for the poor snook who “fell into you schemes” you may lose anyway.
23. This is a legally binding transaction that will be treated that way by the law. There are regulations
24. I could go on, but if you learn this much, and apply it appropriately, you will cut down your sorrows and risk, considerably.

And yes, there is much more. You can learn these things over time.

Quote from @Nithin Kumar:

@Katie Southard This is the floor plan. there is another but that does not have a separate car garage and has private entrance only from the side.

Nice layout. It would work well for generational living. Grandma & Grandpa could have their wheelchairs handy to get down the hall to see the grandkids. Flat, single story, no sunken rooms. Kind of reminds me of the old ranch style, with a bit more privacy and access.

Quote from @V.G Jason:

Quote from @Ken M.:

Quote from @Chris Seveney:

Quote from @V.G Jason:

Quote from @Steve K.:

I would never give the party on the opposite end of the transaction POA over the property, or my social, DOB etc. Who would do that?

People doing crazy stuff lately.

I hate to say it but it's starting to feel a bit like 2007, with sub2 being the new subprime mortgage...

It's too small of a percentage of loans for that to be where the bottom falls out. And yes that poster has a trail of his own. @Russell Brazil He closed his account, cause he needs to eat a lot of crow. 

 who was it?

I would have thought as a mod, you'd have access to that information. ?
Maybe he was actually made a "non-person". ;-)

 Clearly, he doesn't cause you're the same subto guy that's been peddling the forum for the last couple of years. "Teaching" people how to do subto for $1500/mo or something like that. Perhaps longer time you've been here, I do not know. Removed and come back, or of the sort.

@Chris Seveney Poster's name was Whit B.

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@V.G Jason:  You know what, there is only one guy in America that teaches physics, there is only one guy in America that is an auto mechanic and there is only one guy in America that understands Creative Financing and warns people about it. So, clearly I'm that one guy. ;-)  Not.

I bet you are a whale of fun at funerals.

You need to get some perspective buddy, unless you are trying to hide something. In my little part of the world, we call that "blame shifting". When someone becomes obsessed with something they need to hide by falsely pointing at others. I don't even know if I'd like the guy.

So, tells us, what is it that this phantom person did to cause you such delusionary behaviour?

Quote from @Dan Deppen:

I could be misunderstanding how this deal was structured, but wouldn't the seller who is on the underlying mortgage have an incentive not to let it go into foreclosure since their credit is at stake?

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In a Wrap, Subject To, etc the ownership has changed. The seller no longer owns the property. He would be paying off a loan on a property he no  longer owns. Most sellers probably would not have sold on creative financing if they had a way to get rid of the mortgage when they sold.

So, pay off $200,000 (or whatever) on a property you no longer own to save your credit? Not likely, even if you could. 

Now, if the seller was free & clear (no mortgage) when he sold, the seller could enact whatever remedy was provided for in the Deed of Trust, if he was savvy enough to even do a Deed of Trust. He could foreclose and recover the property. 

But, the OP states it was a Wrap, so there must have been an existing mortgage.

Quote from @Chris Seveney:

Quote from @V.G Jason:

Quote from @Steve K.:

I would never give the party on the opposite end of the transaction POA over the property, or my social, DOB etc. Who would do that?

People doing crazy stuff lately.

I hate to say it but it's starting to feel a bit like 2007, with sub2 being the new subprime mortgage...

It's too small of a percentage of loans for that to be where the bottom falls out. And yes that poster has a trail of his own. @Russell Brazil He closed his account, cause he needs to eat a lot of crow. 

 who was it?

