All Forum Posts by: Sebastian E.

Jason Dillard thanks for your advice. Do you think it's reasonable to buy the position on the 2nd at a discount and then catch up the 1st. I think I am better off having the owner call the bank on the second to explain that she is trying to avoid bankruptcy but she can only come up with part of the money and see if they will bite

Thanks @andreas Charged off meaning the second has taken the debt off their books. They can still collect but it's h in default long enough that it triggers this process. The seller just wants to avoid foreclosure. Yes I understand regarding due on sale. I have multiple exit strategies there. I can refi, access cash or just sell it and be ok. I don't want to turn around and resell because there is appreciation potential and I know the neighborhood and know that I can cash flow it.

Hi BP! I need some wisdom here. I am analyzing going in on a deal that is subject to financing. The property has a first mortgage of 220 and is behind 13 months (11k) and is in pre foreclosure. The seller has a second mortgage of 53k (HELOC) that has been charged off. So the total payoff to me to cure would be 64k and I'd need another 6 in rehab costs to put me at 70k into the deal and the property would be worth 310 at that point. What I like about the deal is that the existing mortgage is 10 years into a 3.5% 30 year mortgage and the property is an end unit in the path of progress. I have another rental on the neighborhood so it would be easy for me to integrate in the rental management and I can cash flow. The big question I have is once I get the first current, what are my chances of negotiating down that second HELOC balance. Has anyone had any success on this in the past? If it went into foreclosure i am pretty sure the second would be completely wiped out (although I recognize that rational arguments like these don't always work with the banks). I have authorization from the seller to talk to both banks so I am going to get started on that on Monday. I'd appreciate any advice you can offer this newbie on what could be my first subject to deal. Thank you! Seb

@Russell Brazil what about when it is sold to a 3rd party by the lender. Wouldn't TOPA convey at that point?

I am trying to help a friend with a situation and I am not sure the best advice to give him, so I was hoping BP could help.

He is a tenant in SFH in DC. He rents a bedroom in the home and the owner got sick and stopped paying the mortgage about 6 months ago and informed him that she had to move out of state. Since she was no longer paying the mortgage and was essentially abandoning the property, she wrote up a lease for him that he could live there in exchange for taking over the utilities and maintaining the yard.

The property has two notes: primary is 220 plus a HELOC of 50 so the total payoff is 270 right now (plus some back taxes, not sure about any other liens). The property would appraise around 300 today and has some good upward potential because of the location.

From what I can see is he has two options:

1. Purchase the property for the payoff amount of 270 and force some appreciation with the BRRRR Method. He wouldn't quite be getting the 20% off but because it's in a good path of progress and considering how hot the market is, I think he would still be fine doing a BRRRR

2. Do nothing and continue to live essentially rent free. Allow the property to go into foreclosure and then once the property gets purchased back by the lender and then sold to a 3rd party exercise the TOPA (Tenant Opportunity to Purchase Act) rights with his current lease to block anyone else from purchasing. 

Because the tenant laws in DC are so friendly (I have been on the bad side of that deal, so unfortunately I know from experience), I am confident he can effectively exercise his TOPA rights. The downside to this strategy is of course that the original owner would go into foreclosure and he would risk someone else coming and putting a higher offer in which he could exercise TOPA but it wouldn't be as good of a deal.

My tendency is to go with option #1 and not risk all those variables even if he might be able to get it a little cheaper down the road.

I'd be interested to hear your thoughts!

Thanks @Account Closed! I am based in DC and make it to Baltimore pretty frequently to look at properties. I feel confident in the my ability to make a deal work with my personal funds and leverage but I am still relatively uncertain about the self directed IRA. I know it's not the smartest thing to say but the stock market just has me nervous at the moment and i'd rather control my destiny on something that I understand like cash flow.

@Emily McCabe First of all congratulations on this purchase. As many have said on these forums and on the podcast you either win or you learn. 

I have gone through this before with a tenant and I would disagree that you need to hire an attorney. The paperwork to start the eviction process is not all that complicated but you should go ahead an study it, learn it, and start the process right away. This is what I did and while that was working it's way through the legal system, I began working on the tenant and eventually went to court but by that point, we had come to an agreement, so all we had to do was go into a room with a mediator and give them the details of the agreement, which in my case was forgiveness of the 1.5 months of back rent and I threw in some cash to help him move.

The problem with taking general advice with evictions is that these things then to be very state and city specific, so what might work in one area could be problematic in another. In my market of DC for example I know that my tenants can make my life very difficult, so i'd rather try to work with them than against them. In my opinion avoiding a conflictual confrontation will save me money (in my market), so that is my strategy. What I tell people in DC is that you can win in court and still lose on the deal because of the time, costs, and frustrations associated with battle. Of course there is always a situation where conflict is unavoidable, but I try not to let my ego get the best of me and think about the medium and long term sustainability of my business rather than trying to get a win.

Please keep us updated--this is an important lesson for folks to learn from.

Seb

Hi BP,

I am looking to convert my SEP IRA to purchase a duplex or 2 SFH in Baltimore City. I'd be grateful for guidance on a custodian and agent in the city who has experience structuring this kind of deal. Any help would be most appreciated!

Seb

Congrats Cole! Now to the BRRRR method! Keep building.

I like it @Folashadé Shelton! Is it possible to use the Vacant to Value program on multi-families? I am curious about which neighborhoods that you like in Baltimore and where did you go to school?

As for the appreciation game, I would say make it cash flow and then appreciation will be a nice side effect.