All Forum Posts by: Mike Hartzog

Equity is based on value, and value is subject to interpretation and timing.  Value could have been lower when the lien was stripped.  The court could have used the assessed value, etc.

My pleasure.  I should have mentioned that if you have more than one unrecorded assignment, i.e., there are prior unrecorded assignments, it is important to get them recorded in the proper order (yours being recorded last).  Sticking post-it notes on the assignments you send into the recorders office with "Record 1st", "Record 2nd" usually does the trick.

Todd,

You are correct.  You will be paid the balance of your loan out of escrow at closing.  It's not common to see property get sold or refinanced so soon after purchasing, but its nice when it happens.  If you haven't recorded your assignment of mortgage, get it done immediately, along with any previously unrecorded assignments which are ahead of yours in the chain.

A quit claim deed allows you to convey a property where there are uncertainties such as a clouded title.  A warranty deed would be used in a traditional sale where clear title is conveyed.  If you can convey clear title, that is the way to go IMO.  A property without uncertainties will be more valuable to a buyer than a property with them.

From there you should be able to determine your treatment under the plan.  These can be a little tough to decipher.  I am fairly competent with CH13 plans.  Much less confident with CH11 but I can take a look for you if you want.

Hey Bob - CH11 is available to individuals but typically CH13 is a better choice.  It's used primarily by businesses.  It's like CH13 in that it is not a liquidation, however, the mechanics are different.  Essentially, the debtor business reorganizes and operates the business as a fiduciary for the benefit of creditors, and there is usually a committee of creditors which must vote to approve the plan.  So I think one question to answer for yourself here is whether or not there is an approved plan.  That should be easy to determine on pacer.  Like Ch13, your lien may or may not have treatment under the plan.

I am no expert in tax law.  I do my own bookkeeping but I use a CPA at tax time.  I can tell you that capital gains and losses can happen when an asset is sold, so they don't apply in the example we have been discussing.  Here's an IRS Tax Topic article on it. 

https://www.irs.gov/taxtopics/tc409.html

@Abdenour Achab

When you buy a discounted note, all of the interest portion of the payment is booked as Interest Income. In addition, a portion of the principal part of each payment is considered income as well. This is based on the percentage of discount you bought the note at. Changing your example a bit for easier math, let's say you bought a 100K balance note at 80K, so you bought it at 80% of UPB. So in this case you can only count 80% of the principal portion of each payment as return of capital, and the other 20% would go into an Discount Earned account. The two accounts, Interest Income and Discount Earned, are both considered income from your investment. No difference between the two from a taxation perspective, however, you want to maintain separate accounts for each so that what you report as interest income matches the amount reported to the IRS by your servicer.

I agree with John and Bob.  In retirement you want a consistent dependable income stream and security with regard to your housing.  If you can take that 50K per year and start investing it in real estate backed income producing assets (rentals and notes) for an 8-12% yield, you can begin setting up and growing that income stream.  That stream can then be used in the short term to pay down your mortgage more rapidly and/or buy more income producing assets.  Given the rates on your loans, I would favor continued building of your passive income stream. 

Your area, like mine, is not the right place to invest for income. As Bob points out, the Midwest has the opposite side of that coin, i.e., not much value appreciation but you can buy properties which will cash flow very well as rentals. Buying as turn key is a good option, but you need do some research to find the better turn-key operators. Buying rentals has a distinct advantage over notes for money which you have outside of retirement accounts. Rental property depreciation and operating expenses will generally shelter most of the income you receive from taxes. For money you have in your retirement accounts, I would recommend moving that to a self directed IRA and using it to buy real estate notes or make hard-money loans to local rehabbers. The local REIA is a great place to meet good rehabbers who need these loans.

@Joseph Mceneaney - The pricing for an O&E level (single owner) title search has been in the 50-100 range for me, depending on the property.  I have paid more for slower and less accurate reports.  In my view, the pricing is good considering the qualitative factors.  That said, you may be able to find cheaper sources out there.  Good luck!