I would have thought as a mod, you'd have access to that information. ?
Maybe he was actually made a "non-person". ;-)

Quote from @Christopher Lynch:

I’m looking to get started in the fix-and-flip business and have a few questions. I have a couple of funding options on the table and I’d love to hear your thoughts:

1. Funding Approach: I have capital partners who are willing to fund 100% of the project in exchange for 50% of the profits. Alternatively, I could explore hard money lenders. What would you recommend for someone just starting out? Should I stick with my partners for the initial flips or go the hard money route? I’m asking because I plan to eventually scale and get into multifamily syndication, and I know learning to raise capital will be a crucial skill.
2. Scaling with Private Lenders: Once I’ve done a few flips, I’m thinking of finding a group of private lenders to help me scale the business. Do you have any tips on how to approach and structure deals with private lenders for scaling?
3. LLC Structure: For the LLC structure, would it be best to create a new LLC for each flip, or should I just create one LLC that handles all of my flips? I want to be sure I'm structuring things in a way that protects my assets while allowing for growth and still keeping money partners protected.

Any feedback would be awesome. 

Your question is akin to : " I have a hot fudge sunday in my hand, should I set it down and go look for a banana split". I may someday, want to learn how to make banana splits.

Run with what you've got, prove yourself first (you ain't done nothin' yet!) then make big plans.

Quote from @David Sohn:

If a seller refinanced a house at around 220k and has about 120k left in mortgage, but the house also appreciated to 450k, how do I structure a subto/seller finance deal?

I'll subto his existing mortgage and pay off the 120k. But as for the seller finance, would the loan to the seller be the difference between 450k and the refinance number of 220k? Or would it be the total equity - so the difference between 450k and remaining mortgage of 120k?

I'm trying to structure a deal for the seller but the real estate agent won't submit my offer to the seller because they don't think the offer is beneficial for the seller. But I just want to start the conversation so we can negotiate the terms so it's beneficial for both parties. But because the seller won't share my offer to the seller, me nor the agent knows what the seller wants. (sorry just venting)

I'm not an agent  so I'm only going by what I've been told. ;-)
If the seller tells their agent not to bring certain types of offers to them, the agent is obliged to follow their instructions.

However, I've also been told that an agent has a fiduciary responsibility to present all offers if not told otherwise. Trouble is, how do you find out what that particular seller told that particular agent?

There are ways to get to the seller that don't violate the buyer / seller relationship. I won't advocate for them here, but it can definitely be done. Just plan on paying the agent's fee if you are successful. If they have an legally binding agreement, you need to honor that agreement and pay the fee.

If you failed to mention to the agent that they are going to get paid, and then explained how, of course they won't present the offer. It's part of their contract to get paid and not getting paid is a violation of the contract.

Quote from @Dan H.:

Quote from @Ken M.:

Quote from @Dan H.:

Quote from @James Wise:

Quote from @Dan H.:

Quote from @James Wise:

Quote from @Dan H.:

Quote from @Jonathan Small:

You've raised some valid concerns about California, and it's true that the state faces significant challenges. However, dismissing it entirely based on these issues overlooks several factors that continue to attract people and investment:

• Diverse Economy: California boasts a massive and diverse economy, far beyond just Hollywood. It's a global leader in technology (Silicon Valley), agriculture (Central Valley), international trade (ports of Los Angeles and Long Beach), and tourism. This economic strength creates job opportunities and attracts talent from around the world.

• Innovation and Entrepreneurship: California has a deeply ingrained culture of innovation and entrepreneurship. It's a hub for startups, venture capital, and cutting-edge research. This attracts ambitious individuals seeking to build the next big thing.

• World-Class Universities: California is home to some of the world's most prestigious universities, including Stanford, UC Berkeley, UCLA, and Caltech. These institutions attract top students and faculty, contributing to the state's intellectual capital and driving innovation.

• Natural Beauty and Diversity: While you mentioned the weather (which is undeniably a major draw for many), California's natural beauty extends far beyond sunny beaches. It encompasses diverse landscapes, including mountains (Sierra Nevada), forests (Redwoods), deserts (Death Valley), and national parks (Yosemite, Sequoia). This offers a wide range of outdoor activities and recreational opportunities.

• Cultural Hubs: Cities like Los Angeles and San Francisco are major cultural centers, offering world-class museums, theaters, music venues, and diverse culinary scenes. They attract artists, creatives, and people who appreciate a vibrant urban lifestyle.

