All Forum Posts by: Tim Joyce

Yup and he might not even know of them himself. Something to work into the contingencies in the purchase agreement for sure, if you’re not going to have a full probate investigation done.

I'll chime in to confirm the bare bones of what @Tim Swierczek said, though I'll caution that issues like this can get messy. Your situation sounds an awful lot like one of the law school exam questions a student might face (trust me: just escaped that insanity last May). 

Based on what you've said, we don't have enough information to determine if any other family members have a claim against the property. They could live states away and rarely have spoken to the former owners but still have a claim that can beat a prospective buyer. It would be a shame to get too far down the rabbit hole without chatting this out with a probate attorney (it's not my focus, sorry).

Tim's right that the court can "quiet title" to the property if need be, but if memory serves that involves a formal legal proceeding that actively seeks out folks that have interests in the property, to make sure the right people have first shot. You might still get a chance to purchase from the correct owners, but you won't know who they are without some sort of proceeding. Just so you're prepared. (If you want to be connected with a probate attorney I know, send a DM.)

Wife and I heard of a potential family-deal, where current Detroit Lakes owner wants to quit the snowbird game and go full-time-Florida. They're basically shutting down after this season, and we heard they wanted to list. The idea of having a property like that to use as vacation rental is intriguing, but curious to hear how others have fared in this situation.  

Price sounds like it is good for the area, based on age of house and the fact that any non-family buyer might just tear it down and start over. I hope to broach the topic of seller-financing, if they are into it; but honestly the property can probably appraise close to the asking as-is. Any bank-financing-sized down payment would be probably impossible for us right now.

For us, we'd probably keep as-is for some time due to nostalgia, using some weeks for vacation and the rest as income-generating. In future, as opportunity presents itself, we could deal with a tear down/rebuild situation, or simply sell then. In the meantime, we envision that some family members may also want in on the action, so a multi-owner situation. I would set up all legal structures myself, but curious if the numbers-running process is different for seasonal rentals.

Any advice for how this might reasonably be structured? success/horror stories?

Thanks Grant Rothenburger I know next to nothing about the property right now - could be vacant land used for camping for all I know. Any particular tips for if there is no structure on which to calculate an ARV? Would I look at land comps in the area for future development purposes? Does it being a potential vacation or secondary property change which of the numbers would be most important to you? I’m in Minneapolis St Paul area, so verifying the actual condition could be difficult. But if the land is being sold for $1 or something, seems like there’s plenty of potential upside there. Looking for an efficient way to communicate to folks down here in Twin Cities the potential return they could get, assuming they wanted to trust my numbers.

Any tips for me as I discuss the state of a property up north in Minnesota? I’m told a potential seller might just want to be rid of it, and that makes me think there are back taxes or something. What else would you want to know about as someone I could potentially be wholesaling this deal to? What numbers would you want to see?

Agreed on the NDA. You’re in the business of renting property, not poaching random business ideas. And if they want to run a laundromat, well... sorry that ideas been tried. You could also blame it on the lease/your attorney - “My lease says that the building can only be used for _____ purposes, and my attorney says I need to fill in the blank.” It’s unreasonable to expect a landlord to rent a space for just ANY purpose imaginable. What if the space isn’t zoned for it? What if the tenant causes a huge mess and then disappears to stick you with the cleanup? What if the “business” is illegal? What if the business causes a risk exposure to the property that wasn’t in your plans when you purchased the building? If the prospective tenant still insists on being cagey about it, I call shenanigans and would move on. Can’t have folks playing roulette with your hard won investment property.

Our firm does property tax appeals for very large properties, and can confirm that the process is usually very one-sided, and definitely costly in terms of both time (especially if doing yourself) and/or money (if you're paying a lawyer, anyways). It's all so hard to justify because the valuation change has to be pretty drastic before there are any appreciable savings (since taxes are calculated as a relatively small percentage of overall valuation).

The assessment of my personal residence in Northeast jumped about 12-13% this year, and has steadily climbed about $25 each year since we moved in, just as a comparison.

That said, I think your case would be stronger than mine because we've only just now gotten assessed at what we bought for. Your argument would have to be "look at these comps in the neighborhood" (which of course only works if there are true comps assessed at lower amounts).

Appreciate the shout @Nathan Platter, though I'm certain I don't know IL construction law applicable here (MN/WI licenses only). What is most glaring to me here is that the company is holding onto more money than they claim to being owed. At the very least, you should demand that other $8K back right away. Sometimes companies will try to sneak in a "paid in full" or similar acknowledgement to make it look like the dispute is settled, so watch out for sneaky tricks. It is my sense (again, please don't take this as formal legal advice) that the lack of initial on one particular provision won't save that from being enforceable. But, there may be IL laws that say they can't hold onto more money than they claim to be owed. Construction laws generally allow for some reasonable cancellation fees provisions in contracts, if clear. But it sounds like this contract is ambiguous at best. If they return the $8K, then you'd be set for small claims court anyways. As it stands right now, the contractor is "unjustly enriched" (term of art) because they have possession of money that they haven't done any services for yet. Hope that gives you some things to think about @Pedro L.  From my vantage point, any construction attorney fluent in IL law should be able to tell you the most cost-effective way to proceed, ideally in a free consultation.

Thanks for the shoutout @Tim Swierczek. Not sure I can find the post just now, but the high points are already identified here for the most part. 

From legal standpoint, having property in a company offers some protection from outside, non-real estate-related lawsuit judgments (think a person injured when you drive intoxicated, when your auto insurance isn't enough and they start hunting for other assets). Good property insurance can offer protection from injuries related to your rental property, regardless of the owner on title. 

Since the due on sale clause can have such catastrophic effects on a borrower if enforced, we just never feel comfortable advising clients to pursue that course. That said, 2 of 3 of recent clients decided to risk it anyways. 

I am not versed in the laws around consumer credit reporting, but something about the plan raises red flags for me. If the person giving the advice about freeing up credit-space for future lending wasn't themselves a lender, I would personally feel very apprehensive about it. Just my two cents on that point.

Hey Mike Abramowitz one thing you’d be exposed to is the due on sale clause clause associated with most (all?) conventional loan products. Transferring the ownership to the LLC would trigger that, as would getting the deed recorded in the LLC’s name (both necessary if you’re looking for the liability protection an LLC offers). As far as it being multi member - you’d just have to follow the procedures of your company’s operating agreement. Usually that means some written actions to document the company’s members or manager (as the case may be) approving the transaction and directing the right people to take actions to finish the deal. There might also be a need to spell out what the other non-contributing member’s capital contribution is, in order to establish everyone’s tax basis (not a tax specialist so that’s out of my wheelhouse). I always suggest clients have a lawyer-drafted operating agreement because the size of the assets the company holds can make for nasty disputes later on if things like buyouts and dispute resolution aren’t dealt with up front.