All Forum Posts by: Brian Sparr

@Harman N. - you're over thinking it, my friend!  Nobody's going to care what your email is ... just get out there and start making connections.

Good luck!

Hi @David Morgan -

A real estate agent should have access to see the mortgage history on each property (amount, loan type and date) ... from that, you can make an educated guess as to the current balance.  Look up the historical average for the date of the loan (or, more accurately, a couple weeks prior to that date) and then run the amortization and see where the balance would be today if they paid on time and never added extra.

As an agent, I also have access to purchase the current loan info through one of the title companies I work with ... I'm not positive, but I don't believe they allow it for a single property - it's been awhile since I looked into it, but I think it would have to be part of a larger group of loans that I was pulling info for.

I'd start with the educated guess and see where it gets you...

Hey @Eric Brenneman - 

While it doesn't scare me, it definitely consumes me in the beginning.

Part of what I do for my own clients is help them analyze other markets to invest in that might be more appropriate for their goals and risk levels.  To do that, I reach out to a lot of people in that area and I ask a lot of questions.  For a small sample:

• real estate agents
  • send me the numbers on a recent investment deal you helped a client with
  • do you work with many out-of-area clients?
  • who are the top property managers you like to work with and why?
  • if you need to renovate your own place, what contractor are you going to call?
• property managers
  • what type of properties make up the bulk of your mgmt portfolio?
  • what areas seem to be attracting the most interest from renters?
  • are there any agents that you find yourself working with frequently or that seem to be more investment focused than others?
  • do you have any go-to contractors/handymen/inspectors that I could talk to so I can get a better sense for costs, timing and, potentially, common issues to watch out for?
• contractors
  • how much lead time do you need for a new project right now?
  • once on site, how quickly could you do a <blank> remodel?
  • do you have any agents or property managers that you like and find yourself working with more than others?

This is just a small sampling, but you get the idea ... I do my own research to find these initial people, but I then turn to each of them and ask for recommendations - when the same name starts to popup multiple times, I take notice.

I also make it a point to ask them questions that I already know the answer to or that I have a strong opinion on.  It allows me to verify they know what they're talking about and, depending on the question, will give me some insight into their thought process and how they go about conducting business.

When you get to the point of evaluating a specific property, video and google street view become your best friend.  When we're personally working with an out of area buyer, we'll shoot a quick video walk-thru of the property and send it over to them with our thoughts and numbers on it.  Assuming they're interested, we'll do a video chat with them while walking the property - this way, we can point out any immediate issues we see and they can direct us to show them every nook and cranny that they want to see.  When we get into contract and have inspections done, we'll shoot video of the inspector providing a recap of their findings and answering any of our immediate questions.  It's never going to be as good as being there in-person, but we feel it's a step in the right direction.

If you're contemplating the Raleigh metro or the SF Bay Area, give me a shout - I'd be happy to help!

Hi @Adam Gleve -

I'm an agent in both the San Francisco Bay Area and in the Raleigh metro - we see a lot of this in the Bay Area.  Here are some quick thoughts:

• from an appraisal stand point, you're going to need to remove the stove/oven from the unpermitted kitchen before the appraiser gets there.  If part of the second unit includes unpermitted living space (ie, converted garage or attic), that won't be factored in when selecting comps or making price adjustments.  Also, understand that the appraiser will value it based as a single-family and not a duplex.
• what happens if you get caught? depends on the city, but they might give you the choice of bringing it to code and making it a legit duplex or returning it to its original intent as a single-family.
• how would you get caught? a number of ways:
  • neighbors complain because of inadequate parking
  • you get into a dispute with one of the tenants and they report it
  • you evict a tenant and they sue you because of it
  • etc...
• if you have interested buyers, it's totally ok for them to move forward with the purchase but you're going to want to protect yourself and them.  Make sure this stuff is in writing and they've signed it:
  • zoning - they're getting a SFH and not a duplex
  • (lack of) permits - nothing for a 2nd kitchen or converted living spaces
  • occupancy cert (for single dwelling)
  • directly ask the seller/listing agent about the legality of the 2nd unit
• if your buyer plans on continuing to rent the illegal unit, make sure they are aware of the risks ... this article is geared towards landlords in Oakland, but is worth looking at - find the section for Landlord Liability about half way down.

Good luck!

Hi @Gerich Fellermann

1. I don't believe you are required to state your intent; however, I'd highly recommend you do so.  I'm a member of two different MLSes in different states - one gives me the ability to explicitly indicate an exchange and the other doesn't.  Regardless, I always recommend you find a way to state it upfront for two main reasons: 1) you're going to be assigning your rights to the QI and the buyer is going to purchase the property from the QI (not you), and 2) you want the buyer to clearly understand that they won't incur any additional expenses because of this process.  Buying and selling property can be stressful and, at times, confusing - here's your chance to remove a little bit of that potential stress from the buyer's life by giving them a heads-up before you're even in contract.
2. My hunch is that the realtor has confused which party to the exchange is using the FHA loan. FHA loans are for owner-occupied, primary residences only. You could not use an FHA loan when you go to purchase your replacement property - there would be a clear conflict ... the 1031 indicates you're buying an investment property but the FHA loan indicates you're buying your primary residence - only one can be right. That aside, assuming the property you are selling qualifies for FHA financing, I'm not aware of any issue that would prevent your buyer from using that type of loan.