• Real Estate Appreciation (Historically): @Dan H. points this out with his bathroom addition. While recent years have presented challenges, California real estate has historically seen significant appreciation, particularly in desirable coastal areas. This has made it an attractive investment for some, though high prices and increasing interest rates are currently impacting affordability.

Addressing your specific points:

• High Taxes: Yes, California has high taxes, particularly income tax. However, many high-income earners are willing to pay these taxes for the perceived benefits of living and working in California, such as access to opportunities, infrastructure, and services.
• Crime and Homelessness: These are serious issues in some parts of California, particularly in major cities. However, it's important to avoid generalizations. Crime rates vary significantly by neighborhood and city. While the homelessness crisis is a complex problem, it's not unique to California and is being addressed through various initiatives.

In summary: While California has its problems, it's not a simple case of "everything else sucks." The state's economic dynamism, natural beauty, cultural attractions, and educational institutions continue to draw people and investment. Whether these factors outweigh the challenges is a personal decision.

 San diego, los angeles, and san Francisco violent crime rate is low compared to most large cities outside california.  The 3 of them are below Cincinnati, cleveland, and toledo. 

The lowest city on the list on wikipedia for violent crime is irvine, CA

https://en.m.wikipedia.org/wiki/List_of_United_States_cities...

Any violent crime is too high but i travel a bit.  I feel far safer in the roughest parts of San Diego than i do in many large cities outside CA. 

People seldom look at actual crime numbers.   What they see is what their media presents to them.   A crime in a low crime area may be media worthy but the same crime in a high crime area may be just another day.

in my neighborhood (poway), kids playing doorbell ditch or riding 3 on an electric bike warrants posting on social media and dozens of comments (no exaggeration).  Must be nice that those “crimes” deserve so much attention.

It is my belief that most RE investors are best served initially investing near their home. After they have some experience they can decide if other markets are likely to suit them better.  I believe this is true for high price san Francisco and lower priced detroit and most markets in between.

Best wishes

 San Diego, Los Angeles, and San Francisco having a lower violent crime rate than Cincinnati, Cleveland, and Toledo is not an accomplishment by any means. You are comparing 3 cities where you pay one of the highest premiums in the USA to live to 3 of the cheapest cities in the USA. This would be like me telling you my Escalade drives better than your KIA. Duhhhh, of course it does. 

 The post i was replying to implied a serious crime rate in CA cities.  That is not true.

i also do not associate crime rate with cost of living and find it interesting that you do.  If you look at the list, there is not a strong correlation between price and violent crime rate but more important, the large california cities are lower than most large cities in other states. The stats seem to indicate there is not a violent crime issue in large CA cities that some people believe exists.   They have that belief in large part due to media sensationalizing certain crimes.   The violent crime stats tell a different story.


best wishes

 What kind of person doesn't associate crime rate with cost of living? Of course one would and should assume that the cost of a property in a "safe neighborhood" would be more than the cost of a similar property in a "dangerous neighborhood." That's common sense.

 I agree on a neighborhood basis.  In general higher cost neighborhoods are safer than lower cost neighborhoods. Howevr, look at the stats on a city basis.  There are LCOL cities with low crime rates and HCOL cities with high crime rates. There is not a tight coupling between price and violent crime rates. for example denton texas has one of the lowest violent crime rates.   I highly suspect few people consider it a HCOL city.  As indicated the correlation of LCOL cities having high crime rates and HCOL cities having low crime rates appears to not be strong.

Ca large cities have lower violent crime rates than many cities in other states that are a similar size. 

California has the highest rate of investor homes in the nation because of the returns that can be achieved.   There is nothing that trumps the return on why it has so many investor owned homes.  Great appreciation, great cash flow on long holds, great value add opportunities, good tenants in most areas (my city delinquency and eviction rates are near the lowest in the country).  There are lots of ways to make money in CA real estate for those that know what they are doing. 

