All Forum Posts by: Xiaoyu Liang

Quote from @Sriv Nava:

Quote from @Xiaoyu Liang:

Got myself into a sticky situation as the junior lien holder. All the below numbers are for easy calculation purposes.

I hold a junior lien of $18k to a property in Arizona City, Arizona. The property was sold at $300k with 1st lien of $290k a year ago. The property owner defaulted on my payment, so I hired a real estate lawyer and pursued foreclosure on it. From payment plan negotiation to the actual paperwork for the foreclosure, the lawyer fees have stacked up to $15k. Some information I learned from the local realtors before the auction as following: the market price for this property is at $270k optimistically. The 1st lien has been paid down to $280k. The monthly payment to 1st lien is at $1500. The market rent for this property is at $1700.

I imagine on the auction date, the bid would start from $280k + $18k + $15k, a total $313k. However, since the value of the property is at $270k, I would assume no one would buy this property. I could assume the title of the property along with the 1st lien, and on top of that, catching up on the delinquency. Assuming no property management fee and no maintenance cost, I will get $1700 - $1500 = $200/mo profit. Looks like it will take about 14 years to pay back my debt and lawyer's fee. 

I don't know if my assumptions and my math make sense, but I don't see in any way how this auction is going to benefit me at the end of the day, but my lawyer still suggests I pursue it. To me, it seems like it will only stack up more lawyers' fees. 

Does anybody have any creative ways to make things work in this scenario? What would you do? Keep pushing or cut loss?

 Is this a different property than what you posted 4 months back?

https://www.biggerpockets.com/forums/41/topics/1114728-junio...

 It's the same property. There is a grace period for foreclosure, so I had to wait for a few months.

Got myself into a sticky situation as the junior lien holder. All the below numbers are for easy calculation purposes.

I hold a junior lien of $18k to a property in Arizona City, Arizona. The property was sold at $300k with 1st lien of $290k a year ago. The property owner defaulted on my payment, so I hired a real estate lawyer and pursued foreclosure on it. From payment plan negotiation to the actual paperwork for the foreclosure, the lawyer fees have stacked up to $15k. Some information I learned from the local realtors before the auction as following: the market price for this property is at $270k optimistically. The 1st lien has been paid down to $280k. The monthly payment to 1st lien is at $1500. The market rent for this property is at $1700.

I imagine on the auction date, the bid would start from $280k + $18k + $15k, a total $313k. However, since the value of the property is at $270k, I would assume no one would buy this property. I could assume the title of the property along with the 1st lien, and on top of that, catching up on the delinquency. Assuming no property management fee and no maintenance cost, I will get $1700 - $1500 = $200/mo profit. Looks like it will take about 14 years to pay back my debt and lawyer's fee. 

I don't know if my assumptions and my math make sense, but I don't see in any way how this auction is going to benefit me at the end of the day, but my lawyer still suggests I pursue it. To me, it seems like it will only stack up more lawyers' fees. 

Does anybody have any creative ways to make things work in this scenario? What would you do? Keep pushing or cut loss?

I was reached out by this property owner who is going through foreclosure and see if I can make her a deal to take over the property. The ARV for this property is about $200k. The rehab cost is less than $80k. Current past due to the lender is $7.7k. Total payoff is $89k due to the lawyer fee and process fee etc. Thinking about taking it subject to. Monthly payment for the house is $310. Thinking about holding the house for 6 months and fix and flip. Is this a deal? What are some of the ways to make it a deal if not?

Quote from @John Slater:

Quote from @Xiaoyu Liang:

The borrower bought the property with seller finance and then lease-to-own to the current tenant. The same borrower holds the title. The same borrower owes me money. 

Got it. And loans/liens recorded on the property? 
is your 19k recorded as well?

Yes. Everything is recorded. 

The borrower bought the property with seller finance and then lease-to-own to the current tenant. The same borrower holds the title. The same borrower owes me money. 

Quote from @John Slater:

hi @Xiaoyu Liang - not 100% in understand your post here.  

You mention a promissory note, but do you have a lien/deed of trust actually recorded on the property in AZ?

