All Forum Posts by: Jeff Rabinowitz

I keep a land line to screen out annoyance calls and fax callers (amazingly, I still get an occasional fax call). This is the number I use to register my LLCs and that I give to anyone I am I not yet sure I wish to call me back. The ringer is turned off and the phone it is attached to is in a hallway so it doesn't bother me at all. There is an answering device on the line--I check the messages once or twice a week. The vast majority are junk.

Obtaining a loan under false pretenses is fraud. Using the funding from a loan for purposes other than stated in the loan documents is fraud. Fraud is a felony. Could you get away with it? Maybe, especially if you promptly pay the loan off in full. However, your lender might choose to call the loan due or begin the foreclosure process if they discover the fraud. Do you have the resources to quickly pay off the loan if the fraud is discovered? Are you generally lucky? Is the risk worth it to you? Is this the way you wish to conduct your business?

The safest loan is always the one with the lower payment. If you fail to make the payment, you will lose the house. Beyond that, the best choice for you will depend on your circumstances. The best path is likely to be different if your net worth is $50k or $5 million, if your annual income is $30k or $250K, if you have $20k in the bank or $500k. Find an accountant who is familiar with real estate investing and discuss some scenarios.

Ordinary income tax rates would usually be higher than capital gains rates. I am not sure about the imputed interest as every time I have sold (SFHs) with seller finance terms I had a much higher interest rate baked in. It may be possible to structure the sale as an installment sale (like a layaway) without obligating the seller to pay tax on imputed interest but please, check with an accountant on that. A benefit to a seller is that they do not have to pay tax on funds that they have not received. So, if they have a large tax liability on the sale of a property, they can spread that liability over several years. Again, please explore with an accountant to see if this could apply to your situation.

@Ted Thomas, Detroit is in Wayne County. No part of it is in Oakland County.

@Gayle Chapman, have you looked at Google earth? Do you see any evidence of construction? 

I know several people who lend out of their SD IRAs in SE Michigan. If you go to local REIA meetings, you are likely to run into many lenders or potential lenders. I attended a meeting tonight that was hosted by a private lender who answered questions about private lending for a couple hours.

They have not paid rent in two months and you think they may stop paying? Wake up. They have stopped paying. You may have to go to court to evict them. The first step is to file whatever notice to quit is required in your State. Do it now. You will not receive rent again until this tenant leaves and you can place another.

@Whit Dhamer, in many States a Land Contract is called a Contract for Deed. They are common vehicles in Michigan. They are difficult to do or prohibited in some States. I suspect Illinois may be one of those States. Make sure you speak with people familiar with doing this type of deal in Chicago as the paperwork will have to comply with local law. 

I have sold on land contract frequently and like the model. I would be hesitant to sell to someone who intended to demo/rehab the house unless the house was not usable/saleable in its present condition and I was convinced the buyer/rehabber had the skills and abilities to do a good job, and was likely to complete the sale. I would also want the down payment to be large enough to cover legal costs and a couple missed payments, in case I had to foreclose to get the house back.

It is possible that the seller's mortgage company could call the mortgage due if they learn of a land contract sale. I do not believe that is likely, but you should address a plan on how to address that situation if it should occur. I have sold houses on land contract with underlying mortgages and have not had an issue. Several of my buyers would have been able to cash out those loans with personal funds if the loans were called--I was also able to cash out the loans if necessary.

I rarely use LLCs so do not have any experience transferring properties into LLCs. However, I have sold several properties that had underlying mortgages on land contracts. The memorandum of land contracts are recorded in the public records. I have not yet received a letter concerning the sales or the due on sale clause from the banks that hold the mortgages. I have received, and accepted, refinance offers on properties that have been sold. Either the bank offering the refi did not check the public records or did not care about the land contract sale. I recently received another refinance offer for a property I refinanced ~15 months ago and sold on land contract terms 18 months prior to that refinancing. I am not accepting this refinance offer because the term of the land contract expires in a few months. I expect the borrower will pay off the contract and I will pay off the mortgage loan at the time.