All Forum Posts by: Steve McGovern

My condo association went through this a number of years ago;  the new guy comes and honks... and we all get out and move.  He then starts work on the stuff he can do-- drives, paths, curb cuts, etc....   If & when someone doesn't move within a reasonable amount of time (like about 10 minutes) they're plowed in.   It's not easy, but you should be able to find someone willing to do this.   

If you're free & clear,  Have you sought-out any reputable No-Doc lenders?  

My advice (FWIW; I am no one.) , Stay AS CLOSE AS POSSIBLE to a "real" bank-style lender, if you can, to avoid having someone take advantage of you. Hire a decent, REPUTABLE lawyer, and get them on retainer;  agree to pay their fee upon receipt of your funding.  That Attorney may know some no-doc lenders, too. 

Whatever you do, don't give anyone any more than Mortgage Covenants (e.g., no ownership rights other than a mortgage lien- interest)  Also, whatever you do, don't borrow all the way up-to your ability to repay-- give yourself a cushion.  

Sounds to me like you've got the equity, assuming the house is in OK shape.  You'll pay taxes, Legal, and have some money to repair.  Then, when you get your 'steady' job, you can refi after another 6 months.  

Good luck.  

what are some insurance policies?

Homeowner's, Title,  Mortgage, Flood, Liability, Unit Owner's Renters... are all different types of insurance policies covering very different things.  You asked about Title Insurance, but from the rest of your questions, I'm not convinced that's your only concern. 

what's different for each policy?

in terms of TITLE Insurance, you can buy a Lender's policy (Usually required by a Lender-- you purchase it for them) 

an OWNER's POLICY (Covers the Owner costs a little more but not a lot) 

a LEASEHOLD POLICY (Usually used in the event of a Ground Lease; consider telecom, solar, and stand alone commercial buildings) 

and ENDORSEMENTS to any of the above. (If you are borrowing on a Construction Loan, there will be Draw Endorsement; If you borrow under an ARM, there will be an ARM Endorsement. If you're buying a condo, there will be a Condo Endorsement. If you're developing a new subdivision, you're probably going to want a Zoning Endorsement.) There are about 50 of these possible endorsements, some are only intended for lenders, some for owners, and some for both; you also sometimes see variations for improved or unimproved land.

what does each insurance policy cover?

See above. 

how much does each policy cost?

Ok, Lender first:  LENDER:  Depends on your state, your situation, and your Agent;  for properties over $1M, you can usually also negotiate.   OWNER'S POLICY all of the above, plus usually a dollar more per thousand (AKA "Mille rate"), plus a "simultaneous issue fee."  ($100-200 or so.)   You only need to pay this once; it's not double the cost or anything.  

Just as a possible example:  f a Lender's policy costs you $2.00 Per thousand (AKA $2000 on a $100k home) then buying BOTH Lender's and Owner's will cost you $3.00/mille + $100 (or $3100.00)  

Endorsements, depending on purpose/type may add to this, but you probably won't have many fees on these in a usual BP "Newbie" residential  transaction.  If you're buying commercial, then that's a different story. 

what is the best insurance policy for residential single family bank owned?

Bank Owned?  You mean, if you were to purchase a bank-owned property?  (a) DEFINITELY BUY an Owner's policy... but (B)"  "Best" depends on how a state/juris treats the Liens that result form the Bank owned property.  Did the bank acquire it by Foreclosure, or was it granted to the bank? Do other liens get wiped out?  Are there taxes? Does a former Owner's heirs come out of nowhere and assert a right over the property?   Too many variables but BUY THE OWNERS POLICY.  

how do i get in contact with these banks who have these bank owned propertyies?

 You need a Broker.  To be honest, this question isn't really relevant to the others in your group. 

Respectfully, I disagree with@ Justin K. Some good sometimes comes from limited governmental guidance. The problem with the political environment today is that no one is willing to find the middle ground: our options are RIGHT or LEFT as though the giant expanse in between doesn’t exist, or something. Take a look at Massachusetts ‘ MGL 40b. This piece of legislation incentivizes DEVELOPERS (ie, “haves”) to create LOW INCOME housing (ie “have nots”) by relaxing zoning requirements for that particular development. This is done on a City by City basis— if there’s already a significant amount (determined by statute) of low income housing in that area, then you won’t get a relaxation of zoning policies. If anyone is unfamiliar with zoning in Mass, and specifically eastern Mass, please understand that this is generally one of the worst zoning environments in the country— I have worked on commercial and infrastructure projects nationwide. Now, you can imagine that this is a highly controversial statute— people here HATE that developers have ways around, they HATE that “those people” can find housing in their neighborhood, and the NIMBYs hate the projects anyway— that goes without saying. Me? I’m quite proud to have this option in my primary jurisdiction. It’s not a carte blanche approval, but can help based on the projects’ justifications. Furthermore, It solves two problems (housing and zoning) , provides for those who need a hand, and allows development to continue onward. There’s a middle ground. I have no idea what OP could do in her jurisdiction to urge for the middle, but believe me, it exists.