Does the person who owes you money "actually" own the property in AZ?  you mention is was sold, then sold again or lease to own etc, "with seller financing" etc, so my question is Who is recorded on title as the owner of the property? is it the person who owes you money.?

Aside from the "seller financing" you mention "senior loan", is that the seller financing you are talking about or a different loan on the property?

Yes. I have a lien actually recorded on the property. 

The person who owes me money actually own the property. He lease-to-own to the current tenant with due date in 2027. 

yes. Seller financing is the senior loan. 

Everything started with me funding a fix and flip project in Washington state as a junior lien holder. The property was sold during pre-foreclosure undervalue. I agreed to remove the lien with the rest of the debt secured by another property that the borrower owes in Arizona state. Now, the borrower has defaulted on the payment to my note, and I am in the process of filing a trustee's sale. Below are the numbers I gathered.

The property in Arizona was sold at $313k with $22k down payment and the rest of $291k was seller financed with a monthly payment of $1,500. The property was then lease-to-own to the current tenant with $26k down payment, $1,650 monthly payment, and $325k sales price with balloon in 2027. Then my debt of $19k is secured by this property as well. The market value of this property is at $307k.

Based on the above scenario, after the foreclosure sale, I still would not be able to recoup my debt since the estimated market value of the property cannot cover the entirety of the senior loan and my loan. I am considering the possibility of taking over the senior loan along with the tenant on the same term, which will give me $150/mo cashflow for 4 years, which total to $7,200, then plus the balloon payment of $325k in 2027, which will be $34k+. Seems like a better deal than actually selling the property to a third party?

Quote from @Tyler Gibson:

Quote from @Xiaoyu Liang:

I want to share my experience in purchasing this investment property. It is quite a journey, and I feel like I've been dealing with a lot. I want to see if anybody had a similar experience or how would you deal with it moving forward if you were me. 

I closed a duplex investment property with inherent tenants on 1st August 2022 near Lakeland, FL. My realtor was stellar. He gave great suggestions and was very professional throughout the process. I trusted him so I used his company for property management after closing. The PM had 30 days to bring the property up to standard for inspection for insurance (I am paying high insurance because of the water leak and the electrical issue at closing, plan to switch out once the repairs are done). 

Right after boarding the tenants, one of the tenants broke the lease and left, it was a good opportunity to do maintenance on the property anyways I thought. It took the PM 3 weeks to get me a quote on the project, which was a bit over budget but I agreed, thinking I need to finish the project on time, within 30 days. 2 days before the due date, the contractor found out they need to replace laundry box and quote me for $900. I felt it was overpriced, so I searched around other contractors and got it replaced for $375. I went back to the PM questioning for the overprice and was told they used their long-term partner general contractors, it might be expensive, but the quality of work is guaranteed. 

On the day of inspection, it was found out the contractor replaced the wrong water heater, and the installation was not up to standard. PM came back to me and wanted me to replace the other water heater stating they were both old anyways. I negotiated a deal with the PM to replace the other water heater at a discounted price and asked them to fix the improper installed one. It has already passed the deadline at this point. 

The contractor went the next week, and the tenant was not home so they couldn't complete the task. The contractor also had disagreement with the inspector on the standard for installing the water heater. After communication, the contractor scheduled another week later to install the water heater the right way. It's 2 weeks past the deadline at this point. Re-inspection was scheduled right away after the installation of the water heaters. But the tenant did not open the door again, and the inspector couldn't get in to check. 

So here I am now. 2 weeks past the deadline and $2k over budget. Also, unit B has been vacant this entire time due to the tenant breaking the lease and leaving, and this unit is still not on the market yet. It has been more than 30 days.

I am so frustrated at this point with this property, but I am so lost at the same time. I don't know what I could do to improve my situation. I signed a contract with the PM. PM also manages contractors. What would you do if you were me?
 

 You're going to want to read your contract with the property manager, so that you understand what your responsibilities are if you choose to cancel. But I would have a very clear conversation with the property manager as to what your expectations are and how they have not been mad at *** questions on how they intend to remediate the issue. If the answers are not satisfactory don't be afraid to fire your property manager and go find a new one. You could just be delaying the inevitable. I know a couple of property managers in the area I'd be happy to provide you a suggestion if you'd like.

