All Forum Posts by: Mark Brown

The thing with 1031 exchange companies is that pretty much anyone can hang out their shingle as a 1031 facilitator.  While the IRS has stringent rules on the procedural steps you must follow, there are virtually no rules or regulations on who can call themselves a 1031 company.  Not surprisingly, financial fraud involving 1031 exchange funds is one of the most frequent financial crimes out there. You want to give your "friends" or some company operating out of grandma's garage 250K or whatever of pure cash and trust that the money is still there for you to buy a replacement property a few months later? I would recommend finding a reputable company like First American that also maintains insurance on themselves in case an employee runs off to the Caribbean or something with the cash.

Your property taxes will be higher (like 3.5%) if you pick a property in the suburbs within a municipal utility district.  Your insurance could go up extensively if you buy in Brazoria County, Galveston County, or Harris County east of TX Hwy 146.  These area will require wind (Hurricane) insurance by your lender and that will cost $2K per year or more.  Insurance will also very on what kind of policy you decide to buy - a basic named perils "fire" policy with no replacement cost coverage that doesn't cover water leaks from a no name company that will require you to hire a lawyer if you ever need to get paid vs. an open peril policy with replacement cost coverage that includes water leaks, etc. 

@Peter Yeh. No. This is just an internal decision at the lender for this one specific property. They are disapproving the property, not you or your finances. It’s not something that goes on 3rd party credit reports. I’m sure they would be happy to consider the next property you bring them.

Also as a side note, presumably your realtor filled in "residential" in the contract where you said it reads "or which prohibit the following use or activity: Residential"  You can actually expend on that one word next time. For example, put down anything you want to do that would expand upon the footprint of the house. Ex: "Residential with new back patio and outdoor kitchen" or "Residential with new room addition". Then if easements or something throws you a curveball, you have much stronger grounds to create an objection they can't cure and get out of the contract.

A 14 foot wide utility easement across your entire backyard?  Usually they run those things along the back fence.  I would ask the title company for a copy of the easement document and see what that says about what utility lines there are.  Also, I might try one of those "Call Before You Dig" where they will come out and mark out where the utility lines are so you can see.  If you just want a patio, it may not really be an issue. But yeah, if you wanted to build anything back there more than a patio, like a room addition or something, then it would encroach on the easement and cause a big problem whenever you sell.  I normally try to make sure my purchase contracts for my investors have an option period of about 10 - 14 days and make the title commitment due within the option period so we have a chance to review these things. If you're past the option period, but have a loan and therefore a 3rd party finance contingency, that's your next easiest way to get out of the contract.  Often you can call up the lender or loan broker, tell them the situation, and they might disapprove your loan for you, kicking you out of the contract.  Lenders have about a zillion reasons they can use to kill a loan application, so they can probably find one to fit your situation.

This is a great place to get a lot of free advice, but just spell out in detail what the problem is, and keep in mind most feedback you get may be from experienced investors but not necessarily lawyers.

Personally, I like Partin and Associates. They are fairly close to you up in Katy. They specialize in real estate. And they have an option to charge by the hour rather than by the entity. If you wind up having lots of little LLC's for different entities, some CPA's will charge a flat fee for each entity even if it's not that hard to do the taxes, so it will add up. So I feel like they are a good value for the money. http://partincpa.com/

As I'm sure you know, Sienna Plantation is a very nice area. I would opt for the 4th bedroom. A lot of professionals who might rent may want that extra bedroom for a home office or home gym, etc.  Protect your downside risk also - if you decide not to rent in two years but sell the property for some reason, the extra bedroom will help on resale.

You might do just as well to take an experienced house flipper with you for ballpark estimates.  Also, if you have to do major rehab to a place where the renovations exceed 50% of the current market value, a lot of cities will require to bring up the property to current code, which can add to your expenses to repair things you otherwise would not, such as making the place comply with energy code requirements and next thing you know you gotta replace the windows and insulation. But if the place is basically a complete gut anyway, then maybe that's not so much a big deal.

You can count me in.  I'm in the League City area, so right in your neck of the woods.