Look on LoopNet and find someone who’s active in your area. Then tell the other that you’re somewhat concerned about her experience in this asset class. If you need to save face with her or your friend and you’re comfortable, tell her she’s welcome to tag along for the experience, but you won’t be compensating her. Maybe she can work something out with the broker you choose, maybe not, but if she WANTS the commercial experience then she’d be advised to hang with you.

Originally posted by @Matt K.:

Originally posted by @Michael Guzik:

This is very interesting, I know that Amazon has a distribution center here in San Marcos and San Marcos has really exploded over the past couple of years. I'm not sure if Amazon is to blame or if they even had a part in growing SM but it would be foolish to say they had not part what so ever. The big question is where will HQ2 be....? That will be revolutionary, I haven't heard or seen any updates about it. Does anyone know when they will decide or who they have narrowed it down to?

 I'd say that's more the college than amazon....

San Marcos, population 58,000, was listed as the fastest-growing city in America according to 2014 census data. The growth is mostly thanks to an expanding Texas State University — the largest employer and largest property owner in the city. With the anchor institution showing no signs of slowing down and the invasion of national developers that have seized on a growing real estate opportunity to provide housing for an increasing number of college students, city residents find themselves much more concerned about the consequences of that growth — including rising rents and flood waters — than noisy parties.

https://nextcity.org/features/view/san-marcos-fast...

But in a situation like that, I don't see how Amazon would be a bad thing. It's not like the college is going anywhere, vs if amazon was the anchor I think it'd be different.

 As A Texas State grad, (Ok, as a Southwest Texas State Grad... from before the name change...)  this is exactly what I was thinking.  San Marcos has been exploding for a long time and is a phenomenal strategic spot for industry, commerce, retail, and entertainment -- not to mention academics and county-level government-- smack in between Austin & San Antonio.

 On the other hand,  I just looked up Euclid and I see no fewer than a dozen colleges there, too.  Maybe some decent partnership will occur, which may rise the tides. Amazon would be wise to get out in front of those relationships.  

@Tina Cheung the very first thing I'd make sure you check are your Condo docs (HOA Docs, bylaws, PUD Docs...whatever documents that you agreed to uphold upon purchase and that govern that $275 payment.) Many HOAs don't want absentee owners and severely limit the numbers of units that can be rented.

Otherwise, Good luck!  

Hi @Mike Lynch-- Congrats! 

First, tell me what type of property this is-- is it just a stand alone downtown building? Party walls?  Is it in or very close to a well-traveled retail district?   these all affect your ablity to lease and/or to tailor your replies.  

Second-- NOT to be snooty (I promise), but so you have the value of sounding like you belong when working around the Real Estate teams of your tenant:  a commercial rental rate is an annual rate.  Instead of "one dollar per foor per month," We say,  $12 psf  or "Twelve bucks a foot" when spoken.  It's lingo, but it's established lingo, so if you say "a dollar a foot," and forget the month part, you've just reduced your value by 92%. 

-- Is the area already up & coming?  Could you command $12.50 or $13?   

-- Does this money give you enough to run the entire building at a profit, or do you NEED a second tenant?  I'm only thinking of your flexibility here, to hold out for the right tenant next time, or your need to shove a loud gym next to them if offered... which won't make the insurance company too happy.  Look up legal tenets of  "Quiet enjoyment"   Appropriate tenant mix is a real thing to consider.  

Now, yes, commercial leases are generally for 5 year terms with (x) number of additional 5-year options.  That helps you by giving your books a stable tenant.  Your Lenders and your future tenants in the other unit will both appreciate a long term lease/neighbor from a national, reputable, stable company.  get them on the hook as long as you can.   Here's where it gets tricky: 

1) Your Escalator should be 2-4% per year;  they'll try to get you to say 10-15% per TERM.  Keep in mind your high school accounting class: you want your escalator to be ANNUAL because 2& compounded over 5 years is NOT 10%, it's 10.4%.  Additionally, who says they'll renew in 5 years? You want your compounding now. I'd aim for 3%, but I'd also take a little less in % to make sure they pay you in an annual escalator.  

-- Percentages are just decimals. if you can't agree between 3 & 3.5% don't be afraid to aim for 3%1/3, 3&1/4, etc. Their books will be used to handling this.   

2) in that term, they'll try to negotiate an automatic option; you want them to be held to give you a notice within a REASONABLE amount of time-- how long do you think it'll take you to find another tenant in 5 years?  Again, we have no forward knowledge of macroeconomic events, but you know if your area is growing or shrinking.  Negotiate a notice period of at least 180 days, prior to end of term;  they'll try to work you down to 90, don't be surprised. if the words, "I can't find a new tenant in three months" jump into your head, then stand firm on 6 months.   

