All Forum Posts by: Tim Wilderbeeste

Not sure if I necessarily agree with the sentiment. My wife worked as a course content writer for one of the biggest Real Estate seminar companies in the USA (I daresay a number of people on this site took the company's courses) and I went along to a couple simply because they were freebies thanks to my wife being on board. I could see that they might be useful for people starting from scratch, but as I grew up around real estate via my father there wasn't much I didn't already know. Other kids used to go to watch or play sports on Saturdays - I was always trailing after my father to real estate auctions! :)

But having to got know a lot of the people involved at this company, and also hearing my wife talking about various people, it was always a pretty mixed bag. Sure you have some people who aren't as good as they let on business-wise but can really talk the talk (that's half the people in the USA these days) but on the other hand there were also people involved who were great investors, whether buying and holding, flipping, buying tax lien certificates, etc and yet still went the seminar route as instructors because they simply enjoyed sharing their knowledge and the money could be damned good - some of the instructors were making serious money. 

Just one final point with regard to all the back and forth about the ethics and morality of the business, either as an investor or as an agent/broker. The problem with agents is that real estate is one of only a handful of industries (car sales is another) in which just about anyone with next to no education can hop on board and try to make money - big money if they're good. The lack of any real high standard of education means that many who get into the industry tend to be from the lower pecking order but with high ambition  - and often with few scruples. And before people get indignant and start jumping down my throat I'm more than happy to point out that my father was exactly like that - he had next to no ethics when it came to the business. I'm certain there are some decent people involved, but by and large I haven't come across many people in the industry here in the USA who I'd put much faith in - a lot are just damned lazy and virtually expect the money to fall into their lap. We end up doing 90% of the leg work on each property we buy and begrudge every cent that goes to the agents for doing SFA. 

Investors to my mind are of a higher standard, but which way you go depends largely on how you feel about things. Neither my wife or I would ever feel comfortable buying a house from under someone through foreclosure, especially a family, then having to go through some kind of eviction process to put them out on the street - others can. Fine, each person's different. Our investments have tended to be either of dealing with foreclosures that have gone back to the bank - love them, because we all love screwing banks as much as we can and don't need to have a conscience over it - or short sales, which a lot of people steer clear of but which we've had some pretty good success - just requires patience at times. On the flip side we've really had to toughen up as landlords because we've been taken for a ride so often through our good intentions and by trying to treat people as we'd like to be treated ourselves. Being a landlord tests your faith in humanity like nothing else, and we know loads of people who've sold off rental properties because they got so sick all the angst. We're a lot better at it now, but it's come at the cost of really toughening up, asking for first, last and a full deposit with no exceptions, not allowing pets anymore even though we love dogs ourselves, etc, etc. It's the only way you can manage. 

Hi Edward. Absolutely no argument there with regard to BOA - we hate the bank with a passion. We borrowed from them for our own home about ten years ago and they were a nightmare to deal with. I got so enraged over their behavior (long story) that I ended up putting up a web page devoted to all the crap we had to deal with from them. Some VP ended up dealing with us to try and make it all go away. We were thankful that the loan got sold on to WF some years ago as they have been easier to deal with. 

@Harjeet. You're confused. There's only one bank involved, Wells-Fargo. Not sure where you came up with two. Furthermore I'd think my original post would have made it reasonably clear that we're buy and hold investors. That's why we're having issues with the way Wells-Fargo is trying to structure this. Thanks all the same.

Hi there,

Need some help. My wife and I have a small portfolio of five investment properties, four purchased with conventional home loans, the other through a redirected IRA. Most of them have been owned for at least 5 - 6 years, and given the prices we picked them up at, the work put into them, and the increasing value, we've built up a fair bit of equity in them.

We recently came across another property we've become very interested in, and though we used up all our available savings buying/rehabbing the other properties we have so much equity built up, particularly in a couple of them, that we thought we could take a second loan for 40k on one of the properties to help put down 10% on the place we're interested in and use the extra for the rehab work - it needs a fair bit, but than that's my specialty. Given the current market we're not even close to tapping out the equity in the home property we want to borrow against - if we sold it tomorrow we'd walk away with at lease 150k.

Unfortunately we've run into a bit of a brick wall with the bank we approached, Wells-Fargo, who hold the pink slip on the house we were going to borrow against. They insist that we put 20% down on the property we want to buy, plus take out an interest only loan. I think we can do better than that, not least because the bank tried screwing us royally 6 months ago on a car loan - we got much better interest and terms elsewhere. This from a bank that holds the mortgages to all our properties bar one and which we've done business with for some years now. 

