All Forum Posts by: Troy Gandee

Sadly, I think pretty much all homeowners' policies have shot up over the last 12-24 months in the coastal markets. We've noticed a significant spike in pretty much all of our properties. I've been told the reason is because many of the carriers have been pulling out of this market, so the ones that are left are increasing their premiums to compensate for the frequency of claims made. We use a guy named Will McLeod with NavSav for our investment policies. Shoot me a DM and I'll send you his contact info.

@Lucas Osorio It depends on how you go about collecting the data, but it's not really legal to purchase lists and/or requests that public data and then attempt to solicit a business exchange. I don't know of it really being policed, but if you're a repeat offender, I'm sure you'd eventually get a cease and desist. I know there are some big marketers who have been reported numerous times but they don't seem to have been stopped. A lot of the sources will have an acknowledgment where you attest that you will not use the data for commercial purposes. A FOIA typically has language like this.

What's even more important to know is that since this law changed, the data companies haven't been able to pull very good property records, so a lot of wholesalers are mailing to lists that are essentially worthless. I still get postcards for properties I sold 5+ years ago. 

@Chanel Gargula I have an STR in an ADU at my primary residence in PC. Been operating that for about 6 years. My opinion is that STRs have been saturated essentially everywhere for many years now. We're usually about 97% occupied, but we don't charge much for our space. It's small and we don't have any debt service on it that we have to cover, so we just want to keep it rented. The new restrictions in N Charleston should help those who are already operating, in my opinion. I've heard of quite a few people switching to MTRs or LTRs because they don't want to deal with the permit or may have a non-conforming unit.

I would say it mostly depends on the expenses. STRs require much more management. The management fees are typically 20-25%. Even if you self-manage, the work can be pretty extensive. MTRs obviously have much lower expenses. 

I have a lot of clients who go back and forth or both. Most of them tell me they prefer the MTRs and in some cases, perform better with the MTRs than the STRs. 

@Lydia R. I absolutely agree with you. The examples I've been given for many of these "novations" are just single purpose joint venture agreements. They're nothing special. They are creative and take additional documentation, but there's no silver bullet with them. I brokered a triplex to some investor clients a few years ago. They took title in an LLC. They had some management issues and never really got it turned over, but values in the area shot up due to the Covid run. They wanted to rehab the units and resell the property, but they were low on funds. We also needed to complete the evictions, but the owners were out of state. What we ended up doing was adding me as a member of the LLC, so I could finish the eviction in person. Then I funded the rehab and we listed and sold the property. We just wrote a specific joint venture agreement for the agreement. I believe this would be called some version of a "novation". I would never call it that. I would just call it creative thinking and resourcefulness to get a deal done.

@Charles Carillo You hit the nail on the head. There's a certain guru who has been enchanting quite a few people in my market lately. I don't doubt his sub-to and similar content is valuable, but the novation stuff is a problem waiting to happen.

In contract terms, a novation is just an amendment or change of contract that all parties agree to, so calling these complicated arrangements "novations" is questionable to begin with.

This particular guy is also teaching methods that are blatantly illegal in some states. Net listings are one of their tactics, which are very unlawful in my state. I was also told by one of their students that they've made agreements and contracts that are valid in "all states". That's virtually impossible. Especially regarding real estate agreements. Laws, specifically real estate laws and terms are different in most states, so claiming anything is "legal in all states" is reckless at best.

I was approached recently by one of these students on a deal they want to least. I ran the situation by 2 of the biggest RE attorneys in town to get their opinions. Both said these things sound like fraud lawsuits waiting to happen. The term "equity stripping" was used more than once. 

My state is also cracking down on assignment of contract as we speak, so I don't think these "novations" have a half life. I've been doing this stuff for 10 years and had never heard that term until this year. It seems to me to be language intended to confuse and deceive the seller. 

@Alon A. You should be good then. It's 50% of the improvement value, so as long as you're under that, you shouldn't have a problem with it. 

@Alon A. You should check with the County to be certain, but it's just the house, not the total value. Check the tax record to see what the assessed "improvement (structure)" is as opposed to the land. They are combined for a total taxable value. The County is only concerned with the improvement upon on the land in this case. You'd be surprised how little a home in poor condition can be valued by the County. You can always use a recent appraisal to challenge the assessed value, but it really just depends how much work the home needs. 

Congratulations, @Jordan Dixon. We run a big REAI in Charleston called REI Central. Feel free to check it out if you'd like to meet more investors in the area. We meet the 1st Thursday of each month.

@Alon A. Flood zones are very common in SC. It's not necessarily indicative of a house that floods. It just means in a geographical area that could flood. The flood rating is based on the likelihood of a flooding event.

The more important thin to be aware of is the 50% rule with the County. If you spend more than 50% of the assessed or appraised value of the home (not the land, just the home) on renovations, you will then have to adhere to the contemporary FEMA construction standards, which usually means elevating the home. There can be exceptions, but it depends on the home and the area. You should call the County's permitting office and ask them about that before you proceed. Cheap deals frequently encounter this issue because the rehabs are to extensive.

@Sydney George We're an attorney state. We don't use title companies, but use attorneys to facilitate our closings. 

In the Charleston area, I typically use John Florence w/ Florence Law Firm or Mark Weeks w/ Weeks & Irvine.

I will caution that the real estate commission has recently stated that anyone assigning contracts must be a licensed agent in SC and also have a signed listing agreement with the owner of record. I don't believe they've started policing this yet, but I think they eventually will. You may want to take that into consideration for your exit strategies.