All Forum Posts by: Russ Goodman

I would appreciate some collective thoughts concerning my proposed business model.  At times it help me to get clarification if I feel I'm getting too close to the trees not to see the forest properly so to speak.  So I am open to some thoughts and guidance.

I am considering an overall strategy for real estate investing as follows:  I live in Florida and there are vacant lots available to be purchased at tax sale.   My approach would be to acquire the lots, clear title and as my exit strategy:

1. sell them outright;

2. take back paper;

3. develop the lot; or

4. accumulate a few and exchange them or use them as a down for another parcel. 

I like paper, but with the recent dodd-frank and other issues I am concerned.  I know i am papering lots but I'm not sure if it exempt.  Am I looking to take on too much with the possible development?  I would do the development as a turnkey operation.  I may  know which side of the hammer to use , but I know i still bend a lot of nails in the process.

You're thoughts and guidance would be most appreciated.

Justin some thoughts, if I may.  

The point the others have brought out are valid.  But think about how the terms would  be set up vis a vis her financials.  The note can be structured in many ways to either make it affordable, or not.  You could have her pay some amount over and above her rental as an amount to go towards down (to address @Corey's Point)  for the remainder of the  lease, and then pull the trigger on the sale.  As you know, the note can be sold but you'll get a better discount if it has been seasoned a bit ( say one year).  and Yes I like the 1031 approach  Why pay taxes before you need to?

An additional thought.  check online see if the plats are listed when you do a search.  It'll save you time and maybe some $$.  Good Luck

Laura-

Pull the plat from the recorder's office and see if you can glean more information.  I have found that many times an over-sized ownerless lot is actually a paper street where a road was slated to be built or is a dedicated drainage easement that cannot be built upon.

If the parcel is not recorded or  platted, start to do a chain of ownership to where, and if, it might be encumbered somehow.

Oops sorry I meant James.

Let me try to explain my cryptic post.  I'm pulling references from an excellent book by the author William Tappan called "Acquisition and Exchange Techniques".  the Examples he gives by this time are a little dated, but the concepts are still superb. Josh, not knowing your asset base, have you considered offering the bank a substitution of collateral?  you could give them the choice of accepting a different collateral for a possible non-performing note on their books if they don't cooperate.   If they accept it, they then must release your lot. to develop, sell, exchange, etc.  You could purchase another asset, say an income producing one that would cashflow to cover the mortgage, and then substitute.  I would give you more details, but I can't lay my hands on my copy.  it's in the abyss of boxed up books.  Also another concept from this book is to arrange exchange for the mortgage relief.  I would suggest finding an exchange group and pose your situation.  they are very creative problem solvers.  Good luck and be creative!

Has anyone considered a1031exch with someone needing to shelter their profits? I may all wet with this concept but it is done. It is more complex than I am suggesting, but it is something to check into. Just some thoughts.

Andy a couple of thoughts. First forgive my ingnorance of the development ( I live in Fort Myers area) but are you sure this is a true duplex ( a rental) and not a zero lot line home constructed as a duplex? I seen this done in other areas of Florida. And the others are correct about the HOA costs can wreck a cashflow. Citizens is a crusher of an insurer. Check out the Proforma costs for the HOA , if there is one.

(My reply was to an earlier post I didn't see a subsequent on wthat WAS very good.)

No.

If I may interject, what is not being calculated clearly is the cashflow. 12% for 6 months with 3 pts. calculates to a pmt of 17254.84, an APR of 22.72%, and Yes usury under florida law as far as I can recall.

However, earlier in the post, Lupe posted that a lender was at 6.25 % . Let's use this rate for arguments sake. therefore 6 months 100,000 comes in at a pmt of 16,971.80 with a little more that 3 point and NOT be usurious. The discount to 18% comes to 96,691.52. So the take away from this is yes schedule for a year as stated above. The difference is about 300 per month pmt bewteen the two cashflow examples is minor but yet the lender is making 3 points with less money coming out of his pocket to make the deal . though the 6 monthds of 300 more cash )( 1800) he is trading off to avoid usury.

excellent! Glad to hear that! I'd love to hear more bout the discussions when you can. I am trying to set up a similar project but in florida. We have wind loading issues with hurricanes that you may not have. My biggest quesion is estimating the site development costs for SFR versus quads or larger (think townhomes). Kepp us informed Matt. Good luck.