Can anyone suggest some alternatives or at least give us an idea of what we can expect from other lenders? We'd really like to buy this property, though not by screwing ourselves financially or painting ourselves into a corner. 

Thanks.........Tim

@Bryan Otteson

The trust option was the one we went down in the first place, but were dissuaded from doing so via an earlier post here, as well as the lawyer we consulted. The basic premise we were given is that making such a move could have been viewed suspiciously from a legal standpoint and might not necessarily stand up under scrutiny in a Florida court.

As for the 'guru', that's getting a little overblown in the context of this post. My wife has never even met the individual concerned, but has edited a number of his books. He doesn't even live in our neck of the woods - closer to you in fact - so the only contact has been through email or over the phone. With that in mind, it could hardly be said that he was the one who recommended the lawyer we consulted. I agree with you that now, in hindsight, I'd question the lawyer's level of expertise (his specialty is real estate) given the fact we're now discovering that the due on sale clause is common, but I'll give him his due, he did return his fee to us when all this came up - I nearly fell over in shock when my wife told me!

'Frankly Im surprised there is any real discussion about this. Wells Fargo, BofA, Chase, and every major bank has the same due on sale clause. Its standard language in every mortgage. Secondly you took advice from as you put it, a "guru". Thirdly, your attorney charged you probably a lot of money to set up this LLC that you are now realizing may be useless. He then seems mystified that a due on sale clause was in your mortgage? Oh and now Im guessing he will be assisting you with the purchase of the umbrella policy? Walk away from the attorney. Buy an umbrella policy. Its like $300/year. Shut down the LLC. Lesson learned. Stop reading anything that comes from a "guru". Go make some money. Stop spending it. '

Congrats. Having extolled the virtues of the community, the first cynical blowhard rears his ugly head.

As a point of fact the lawyer had the integrity to return ALL of his fee, thanks very much. Screwed that one up, didn’t you?

As for the 'guru', what does that have to do with the point about the LLC other than the fact we arrived at that situation via an earlier proposal (mentioned as an aside) from the individual on the matter of trusts? The LLC advice came from here - and the lawyer - so you might as well question why people are on this forum seeking advice in the first place from fellow investors and self-styled gurus. Of course, the irony of your questioning the advice of the 'expert', while ladling out your own deftly delivered diatribe probably eludes you - having someone ghost write a book for you soon, are you?

Further, I suggest you learn to read - I quite clearly stated that my wife has been professionally engaged as a writer (on numerous occasions as a matter of fact) by this very well known individual and personally sought out his advice on the matter of protecting the RE assets, so by all means enthrall us with your acumen vis-a-vis your brilliant extrapolation to the effect we're reading his books?

As for the umbrella policy - really? Who would have thought that such a thing existed? The point, oh greatest of real estate sages, is that we still wanted to find a way to isolate the properties within a legal structure that would further insulate the growing portfolio of RE assets, a not unreasonable aim in a situation where a three to five million dollar blanket policy could prove small change in the right circumstances, especially here in the USA with its bevy of piranha lawyers waiting for any given opportunity to stake their financial claim.

Oh, and as for that pearl of wisdom on making money instead of spending it! What breathtaking insight! You mean real estate investment isn’t about taking from the rich and giving to the poor? Damn, I’ll have to lay down my bow and arrows and break the bad news to Little John and Will Scarlett! I guess in your neck of the woods they simply give real estate away, agents waive their fees, surveyors, contractors etc donate their time out of goodwill, and lawyers perform their duties pro bono on the odd occasion people (obviously not a genius like you) need their services? The point, Sherlock, is that any business requires the expenditure of money at times on ancillary services, even consultation fees, and anyone who doesn’t do their utmost to protect themselves from the potential legal minefield that property ownership represents in the USA is courting disaster. Any more profound philosophical insights?

Finally, I would suggest you peruse the responses from those who preceded you on this post and note the professionalism and basic courtesy so utterly bereft from your own arrogant, chest-thumping ‘look at me’ post that essentially added nothing to the discussion other than the sad fact that, like all forums, there’s always some egotistical jerk lurking about who thinks they own the site and look for any opportunity to jump up on a soapbox and pontificate. Try learning that most un-American of traits – humility – before posting again. Or better still try restraining that impulse to post completely.

Okay, I guess I need to clarify. When I first came on here a few months ago, it was to seek some insight on a proposal put to us by a well-known real estate guru my wife has written for to the effect that we should place our properties in land trusts to protect the assets. As I recall, I think the general consensus was that the trust thing could work via the appropriate states like Delaware, etc, but the feedback from some, plus our RE lawyer, was that it was too convoluted a situation for our relatively small holdings (four rental properties plus our own home) and that an umbrella LLC (versus single entities for each property) was the way to go. So it was on that basis that we proceeded with the lawyer's own suggestion to go with the umbrella LLC, only to have him come back at us and give us the bad news.

