All Forum Posts by: Account Closed

 I'd find out why he needs to sell, take care of the need and take the house Subject To or Lease Option with the understanding that I would be turning around and selling it for whatever I can get. All in writing of course, with proper title report, escrow and disclosures.

 I would put "unknown" unless you have personal knowledge. What someone "Tells" you is called hearsay and will not hold up in court. What if the person who you bought the house from mis-remembered and was actually thinking of a previous house? That has happened. When the judge asks how you "know" that to be true, and you say "I was told that" they will look at you with a blank stare. Not permissible in court. So, just say "unknown" if you think it might have been but don't have proof.

 The new tax laws change how some people invest. I think the numbers are $157,500 income per year filing single or $315,000 per year filing joint. If he is under those numbers it is pretty straight forward. If he is above those numbers he needs to talk to a CPA first. But basic accounting needs to be done either way. You have to track each expense and he has to track the amount lent to you you, the date, and any payments you make along with any interest accrual. The simplest way to put it is that every time money gets involved (buying lumber, hiring a gardener, etc) you have to put it on the spread sheet. You track date, amount, to whom, why. Your dad has a spreadsheet with a line item for every time he funds the loan or gets a payment or accrues interest. Basic accounting. Keep your receipts. I sort my receipts by type. Advertising, materials, contractors, etc. and put them in an accordion file per property. I also scan everything and put then into a folder on my laptop and back the folder up to a USB which I store offsite.

 Buy a house with a partner in a Joint Venture instead. You learn a lot more and you actually are investing. (Do a search in the search bar above for details.) For instance, when I Joint Venture with people they get all of their questions answered and the training and actually own property. 

 I don't want to belabor the issues but as I said, if you know the person well and in this case it appears to be your father, the expense of $1,000 to $1,500 to have an attorney draw up a mortgage for $50,000 might be unnecessary. When I lend to my investing son, and it is a great deal of money, I transfer the money and it is a note in the bankbook. No promissory note, no Deed of Trust or Mortgage and no written agreement. I raised him the right way. A handshake agreement is golden and works for us. He has always paid me back because I taught him that is the honorable and proper thing to do. 

Your insurance agent should ask you how you are taking title when you order insurance. If they don't ask, get a different insurance agent. Tell them what you are doing and they will direct you to the proper insurance.

A promissory note is sufficient for the IRS and you should have a closing statement from escrow to support the numbers.

The biggest challenges are to stay under budget and to sell quickly. Time is not your friend when doing flips. You must fix and sell as fast as reasonably possible to make any good kind of profit. By the way, Fix & Flips are the highest taxed in the real estate investment world. You should consider doing Cash Flow investing with depreciation of assets and appreciation of property while selling to Tenant Buyers if you really want to become wealthy. Both you and your dad can be independent in about two years. That's what I taught my son to do and he isn't even 30 yet. It's also the least taxed of the real estate investment options. It's long term cash flow every month and no rehab worries or chasing the market to sell a property.

 Have a title company provide you with a report on the property so you know that the person selling it to you has the right to sell it and also that there aren't any outstanding liens against the property he didn't tell you about. This protects you and your lender from a serious misunderstanding if there are title problems or outstanding liens.

Make sure you take out insurance on the property.

In my case, when lending to someone I know well, I use an agreement and a promissory note and if the amount is $50k or less I don't do a Deed of Trust. Some people do, but I don't. I just do the agreement and note.

If I don't know the person or if the property is in a different state, I do the Deed of Trust (Mortgage). Compare costs and risks and let your tolerance for risk be your guide.  

Another way you might want to think about is to just set it up as a line of credit that you make payments on every month for but as one project finishes you can pay off the loc or if you have another house ready to go you draw on the loc to fund it. If your lender is looking for ongoing cash flow it makes things a lot easier.

 That is actually a "depends" type of question. The amount of the loan matters. How well you know the lender matters. How much the property is worth matters. Your time frame matters. How you are going to pay the loan back matters. Will it be amortized or interest only or lump sum with accumulated interest. Generally you should have a promissory note and an agreement as to what happens in the event you don't pay it off when due.

 Put the addresses through SmartyStreets com and see if they come up as non-deliverable. If they do, enough said. If they don't come up as non-deliverable there is a problem with the letter carrier and it should be reported to the ombudsman at the general headquarters of the USPS. 

 You would make Uncle Sam very happy with your much higher taxes. Talk to a CPA to see what is best for your situation. 

 Contracts need to be reviewed by a competent attorney in your jurisdiction. Wishful thinking won't hold up in court. ;-)