All Forum Posts by: Ross Hair

You're overthinking it Quentin. Find an agent you like and fire away with your questions. Your agent will be happy to answer all your questions. Just don't cut your agent out when you're finally ready to jump on a deal. Good luck with your RE License exam. 

Well said @AJ Wong

My rule #1 is "Don't get in the way of the deal". Too many Realtors slow the deal, make it too complicated or insert their own personality or agenda into the deal. Investors will let you know exactly where they need help. Keep things legal and get the heck out of the way. 

@Hannah Noble You need to be very careful and do deep due diligence on a leasehold condo deal subject to a ground lease. Don't be afraid of the deal, just do your due diligence.  Here are the headline red flags to look out for:

1 - Leasehold Interest. When you purchase the condo you will own the improvements (the condo) but you will not own the land beneath the condo. That's not unusual (a condo association or HOA would normally own the land anyway). The unusual part in a leasehold condo is that an investor owns the land and will charge you ground rent. So red flag one is determine the ground rent and pay attention to ground rent escalation clauses. The ground rent could be very high (20K plus a year and rising) plus leasehold owners often try to sell just before a rent escalation period.

2 - Ground Lease. The ground rent, rent escalation and length of the ground lease are the critical parts of this deal. At the end of the ground lease ownership of the improvements usually return to the ground owner. You need to check if you can automatically renew the lease. If you can not renew the ground lease, or you can't renew it at a reasonable rate, the value of the condo will significantly decrease, down to zero , as the ground lease nears its end of term. In short, your condo will decrease in value each year. Red flag 2 is check the right of lease renewal and red flag 3 is pay careful attention to rent escalation.

3 - Financing a Leasehold Condo. Fannie Mae underwrites leasehold mortgages so getting competitive finance isn't difficult but does require a mortgage broker who understands the product. The red flags are that lenders may not offer leasehold mortgages in your area, lenders require the ground lease to run at least 5 years past the mortgage term (you have 37 years left .. that's getting tight) and the condo dev still needs to be warrantable. Most older leasehold condo developments are no longer warrantable. If not warrantable you will not get a loan. Even if you have the cash to buy, it will be difficult to resell.

Some ideas - value the condo based on the comparable cost of renting the same unit. If the numbers pencil then think of it as a nice rental for you personally in a great area (few minutes from the beach). It could also be a really nice short term rental as you can buy for far less than a comparable fee simple condo and the cash flow could be excellent. Just accept that you need to make enough money now to walk away from your purchase price later.

The biggest idea - figure out how you can be the land owner in one of your future deals.

Hi Sean,

I'm thrilled you had a good mentoring experience with Brad and Andy at IRR.

I've only heard good things about them.

It makes such a difference when you get real hands on mentoring from someone who wakes up in the morning and actually does the things that he teaches.

Just compare that to the "coaching calls" you get from Provo, Utah (home of most coaching programs) - where they spend most of their time trying to upsell you into the next level of coaching.

Jeff,

Start with a couple of really good REO brokers. They have pocket listings all the time and send them to their preferred list of investors.

Then go to your local public trustee auction and meet the investors who are bidding on the foreclosure properties.

They flip their deals all the time as their plans change or they need quick cash.

Hi Nick,

The point about "cash" is it doesn't need to be your cash.

Line up a short term private money loan, bring in a short term partner, make a cash offer and get a loan anyway (just leave enough time to get the loan).

I've always found that the cure all is a bigger earnest money check ... it's a little more risky for you but it satisfies the seller's concern that you're serious.

Sean,

You need a hands on mentoring program with someone in the field - someone who invests day in and day out.

I recommend a guy at IRR called Andy Bacon. He spends every day in the field and has become a wily old pro at fixing those sub 100K junkers. His old partner John Fisher is also very good and runs a monthly sat morning breakfast meeting.

Go to CAREI for intial networking but spend most of your time with Andy at IRR and John Fisher. The website is www.irrofcolorado.com.

Hi Mark,

Out of 10 agents, 5 will hurt your business, not help it, 3 will add no value, 1 will be helpful and 1 will actually be of benefit to your business.

I highly recommend that you find a successful investor in your area of investment and find out who that investor uses as an agent.

You'll find that the successful investor uses multiple agents - many for finding deals, one or two for selling deals.

Bernie,

I'm sorry to hear that you're a Giants fan. My condolences. You seemed like such a nice guy but now you're dead to me :)

Good luck with your rei plans. Indy is a solid cash flow market.

I'm starting to hear a lot of rumblings from our local real estate commission (Colorado) about double closes.

I'm not talking about the usual ignorant speak that double closings are "illegal' but rather a determined movement to stop them. The real esate commission is putting pressure on brokers to not participate in double closes without full disclosure of the source of funding.

We're down to just two title companies that will handle a double close. Both title companies require full disclosure as to the source of funds or flash cash to fund the first leg of the deal. The good news is that a bunch of flash cash private lenders have entered the market and will supply funds at less than a point for up to 5 days.