Hey @Anthony Jernigan, keep your comps limited to other condos ... a 3/1.5 SFR is nothing like a 3/1.5 condo. Each of the property types are zoned differently, offer a different quality of life, can have different insurance costs, will qualify for different mortgage rates, attract very different buyers and will behave differently as the markets shift.

Hi @Tim McGarvey - part of the question will be how you hold title.  As I understand this article from the Alameda Assessor, your percentage of ownership will be reassessed when you're removed - from their perspective, it's as if you sold your stake.  So, if you're 50/50 on title now, half the value will be reset and taxed at today's valuation.

You'll obviously need to run this past your CPA/attorney, but one idea would be for you to remain on title after the refi and then have the property transferred into a trust where your family member and their spouse would be the trustees.  Because of how expensive probate is in California, properties are transferred into trusts all the time and it shouldn't trigger a reassessment.

Hi @Will Costello - not knowing the specifics of your market, I can't really say whether this strategy would work for you or not ... however, here are a few things to consider:

• Using a HELOC proves most beneficial when either: 1) a property doesn't initially qualify for traditional financing, or 2) you don't have access to any other cash for the purchase. In the first scenario, you use the HELOC to buy, make your renovations and then do a cash-out refi into a traditional loan and you pay off the HELOC.
• This strategy is 100% financing - whether you use the HELOC to pay the full amount or blend it with a traditional loan or seller financing ... any way you slice it, you're financing 100% of the deal. Depending on your local market, there's a good chance rental rates won't cover the debt payments and other expenses (as, it sounds like, you've already figured out in your own market).
• If you can qualify for both the HELOC and a traditional loan, I wouldn't use the HELOC to pay 100% of the price. Today's rates on traditional loans are, generally, lower than 5.75%. Do 80% with a traditional loan and create a lower blended rate for yourself.
• Introducing seller financing to the mix doesn't make the numbers any better. Unless you can't qualify for a tradition loan (ie, low credit score, recent foreclosure, too high of DTI ratios, too many loans, etc), introducing seller financing is only going to make it more difficult for you to find potential opportunities.

Having access to a HELOC gives you options and potentially opens you up to deals that you couldn't otherwise complete. But, that said, think of it simply as a tool in your belt - it'll be great for some situations and terrible for others.

Hi @Javier Barnes-Tabora - you're going to be faced with similar issues to those that "out-of-state" US investors face:

• how do you narrow down and choose a market to focus on?
• how do you get connected with an investor-friendly or, ideally, an investor-focused agent?
• when your offer gets accepted, how are you going to handle inspections and your due-diligence? are you going to fly out and see it in person? rely on your agent?
• how are you going to get your money into the US? (some countries make it pretty difficult to transfer out enough to make a purchase) 
• property manager? contractors?

If you find the right agent in the beginning, they can make the rest of this process SO much easier for you!

Regarding taxes, yes, you'll need to be prepared to pay US taxes on the rental income generated while holding the property and on any profits when you sell (assuming you don't do a 1031 exchange).  I am, by no means, a tax expert, so here's a pretty good overview from EPGD Business Law...

If you're thinking about investing in either the Raleigh, NC metro or in the San Francisco Bay Area, let me know - I operate in both and would be happy to share my thoughts on those markets...

Hi @Naeem Kapasi - unfortunately, as @Russell Brazil has already alluded to, you're stuck dealing with the dated comps - especially if they closed recently and are close in proximity.  While I'm sure this will vary from appraiser to appraiser, I've noticed in my markets that appraisers seem to be more willing to use older comps before they'll extend the radius of their search.

I've been in your position before (numerous times) and here's the approach we took (sometimes it worked and sometimes it didn't - just depended on that specific appraiser):

• If you had multiple offers on the property, make sure the appraiser is made aware.  Even if they didn't come in as formal written offers, if a large number of people were asking for disclosure packets or discussing price, play this up.  A single offer at your asking price isn't nearly as convincing that the "market is willing to pay" as compared to 6 or 8 or 10 offers/interested parties.
• Definitely create a list of your upgrades along with the cost (assuming the cost is high enough to bridge the gap between the dated comps and your sale price) - photos don't really matter.  Part of the appraisal includes categorizing the "condition" of the subject property and the comps, and there's a corresponding price adjustment that will be made if the two properties are in different categories.  If the appraiser sees a big dollar amount for your list, they might increase the price adjustment to be more in your favor.
• The appraiser won't walk through any of the comps - they'll look at the MLS photos, the MLS description and do a drive-by. If you or your agent walked through any of the comps and are able to paint an uglier picture of the condition of those properties than their photos and description do, you need to let the appraiser know. For example, if you were told a place needed $50k in foundation work but it wasn't mentioned in the MLS write-up, you're going to want the appraiser to know.

As a listing agent in this situation, we'd be trying to do as much of the appraiser's job for them as we can ... we'd provide them with the 3 to 6 comps that we believe are best - we'd highlight our upgrade list - we'd highlight the faults of each comp (especially if it wasn't obvious from the MLS entry) - we'd focus on the number of offers we received and how quickly they came in ... and we'd deliver all of this as a print-out that we'd hand them as we let them into the property to complete their appraisal.

Good luck!