However, i recommend newbies start in or close to their home market.  They need to identify the possibilities in their market.  After that if they believe CA is the right market for them, they can join the plethora of investors that invest from all over the world in CA RE.

good luck

Hmm, me thinks a strong case can be made for "confirmation bias" here. "Since I invest here, there must not be any problems". ;-)

 Let’s look at my claims:

- there is not a strong correlation between safety and cost of living of the city.   Not sure how that is biased, but I also provided the link and an example of one of the safer cities on the list not having a high cost of living. 
- California has highest investor ownership rate and I provided the link to the source.

- California has higher rate of return for the large coastal cities matches the stats case Shiller used to provide for total residential return for this century.   The 3 top cities where all coastal CA cities but CA cities made up a majority of top 10 cities on the list with my market at number 3 for total return for this century.  I will challenge you to find a single reputable source that does not show San Diego to have achieved outstanding long term return.

- I posted a recent rehab that I added half a bathroom out of existing space and the comps showed that half bathroom added $50k of value.   Good luck getting such significant value add in a low cost market.  This was in a property where the psf is over $1k.  
- I pointed out that my market (San Diego) has one of the lowest eviction and delinquent rates in the country.   I challenge you to find a single reputable source that shows otherwise.

I then advocated for all newbies start close to their home market.

I stand by my remarks and challenge you to show one statement to not be factual.   Facts, no need for confirmation bias.  In addition, I do not need to make more money so I am not needing to push CA RE.   Not a realtor, not a mortgage broker, not selling any mentorships (my protégés do not pay but are a very limited group).   I do not need to push CA RE and have little to gain which places me in a different category than many of the people who have posted on this thread including the OP who is a realtor, property manager, and sells mentoring (at what appears a reasonable price) in his Ohio markets.

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I simply notice that L.A. is burning because the mayor cut fire support by $17 million dollars, she wanted to cut it more. It's fire season and she fled the state. The fire hydrants don't work, the "water lady" who gets paid $750,000 a year to turn the tap on didn't do that, and on and on and on. (I feel sorry for those firemen trying to handle the chaos, they weren't told by the reservoir people they had drained the water) The money was diverted to DEI programs of which these characters directly benefited. Just watching the news. 

That does not build confidence in investing in an area no matter how many friendly seals bark at you.

Do L.A. and California lose carbon credits for all the noxious smoke? (I know, San Diego is considerably south of L.A., been there, done that, nice place, but to most people in the U.S. and the world, L.A. / San Diego distinction is lost on them. 

Now, if I was an investor in California, would things like L.A. fires, landslides, earth quakes, taxes, canyon fires, traffic, eviction moratoriums, etc worry me? You betcha.
I spend (not so sure how much now going forward) a fair amount of time from Santa Barbara to Laguna Beach. I love the ocean. Rarely is the beach crowded though, for such a large population. How many people pay for a gym membership that they never use. Same thing. High taxes, high rate of crime. Some violent, some not, still too much crime no matter what goes on in Detroit, Baltimore, D,C., Philadelphia and so on. Just because they have more problems doesn't make California desirable. That's called a straw man argument.

My only question is if property taxes are going to go up for the people of Pacific Palisades to cover the damage the People caused to the city. Strike, that, the damage the city caused to the people. ;-) But, the people voted for them again & again, didn't they?  At some point, even the worst carpenter stops hitting his thumb on purpose, so he can experience how much better it feels when he stops.

Frankly I'm glad guys like you choose to invest where you do instead of adding yet more competition to where I invest. No harm, no foul.

Quote from @Khon Kounbandith:

The house was in good condition.  Renovation cost is roughly $30K.

I guess what throws me off is that you say 

Cash invested: $60

Quote from @Andrew Syrios:

Quote from @Walter Jones:

I always like seeing this report each year. Tennessee holding steady at #5

And of course California came in dead last. And that was last year before the fires. This year will likely be even worse. 

Maybe, but so far the reports are about neighborhoods where people have real money. They can go to their second home or buy another. And if they work in Hollywood, they probably want to be close to where things are happening.