Our obvious concern is to minimize our liability and protect the assets, particularly as we feel fairly vulnerable in what is of course litigation land these days. Here's a few points  -

Reading elsewhere, I've come across a point where it may technically be illegal for a bank such as Wells to try and prevent placing the properties in an LLC as a matter of our estate planning? Or would that only apply with a trust?

Further, I've also read that we could possibly sign some sort of personal guarantee with the bank in order to get them to hop on board as far as the LLC's are concerned.

Lastly, while I appreciate the bank's concern, surely the fact we have considerable equity in each property should make a difference?

Thanks for all the responses to date - much appreciated. For someone who peruses forums on a number of different subjects it's refreshing to come on here and find how willing people are to share their expertise and knowledge to such an extent - and without all the typical animosity and flaming.

As some of you may recall I made some inquiries on here a few months ago about the best way to protect our real estate holdings by placing them in an LLC. Well we consulted a lawyer and began the process through him only to run into a major hurdle - we have been instructed by Wells Fargo, the lender on three of our properties, that we are not allowed to place the properties in an LLC and if we try to do so they will trigger the due on sale clause. The lawyer said he is mystified by their stance and has never come across such a problem before - we ourselves have always found Wells Fargo very easy to deal with up to this point. Now we either have to try and refinance with someone else who'll allow the transfer to an LLC, or take up the lawyer's other recommendation of simply getting an umbrella insurance policy to cover the properties. Personally I don't get it - I thought placing investment properties in LLC's was a stock standard business practice in Real Estate, so why is Wells Fargo getting so obstructive about it - does it leave them exposed somehow? Also please note - the LLC's are purely for liability purposes, not for any kind of tax breaks.

@Kyle. Statutes are different from state to state, and we use a fairly stock lease agreement for Florida. There are numerous clauses specified, and which they signed off on, regarding certain breeches that result in the loss of the deposit. 

Aside from the bounced check, they left with damage to the property, didn't clean, no evidence as requested that they maintained pest control, all of which will cost well in excess of their deposit to rectify. Statutes here state that you can issue a 30 day claim that the check itself be honoured, otherwise the individual can be taken to to court, just as they can be taken to court for loss of rent and damages. 

We aren't hard arses about it, quite the reverse actually. We've let people break leases after changing their minds, and I don't think we've ever had a single tenant who's really cleaned premises well enough on their way out that we didn't need to reach into our own pockets to get a place spruced up for a new arrival. We have a tenant who occasionally falls behind by a few weeks because of ongoing medical issues with her son, but we know she's good for it and eventually catches up. We also have another tenant who got abandoned by her husband soon after moving in and ended up falling three months behind in rent, but rather than evict a family that included an elderly and sickly old woman we rode it out, she got help from friends and church, and we set up a program for her to pay her rent in weekly installments, rather than monthly, until she eventually caught up her rent after two years - she's now been with us for 6 years.

@Alexander. As far as going over the sum of the deposit, sure. We've only had one other really bad tenant, and in that case we did the same of taking the individual to court, as mentioned earlier to Nicholas, even though we knew we wouldn't see a cent, just to protect others down the track.

As per Florida law, we issued them with a 3 day pay-or-leave notice last week that expired on Friday, and as best as we can ascertain they have left, bar some items of furniture left behind and a set of keys left on the kitchen counter. We have asked for confirmation on the point from the tenant, but have heard nothing in return, and in essence our hands are now tied for the next 14 days because I can't throw out the stuff or start changing locks until then. Doubly annoying is that they had the electricity turned off, so we'll have to get it put back on at our own expense come Monday to keep the AC and pool pump going, even though we can't officially take the house back until the 25th. Kind of ironic that the law protect the rights of the tenant in such a situation, yet they can now come and go as they please to use a pool being maintained at our expense for the electricity to keep things running.

Oh okay, I think I've read up on the matter before now that it's been clarified. So if I read this correctly, we find an agent in one of the applicable states to act as the representative for the holding LLC, and then register a subsidiary LLC here in Florida to manage the properties? Just want to be clear so that we know our options when we approach the R.E. lawyer we've lined up to see next week.

Dare I ask which of the applicable states would come most recommended, or are they pretty much on an even keel?

Hi Taylor. If you get any closer to determining the optimum state to establish the LLC I'd certainly appreciate the knowledge. Not exactly sure what you mean though on the score about the lawsuit and 'formal' acceptance.