All Forum Posts by: Nick Romano

Hey Larry I have a great contractor in Plymouth Area. If you move forward with the deal let me know and I'm more than happy to connect you two. Not sure if he's taking on new biz but worth a shot. Thanks!

Finally found my first multi family in the Boston suburb area....I think...This is more a story than a question.  I wan't going to post it here but I figured I may as well!  Maybe people  learn from it or shed some light on the situation.  Here goes:

So I've done all my research, and after about a year finally found an awesome multifamily!  I got the financing, put in the time, effort and money (appraisal, inspection, etc), insurance and all the above.  I knew the seller was going through a divorce and I was under the impression she had a court order to sell all her (four) properties.  About an hour before closing I got this email from my attorney:

"Nick,I just received and email form the seller’s attorney’s office stating that there is a problem with this closing. Seller hasn’t been served yet, but a Temporary Restraining Order was issued yesterday regarding sale of this property.

The seller’s attorney will be calling Jeff and once Jeff speaks with him we will call you. In the meantime, please hold off on going to the registry as this may not close today. Please let your broker know as well.

Thank you, Karen"

So needless to say we didn't close!  Has anyone ever heard of such a thing?  An hour before closing?

What I found out:  The seller is in fact going through a divorce, and she does have a court order to sell all her property.  However, there is a contractor that supposedly feels he is "owed" a portion of the proceeds of the sale (according to seller).  The seller is going to court on Thursday and we're re-scheduled to close this coming Friday....provided everything is solved in court.  

My Opinion:  I assume this is some sort of mechanic lean they put on the property?  But would this be described as a "restraining order"?  I'm trying to tell the seller that we should close on the property and the proceeds should go into an escrow account where she can then sort out how the contractor and herself can distribute the money/profits.  Is this a good solution?  Any other solutions?

Let me know what you guys think...this is an interesting one.

Thanks so much!

@Trent Honea seems like you have some bad tenants on your hands.  This is a good example of screening the hell out of tenants!  And even when you do these type of tenants will always sneak through.  

Get in there and fix/update everything so there are no future claims.  Sounds like these guys will be quick to point out anything out of place.  Notify insurance right away so they can deal with claim right away...honestly, I bet nothing will come of the situation.  They'll need to deal with the insurance company to get any sort of money and quickly realize its a pain to get money from insurance companies.  And if she isn't really hurt they'll realize they're committing fraud for a false claim...it sounds like they were just upset and making "in the moment" requests.

My take on this situation:  

1) Don't Panic

2) Get insurance involved right away (I bet it ends right there)

3) Fix the cabinets and anything else not secure or up to code in the house

4) Don't renew the lease and get the tenants out of there

5) Rent to new great tenants and restore peace of mind

***also just a quick note.....  If the cabinets were installed incorrectly and the tenant really did get hurt...The tenant is 100% in the right.  Get those cabinets fixed and don't rinky dink anything for your tenants.  Your job as a landlord is to give people a great safe place to live!

Best of luck!

@Wes Brand yes love the idea...either work.  If you do make it a percentage just make sure its high enough to cover everything.  For example, if you have a low gross rent you'll need a higher percentage.  If you have $8000 coming in per month on a 3 unit....smaller percentage is justified...etc.

@Wes Brand  Still i agree it's a Good idea if you can amortize over the life of the expenditure 

@Nicole B. one thing i don't see on here that no one mentioned was CapEx. Being in a condo the larger expenditures like roof and exterior are covered in the condo fee, but you'll still need to account for expenditures inside the walls of your condo. I usually set aside 7% for CapEx and 7% for maintenance (may be high)...But bottom like may you;d want to account for CapEx inside yous condo....maybe 5% or so for CapEx per year? Rather be safe than sorry...Good Luck!!

nice good info thanks!

@Bill Briscoe you mentioned your rent was above market value?  Also seems the cash flow is pretty strong.  Why not lower the rent and get some better tenants in there?  The tenant paying slightly more each month could come back to bite you in the long run.  My opinion would be to lower the rent and find some top notch tenants that you dont need to worry about!

Good luck!

@Jeff B. @Edward B. @Jerome Hanson @Joe Splitrock Thanks so much for all the dialogue.  I love the back and forth!  Clearly there is no "black and white" answer here.

I definitely have a good idea of whats going on with transferring deed now.  Honestly, it seems to all fall in the gray area so its all about personal preference and ability to react.  As long as you're well educated about the consequences and fully understand the contract I think the real answer is:  It's up to you.  

Awesome chain and thanks everyone for bringing up great points!!  Good work I hope this forum helps people get better educated on transferring deeds.

Thanks! 

@Edward B. great insight.  You're right, just as everyone agrees on this forum, it isn't fraud but simply a breach of contract.  While it will give the option for the lender to call the loan at any time, which could possibly put your house into foreclosure if you can't afford to pay off the loan when called.

@Jeff B. the problem with commercial loans is they are far less competitive.  

@Lynn McGeein don't speed if you cant afford the ticket....nice advice:-) 

My loan will almost surely be sold to Fannie/Freddie because it is a small value conforming loan...maybe the play is to transfer to an LLC after its in Fannie/Freddie hands...(they always let you know via letter/mail when they sell the loan)???  

While Fannie/Freddie will be able to call the loan at any time (I could afford to pay it off if really needed) maybe they are just not calling the loans right now?  

I'm still a little confused how everyone is transferring the title/deed on their conventional financing loans from personal to an LLC. A few CPAs said they do it all the time....and people blog about it often here with no repercussions.

Maybe no one is committing mortgage fraud, but is everyone just breaking the contracts and calling the bluff that these mortgage companies will not call the loan??

I'm still torn....

Hey Guys! I'm closing on my first Multi Family in Mass and I'm told I can't close in an LLC because the banks will not give financing to an LLC (even if I co-sign or guarantee the loan). I have had some people tell me to close in my personal name as an individual then convert the deed (via quick claim, etc) to the LLC after the loan is established. The issue is every mortgage company I've spoken with says this would be fraud or in violation of the mortgage terms and could result in pulling the loan and putting the house into foreclosure.

I spoke with my CPA and he said I will want it in an LLC and he does these conversions all the time. I have also seen multiple people in this forum doing this same process (transferring after the loan closes via conventional financing from personal to LLC).

So my questions is: Are you unknowingly creating mortgage fraud by closing the loan as an individual then putting the deed into an LLC? Is it in unwritten rule that this just what investors do to get conventional loans into LLC's?

Is there some clause that I should put in the loan contract before signing with the lender??

Let me know what you guys think.  Interested to get some opinions here.

Thanks!