All Forum Posts by: Tim Hoffman

I tried to sell one of my SFH on an agreement for deed. Had the buyer get the insurance and list me as additional insured. This particular house is the only one I have at a big bank (not a local bank) and was one of the first 2-3 houses I bought. The insurance transfer was what triggered a response from the bank. They gave me 30 days to correct. I put the insurance back in my name to make the loan servicer happy. Went from an agreement for deed to a lease option with generous rent credit and all was fine again.

The loan servicer, by the way, was Bayview.  Just FYI.  After a few months I just decided to pay off the loan and continue as negotiated with the buyer.  Could not have done that if I was not properly capitalized.  

call me anytime Ted. Happy to see another local investor.

@Sha'neice G. Welcome to BP and landlording in the Rockford area. I have been a landlord in the Rockford area for over 15 yrs and I felt a lot like you when I started. Couldn't wait to quit the day job.

I am the VP of the RAA (Rockford Apartment Association), a group of landlords (SFH, Duplex, Apts, even some commercial) who get together to stay informed of local issues facing our industry. You NEED to join. We share information just like BP does only on a local level.

Call me anytime. I love talking RE and the excitement of a newbie is always like a shot of caffeine to my system.

Tim, 815-988-4004

Thank you Bill, I feel a sense of calm coming over me now that I know I do not HAVE to buy something in the next few months and possibly overpay.

Tim

Bill, Thank you for the input. I got a call from the School District rep asking for the mailing address I wanted the letter sent to. He had forwarded my email on to their attorney asking that they put in writing the fact they were going to use ED if we did not come to a deal. Sounds like it is going in the right direction for me.

As for the replacement property under a 1033 exchange, can it be multiple properties? I sell 1 SFH and buy 2 or 3 SFH over multiple transactions, (purchase 1 at a time until I spend all the proceeds)? The last 1031 I did was a 3 family into 2 SFH but that was about 7 yrs ago. As for the proceeds, do I need to segregate them from my normal operating funds or can they be co-mingled until I spend the money on replacement property?

Your info and insight is very appreciated. Thank you.

Tim

Joel,

I guess since the first couple times I used this QI, it would only qualify for a 1031 exchange he must have just gone with that. That and the fact when I called him I specifically asked about a 1031. I will contact today about the 1033. I already sent an email to my contact with the school district about getting a letter that says we settled this before it went to eminent domain but that was an option they were prepared to use. We will see if they respond.

Thanx for the rely. I always learn from this group.

Bill and Billy, Thank you for your responses. I have done a couple 1031 exchanges in the past and I have a qualified intermediary already.

As for the 1033 exchange, I had not heard of that option and will look into it. What are the basics that differ from a 1031 exchange? Timing differences from a 1031?

The School District and I have worked out a deal and have a signed contract. My intermediary gave me an addendum to include regarding this being part of a 1031 exchange. While we did not go thru an ED process, the people I was dealing with used the term a few times and I understood it to be that if we did not come to terms they would use their ED powers. Not positive, but I believe I could have them write a short letter stating that this was resolved equitably prior to the use of ED.

I was first contacted by the school district about 4 months ago. Because of the small size of this case, a reverse 1031 was cost prohibitive so I was not able to get a replacement property under contract until I had the signed contract from the school district. As I said, I normally buy REO or other distressed property and force appreciation. With the markets improving (slow but steady in my area), there are fewer and fewer bargains to be had by the local investor community. When you are used to paying wholesale for something, paying retail or even discounted retail just feels wrong.

Thank you again for your reply

I am a seasoned investor (15 years and over 60 SFH) in Northern Illinois. I have a property next to one of the local High Schools that is being taken for some school expansion projects. They have given me a good price (after 3 months of negotiating) and my question is this. I know I can do a like kind exchange (1031) to defer the capital gains but is there another way since it is via eminent domain? I have historically bought foreclosed property and forced appreciation. With the time limits of a 1031 I may have to overpay for a property and that is killing me just thinking about it.

As a side note, negotiating with a School District was a very interesting process. At the end of the day, their final offer was actually more than my previous figure (about $6k). They said they had deadlines to meet and they would give me the extra if I could close in 45 days. That day I gave my tenants a 30-day notice to move. Paid $51k about 7 years ago (about 6 mo before the bubble burst) and their final offer was $105k. I love real estate.

Thanx for all your help

I moved from a deposit to a move-in fee about 18 months ago at the urging of my attorney. His point was that over 80% of all landlord-tenant lawsuits (initiated by the tenant) revolve around the security deposit. Eliminate that and you eliminate that risk.

I charge a move-in / cleaning fee of about 1/2 of the rent. $1200 rent is a $600 move in fee. $925 rent is a $450 move-in fee. My lease states in bold letters that the fee is non-refundable and any damages beyond normal wear and tear along with any excess cleaning will be billed to them. I inform them that as long as they leave the place in broom clean condition with no damages they will not be billed. I had a tenant go to the dollar store and buy some cheap cleaning supplies, attempted to clean and then wanted their full deposit back. This way, my cleaning crew cleans to my standards with no grief from a tenant.

As for holding a deposit over their head to return the unit clean, I have found that people do not change their behavior significantly regardless of the incentive. A pig will leave the place a pig stye if they are getting a deposit back or not and a clean person will leave it clean under the same circumstances. It is in their nature. Just think about you and what you would do. I'm not a phycologist but i am just saying.....

Use it to your benefit. I use this as a marketing tool. Assume you have a place to rent for $1,000/mo. My advertising would say something like, "NO DEPOSIT special, just a $500 move-in fee plus the first months rent" They only need $1,500 to move into my place. The competitor will say something like, "... $1,000 First months rent plus deposit to move in..." They need $2,000 to move into their place. Who's place do you think they will chose or which one of us will have the pick of the applicant litter? Just sayin'.

On those rare occasions where they ask about getting money back, I offer them the option of paying the move in fee OR paying a regular deposit equal to one months rent. When they move out, they will get the deposit back as long as the unit is in the same condition they received it. That means professionally clean the carpets, bathroom and kitchen are cleaned and sanitized, and so on. After that conversation, they always chose the move in fee.

Finally, on those occasions when the deposit was not returned in full, did the damages, fees, unpaid rent and so on cause you to file bankrupcy? Probably not. In reality, we are only talking about a few hundered dollars difference between a deposit and a move-in fee. Not the end of the world and if you use it as a marketing tool you get that back in better tenants and faster lease up time. What are you waiting for????

Hey Shawn,

Great to hear you are interested in RE at such a young age. I too was interested very early but I did what I was "supposed" to do. I went to college, got a J-O-B in my field and worked my way up the corporate ladder. Then, about 11 years later I realized I still had that burning desire for RE. I found a mentor, did what he said, read voraciously about RE, drove around so many neighborhoods and side streets I knew my City like the back of my hand and then I put an offer in, (about 6 months after finding my mentor). About 18 months after buying that first house I quit my day job to do RE full time. Fast forward 15 years and I have 65 Single Family Houses (12 owned free and clear plus my personal residence as well).

I am not going to say college is a waste of time but college is not for everyone. I got my degree in Accounting and use it in my business. I could have just as easily taken some accounting classes at the local community college and been 4 years and many thousands of $$$ ahead. I have told my kids college is an option but it is not the only option. Only you can decide if this RE bug is a fad or a passion for you. Good luck