All Forum Posts by: Marc Winter

We live in a "what's in it for me" world.  To paraphrase a great leader: "Ask not what your community can do for you; ask what you can do for your community".  

If you're just starting, I'd suggest you attend some local meetups and network with some local, established, successful investors.  

The basics of real estate remain the same wherever you decide to settle/invest.  Learn those basics first, then you will have some foundation for collecting a good-fitting working team.  Come humbly from a position of knowledge and strength and you'll find all the help you need.

Good luck, and keep moving forward!

Could it be the seller thinks he can get more money for the property?  

First, I'd ask them why they don't want to close.  If it's money, perhaps negotiate (a very little bit) if it was a really killer deal to begin with.

Secondly, speak with your attorney about recording (county recorder) a memorandum regarding the contract of sale.  Once recorded, the owner/seller of the property will not be able to close on the property without addressing this issue, thereby blocking them from cutting you out and selling to another party.

Other than that, keep in mind it is VERY difficult to win in court for specific performance to force the seller to sell.

Good luck, and keep moving forward!

"I would prefer to place the title in a trust and purchase a majority share in the trust, as I have heard people are doing (clears the mortgage from the seller's DTI), but I would really appreciate hearing what you have to say."

@Lynn McGeein gives good advice.  I'd like to add this:

Placing the title into an inter vivos revocable trust will NOT affect the mortgage.  That means the person/entity who signed the mortgage/note will still be 'on the hook' for the loan.  

Remember, the title is placed into a trust, and administered by the trustee at the direction from and for the benefit of the beneficiaries.  That has nothing to do with any liens or loans attached to the property--they still stick to that property.

To learn more, speak directly to a VA mortgagee/lender or mortgage broker about how to assume the loan and how/if you can absolve the current borrower from any liability.

Keep investing and moving forward!

Unfortunately, it's become more common for people to shirk their own responsibility, like paying rent, and then look to blame other folks for everything that happens to them.

Question: Why are you taking calls from an evicted ex-tenant? I would not engage with this ex-tenant.  Let them file what they will, and if there is an investigation at all, (doubtful IMHO) the authorities will request whatever information that's needed.  

Keep investing and moving forward!

Mr. @Niyi Adewole makes good points.  

Another important issue is how to take the title. 

If your bank will finance the purchase to an LLC? That would be preferable imho. If not, you could take title as an individual and later transfer to an LLC (you might trigger some due on sale and/or transfer tax, so get legal representation on that).

If LLC is not possible, I've used Revocable Living Trusts many times. It does not give you the protection of a properly formed LLC, but it does provide a bit of anonymity and can spell out the division of income to the beneficiaries in the trust docs.

There should be no transfer tax involved with the trust, and it will not trigger any due-on-sale clause thanks to Garn-St Germain.

BTW, if you do use a trust, only record the Deed into Trust, but NOT the entire trust declaration.  See a qualified lawyer if this is your first time.

Keep investing and moving forward! 

Hakim,

You can record a memorandum about the option or contract--speak to your attorney on what form that should take.  To record a document, it must be notarized. 

The recorded document will put the public on notice that there is an issue (cloud) with the title and that will prevent someone else from buying the property without dealing with you first!

I'm a real estate broker and investor and have done this multiple times.  However, I'm not an attorney, so please make sure to discuss this with them.

If the unit is priced right and showable, it will get rented. 

We always provide the applicant with a list of required qualifications: income/rent %, credit score, evictions, etc.  We also list all the documentation required to be approved: proof of income, social or TIN, etc.

The application fee should not scare off a qualified tenant who likes the property, however it will keep tire kickers away.

Keep investing and moving forward!

Hakim, 

It reads like you want to do a lease with an option to purchase.  Yes, you can do both at the same time, ie 

1) contract to purchase in the form of an option to buy within 24 months, with a 1-year rollover clause, and 

2) lease for your preferred term, say 24 months.  Insert a rollover clause for an additional year in case you need a bit more time to get financing.

The lease should not mention the option, and the option should not mention the lease--if things go sideways, you'll be able to part ways with fewer complications.  

Simply tell the seller you want to purchase the property, and "Here's how I'd like to do it"...

Keep investing and moving forward!

Look at the demographics of your specific location to see if the rent is within 30--40% of income level.  Then check to see if it is cheaper to rent than to buy/own.  If yes to both, then proceed cautiously.  Do not overleverage on financing.

Making tenants 100% responsible as @Nathan Gesner posts is spot on.  

However, you are looking at separate electric and water metering, maybe gas too? Who will be reading/servicing those meters?  Check with each utility to confirm you can have the additional accounts in a tenant's name.

In our North East Pennsylvania location, the water companies will allow a separate meter, HOWEVER, they require a separate water main from the street hookup to the additional house meter so they may control each meter on the property independently of the other(s) without entering the dwelling. That can get pricey.   

Other than that, with only one meter, the owner will have to pay for both houses and build that into the rent.  I would never pay for any tenant's utilities:  what is free is too often wasted.  How do I know?  I remember a tenant who decided it was easier to open a window than lower the thermostat in winter.  Ouch.  Or would not bother to report a leaky toilet flapper. Ouch ouch.  

Good luck, and keep moving forward.