3) in terms of your OpEx, the things you listed should already be attributed to them, generally speaking.  However I would also charge a rate psf back to them that reflects the Insurance, Taxes, and exterior maintenance to them.  You NEED to research NNN Leases, and you need to have an appx. number in mind.  Everything from landscaping to furnaces blowing to downspout fixing should be part of this:  this is NOT a Condo, and it's not a residential lease.  here are my two opposing thoughts on the matter:  

A) Don't let them take advantage of you; 

b) If you're happy paying taxes AND/OR that's the norm in your area then, well, who cares? have at it.   It's better than losing a good tenant.   (but I doubt it-- not for a n ational insurance co tenant!) Either way, any broker or savvy tenant will expect you to have this nailed down before you speak to them, so definitely jump on the case here.  

Other matters-- You may be met with concerns of ROFR or having a certain net worth or a certain Insurance amount. They may demand that you keep the exterior up to THEIR corporate standards; I'd negotiate back to them that if their corporate standards require (x) then it's their responsibility to do that for the building.  Then find the middle ground between the points.   

ALL Of the above plus... Indemnification, subrogation. your ablility to finance/refinance the property all come into play in a commercial lease, and one wrong article ("And" instead of "or") can literally mess you up here.  These are times when you need a GOOD Commercial Attorney to look at for you to make sure you are not already in default of a non-monetary term.   I know a great one in NC who is reasonably priced-- if you need one, PM me.  

Generally, a commercial Broker should also be able to help you through some of the primary pieces of this.  

You have a lot to think about here.  I hope that helps you for a start.   

Originally posted by @Sean Walton:

I really liked never split the difference by Voss and getting more by Stuart Diamond. They both see negotiation as more than a zero sum game.

I just started The Book on Negotiating Real Estate by J. & Carol Scott and Mark Ferguson published by BP. So far I really like it and the real world real estate examples that reinforce concepts. E.g. a woman’s dad whose house she is selling won’t take less than 100k but J. Can’t pay more than $95k. He negotiates to pay $20k down and $80k more once the rehab is done and sold. This saves him finance costs win win

 That BP Book is a good recommendation, Sean, thank you.   Maybe @Laith Ali  and others who (again, are correct to) consider other books vague can find more value in a book like this since the examples are real-world, and grounded in Real Estate.   I may check it out, myself.  

Also just bumped into this ancient thread on the subject as I searched for this book-- other offerings from our colleagues, 9 years ago.  

https://www.biggerpockets.com/forums/62/topics/279...

Originally posted by @Laith Ali:

@Steve McGovern:

I have to disagree Steve. I don't think its as gray as you think. I found your reply very vague, and that's how most of these books are very vague. I read too many books on real estate and finance that were just vague. I feel like they are just saying stuff so they can keep the book thick to justify the price. 

I will say that experience is what gives you good negotiating skills. If you don't know anything about construction then it will be very hard for you to get a good deal because you have no reference on whether the price you got was fair or above average. I also think that having good experience gives you genuine confidence. 

 Hi Laith!  Thanks for your reply.  Sorry I didn't see it before  (Personally, I can't "really tag" people from my mobile;  maybe that's what happened here.)  

Again, I completely here what you're saying .   Negotiation classes, books ARE vague, because every situation is different, and because the parties in every situation are different.  Biology is also vague...  until you concentrate in Mammalogy, Botany, Herpetology, or even further down into molecular biology or organic chemistry, but you have to start somewhere.   

To reach the most people with the the most strategies, a somewhat vague approach is actually required.  At print, the authors often have no idea whether their readers are practicing real estate, litigation,  international diplomacy, or if they're just bartering at flea markets and antique shops.   

Your statement on experience, and especially that confidence that one acquires from that experience is also spot-on.    I would say that the classes I've taken in negotiation are much, much more valuable than the simple books I've read, and they give you an example of how some of these negotiations can go.  Playing these negotiation games is valuable learning from both the academic and experiential sense.  

(Yes, this will also be vague, but it really happens.)  Take 20 people, and split them into 4 groups of 5.   Give all 4 groups the same problem to solve.  Usually 1 person in each group is a neutral, and the other 4 will be 2 parties who want "A" and two parties who want "B".  Run the game by its rules.  Inevitably, one group won't be able to make a deal, one or two groups winds up with "A" or "B" Winning everything, and the other party getting nothing, and the others will be somewhere in the middle--  they've found a creative way to break the ice.  Almost every time you run it, a different result comes up.  In this case, the control is the set of standards and the rules; it's the people who vary in these instances.  People who vary from their experience levels to their willingness or reluctance to engage others, to their confidence to their own varying levels of personal interest in the outcomes.   

For those who are looking for better ways to "learn" negotiation, I definitely recommend taking a look at some of these courses.  I just googled "edX"  and "Negotiation" and a bunch popped for me in the edX and coursera platforms.  These are generally free classes.   You can also google negotiation games and run them at work or with friends at a party.  They're fun, eye-opening, and can help boost people's confidence in specific scenarios.  Add alcohol at your peril.  :-)