All Forum Posts by: Kim Hopkins

I'm not sure why my update didn't post. @Ronald Rohde. I revisited this with my attorney and CPA. Long story but b/c of the down payment and the fact that he's paying tax on the payments either way, the difference is negligible in this case. Great point to consider in general though.

Quote from @Ronald Rohde:

Quote from @Kim Hopkins:

Hi All,

Just wanted to share with you the exciting conclusion. :) (Exciting in the world of title insurance policies, I suppose). It's amusingly a bit bitter sweet. 

Good news: We got an extension from the seller for title commitment only so that we have time to get the extended title insurance. We've ordered the ALTA for $3k and we're all set.

Bitter Sweet: I spoke with the lender we plan to do a refinance with in 5 years from now, and he doesn't give a rat's booty about the ALTA. Would have been perfectly fine with the standard title insurance. ;) 

I also think there is a 90%+ chance we would be fine with the standard, but at the end of the day, if we want investors, it's the right thing to do and so we will do it. 

In the end, we found an off market deal and had it under contract with seller financing at 0% interest within 24 hours of hearing of it, with in place rents projected to yield over 9% COC in year 1, so I have ZERO regrets about how we approached this deal and so far am very pleased with how it is progressing. As anyone who actually does deals knows, it's about tying it up, solving the problems that arise, and understanding how to mitigate risk.

Appreciate all the feedback on this one. Thanks! Kim

 Glad it worked out.

Seller financing at 0% is not kosher. The IRS will impute interest income using AFR tables. Not a huge deal for you, but it does impact you when Seller is audited. Your deductions would also change.

 Yeah I talked to several people about that including our attorney. Have you heard of pace morby? They're doing this on thousands and thousands of deals. I hear you though. Is it possible AFR only applies to inter family loans? I need to revisit it myself. 

Hi All,

Just wanted to share with you the exciting conclusion. :) (Exciting in the world of title insurance policies, I suppose). It's amusingly a bit bitter sweet. 

Good news: We got an extension from the seller for title commitment only so that we have time to get the extended title insurance. We've ordered the ALTA for $3k and we're all set.

Bitter Sweet: I spoke with the lender we plan to do a refinance with in 5 years from now, and he doesn't give a rat's booty about the ALTA. Would have been perfectly fine with the standard title insurance. ;) 

I also think there is a 90%+ chance we would be fine with the standard, but at the end of the day, if we want investors, it's the right thing to do and so we will do it. 

In the end, we found an off market deal and had it under contract with seller financing at 0% interest within 24 hours of hearing of it, with in place rents projected to yield over 9% COC in year 1, so I have ZERO regrets about how we approached this deal and so far am very pleased with how it is progressing. As anyone who actually does deals knows, it's about tying it up, solving the problems that arise, and understanding how to mitigate risk.

Appreciate all the feedback on this one. Thanks! Kim

Thanks @Tom Gimer for that comment, and I actually had a related question for Caroline which I might as well ask. There actually is an unpermitted structure on the property (which we were well aware of, it happens in these kinds of multi-tenant small spaces often). It's an added unit to the back with an office/restroom. We tentatively plan to use it for storage for extra income. Do you know if an unpermitted structure would actually prevent title from issuing extended coverage? I found a table that mentions unpermitted structures but it looks like that's only an issue for the "enhanced" owners policy in residential that @Tom Gimer mentioned above. 

(Of course, I have asked my attorney this question as well, but am waiting to hear back and curious on your thoughts!)

Thanks all for the helpful feedback. From this discussion and with others, we would be totally comfortable closing without an ALTA and just doing the standard title policy. However, we have actually decided to consider allowing investors in on this property, so we will proceed with the ALTA and extended policy. Plan is to waive due diligence on all other items and then request a short extension on DD to get the ALTA in on time, with perhaps more earnest money down if needed. If we can't get the extension, we'll just proceed without investors and add them in after we get the extended policy and everything looks good. 

Quote from @Guy Gimenez:

Quote from @Kim Hopkins:

Quote from @Guy Gimenez:

With no disrespect meant, experienced investors don't forget to order a survey and they know when a survey is needed and when one isn't. If you had a checklist in place, you wouldn't have missed this and the whole point of your post would have been moot as the survey would be completed by now. 

@Kim Hopkins

 You didn't read my post correctly. Of course I know to order a survey and of course I have a checklist in place. I got a copy of the existing survey the second we were in contract. I simply forgot that the ALTA was needed for an extended policy until we got the contract signed. And I would have pursued the deal regardless of the wait time for an ALTA so I don't understand why you are making these comments that have absolutely nothing to do with my question. 

 All the best Kim. Not looking to argue with someone who can't see the forest for the trees. 

 You too Gus. I haven't Internet trolled in a long time so I'm enjoying learning the process from you again.

Quote from @Tom Gimer:

Quote from @Cason Acor:

@Tom Gimer yes, you can get an extended policy on commercial property. 

Sorry, I shouldn't have used the term "extended coverage". The major underwriters that I am aware of do not offer "an extended policy" (the issue raised by OP and her attorney) as a product for commercial. For residential they do. Can similar coverage be negotiated on commercial?  Of course. But it doesn't come wrapped up as a standalone product. The removal of exceptions and addition of endorsements would be required to obtain similar coverages... each at an additional cost and/or with additional requirements. 

Yes an extended policy is standard for commercial. We've always done one except in this case since A) surveyors in the area are back logged and B) we don't technically need it since we're using seller financing

Quote from @Ronald Rohde:

For such a small deal, I'd take the risk. Order the ALTA, get it delivered when you can. You're going to want it when you sell anyway.

Good point but we do plan to refinance it with a traditional lender in 5 years. Question though, wouldn't we need to get another revised Alta at that point anyways? If I recall, a traditional lender will not accept a 5 year old survey but I might be confusing this with the appraisal since I know they would require a new one of those. 

Quote from @Guy Gimenez:

With no disrespect meant, experienced investors don't forget to order a survey and they know when a survey is needed and when one isn't. If you had a checklist in place, you wouldn't have missed this and the whole point of your post would have been moot as the survey would be completed by now. 

@Kim Hopkins

 You didn't read my post correctly. Of course I know to order a survey and of course I have a checklist in place. I got a copy of the existing survey the second we were in contract. I simply forgot that the ALTA was needed for an extended policy until we got the contract signed. And I would have pursued the deal regardless of the wait time for an ALTA so I don't understand why you are making these comments that have absolutely nothing to do with my question. 

Quote from @Kim Hopkins:

Quote from @Beth Johnson:

@Kim Hopkins

My husband and I are doing the same thing. We took our HELOC and use it to lend out on private money loans at very low loan to value with 12% return to cover our heloc payment and all the utilities on our second home. It even covers our flights there twice a month and then some. Our loans are typically 8-12 months.

To learn more about how to safely invest in private money loans individually, since most hard money debt fund will have a long lock up period, check out my recently published book by BiggerPockets called Lend to Live: Earn Hassle-free Passive Income in Real Estate with Private Money Lending. My co-author and I cover all the areas you'd need to know to find and fund your first loan. https://store.biggerpockets.com/products/lend-to-live

Let me know if you have more questions that I can help with!

 Yes very interested in this idea! Thank you!

 Do you give actual examples of how to find people to loan to?