All Forum Posts by: Jason Mak

thanks Jon!

sorry this may sound like a stupid question but i've been sitting on my computer trying to figure out how to do this as I've been trying to PM other folks.

Thanks Dion for taking the time to reply. Your responses was certainly helpful and I've also consulted in person with a experienced party.

The the subject loan is located in California.

Regarding your response to #2 - the property has two lis pendens. From you response, I believe I should just treat them as another subordinate lien. So in the event of the foreclosure, these two lis pendens (similar to subordinate liens) will get wiped out if the property is sold at trustee sale and does not garner more money than the first position lien right?

I don't have to worry about the ramifications of the lis pendens themselves right?

As for the response to the 3rd question, that is good to hear. I've talked to several people who have bought loans and they have given me different answers but the cost you stated (~$5k) sounds about right. I've also heard that lawyer fees can also be compensated as a percentage of the loan value being foreclosed (with a minimum value).

Dion - Thanks again for your reply. I really appreciate it. I'm a noobie getting into this field and have a few contacts but glad that I can also find good people to give me advice on BP. This deal seems a little bit hairy for my first one in but it is local (LA area) which is why I was looking into it

Hi Johny

Welcome to BP.

Jason

Greetings BP Community,

Was hoping if any experience loan investors could help me out with some questions I came across when evaluation a loan for sale on auction.com

1) Basically, I am bidding for the 1st position non-performing loan. However, there are still 2nd and 3rd liens. If I purchase the 1st position and foreclose on the loan, then the 2nd and 3rd lien should be eliminated provided that the remaining equity doesn't exceed the 1st loan amount right? Or if I'm successful in foreclosing, do the 2nd and 3rd position get completely wiped out leaving me as the sole equity owners?

2) there are two lis pendens on this loan. Do you know if these lawsuits carryover once the property is foreclosed on? Or do these liens get wiped out too?

3) Finally, as I underwrite this deal, do you think it is realistic if I assume about $100k in lawyer fees to foreclose on this property?

Any insight you would be able to provide would be great.

Thanks,

Jason

I suggest quickbooks. It's a good pure accounting software that you can just handover to your CPA at the year end for taxes. i agree with Steven Hamilton that if you really don't want to do the bookkeping, then to hire a part-timer. We have a part-time bookkeeper who e-mails us the updated quickbook files of each property at the end of the week for us to review and to pull reports. That being said, it's important that you learn how to use quickbooks (or whatever software for that matter) so that you can catch mistakes, verify records, or simply do the work yourself when you bookkeeper goes on vacation.

One more thing, since our properties have onsite management, we use google docs to coordinate rent collection with the bookkeeper. This is nice so we can keep track of our rent collections as we collect them each month.

thanks all for the responses. I wanted to circle back and provide some of what I have learned researching the 223 FHA refinance in case others are trying to learn about this topic:

Downsides to the HUD Loan:

- Large upfront costs - from my research, significantly more than conventional portfolio or agency loans, this include large mortgage insurance premium (on top of the monthly premium), higher financing fee of between 1.5-2%, and more significant inspection fees

- Long origination period - people familiar with the los angeles office estimated at least 9 months (time is money!)

- Hidden interest costs - sure, they'll quote you 3.5% but don't forget to add the 0.45% PMI cost.

- Huge capital replacement reserves - I have worked with Fannie loans and thought I was accustomed to the capital replacement reserves, but apparently HUD loans look into the entire duration of the loan when calculating the replacement reserves; so if I took a 35 year loan, the HUD officer would take into consideration all the windows/doors/capex that I would need over the entire 35 year in coming up with the capital reserve requirement

- Pricey annual audit - for an apartment building and loan my size (65 units/ ~10mm), this would run me about $10k a year, just another cost to take into consideration

Darryl is right, these loans are suitable for large entities with larger and more diverse portfolios. While we haven't completely ruled the HUD loans out yet, I wanted to share what I have found with the BP folks.

Hi Casey,

I'm in a similar position as you. I'm looking to refinance a property using a 223 Hud loan. i found the article below to be pretty informative.

http://www.biggerpockets.com/articles/1332-hud-223-f-pros-and-cons

i have also talked to a family friend who paid the prepayment penalty and refinanced out of the HUD loan due to: frustrating annual maintenance audits and the onerous annual financial audits (that he had to pay a CPA to do for him).

Just wondering if anyone on the forum had any firsthand insight on this stuff.

Hello Biggerpockets community,

I am in the process of refinancing a 65 units apartment in California and I have a great deal for a 223 refinanceHUD loan (3.5% for 35 years). However, I realized there are many downsides in taking a HUD Loan. I read this great article.

http://www.biggerpockets.com/articles/1332-hud-223-f-pros-and-cons

I was wondering if anyone had any experience with these loans in particularly with the annual financial audit and the annual inspection. Were they as onerous and cumbersome as people made them out to be?

We do plan on holding this property for the long term and we do have experience working with Fannie loans so we are familiar with the impound and capital reserve process.

Any honest advice or feedback would be greatly appreciated.

Thank you,

Jason

anyone sitting on just cash?