 Thank you for helping. I would like to know your suggestion. 

Quote from @Drew Sygit:

@Xiaoyu Liang we disagree with blaming the PM 100% and terminating them.

They are responsible for some of this, but not all of it.

Here are challenges no one likes to think about, but are quick to blame a PM for:

1) 3 weeks to find a contractor to bid
***Not uncommon currently as GOOD contractors are busy, leading to long queues

2) High Maintenance Costs
***Yep. Those good ontractors know they are in high demand and charge accordingly, You can ALWAYS find a cheap contractor on Craigslist with nothing going on - but why are they so available? Because they do crappy work and take forever to complete things.

3) Replacing Wrong HWH
***100% on the PM and would not have let them repalce the other one. They obviously did not meet the contractor at the jobsite or give detailed directions.

4) HWH installed incorrectly
***This is on the contractor! Was a permit pulled? Hopefully, the PM did NOT pay them in advance.

5) Tenant not home to meet contractor
***PM is partially at fault. Many companies try to cut corners and have tenants grant contractors access. MANY tenants won't cooperate with access if they are NOT home, so it's just easier for contractor to meet tenant. Yes, in a perfect world, the PM would meet every contractor every time.

6) Vacant unit not marketed
***Not understanding this one as unit should be marketed and worse-case, MoveIn Date can't be set until inspection passes. So, they can still show and look for a good tenant.

Other Observations:
1) How much are you paying your PM to handle these maintenance issues? 
***Many owners expect PMC's to do this for free or included in the monthly management fee, but it is too much work in this case. If you are not paying them anything, you are getting what you paid for.

2) What conversations have you had with PMC about who will be responsible for any tickets from the city for not passing inspection? Or have they given you proof the city has granted an extension (many do with reasonable causes)?

3) Overall, there seems to be a lack of communication from the PM. They are not anticipating what may go wrong and communicating what to expect and how they will handle it.

So, it MAY be time to look for a new PMC if they cannot satisfactorily address these issues.

 I agree with you. That is why I did not blame the PM in my post and want to see what everyone else thinks about who's responsible for this entire thing. The fact that it happened twice that the tenant did not cooperate to open the door showing the PM was never been and never intended to be on site. They will just simply schedule for the next time and it is at the grace of the contractor to pick the next time, which is always another week later. 

There are email communications almost every day but not as detailed or as responsive. I called last Friday morning, and they gave me a more detailed explanation and said their priority is to put my property on the market. It has been their priority since Tuesday. Yet at the end of Friday, the property is still not on the market and I did not get an email explanation on why. Am I asking too much? 

I want to share my experience in purchasing this investment property. It is quite a journey, and I feel like I've been dealing with a lot. I want to see if anybody had a similar experience or how would you deal with it moving forward if you were me. 

I closed a duplex investment property with inherent tenants on 1st August 2022 near Lakeland, FL. My realtor was stellar. He gave great suggestions and was very professional throughout the process. I trusted him so I used his company for property management after closing. The PM had 30 days to bring the property up to standard for inspection for insurance (I am paying high insurance because of the water leak and the electrical issue at closing, plan to switch out once the repairs are done). 

Right after boarding the tenants, one of the tenants broke the lease and left, it was a good opportunity to do maintenance on the property anyways I thought. It took the PM 3 weeks to get me a quote on the project, which was a bit over budget but I agreed, thinking I need to finish the project on time, within 30 days. 2 days before the due date, the contractor found out they need to replace laundry box and quote me for $900. I felt it was overpriced, so I searched around other contractors and got it replaced for $375. I went back to the PM questioning for the overprice and was told they used their long-term partner general contractors, it might be expensive, but the quality of work is guaranteed. 

On the day of inspection, it was found out the contractor replaced the wrong water heater, and the installation was not up to standard. PM came back to me and wanted me to replace the other water heater stating they were both old anyways. I negotiated a deal with the PM to replace the other water heater at a discounted price and asked them to fix the improper installed one. It has already passed the deadline at this point. 

The contractor went the next week, and the tenant was not home so they couldn't complete the task. The contractor also had disagreement with the inspector on the standard for installing the water heater. After communication, the contractor scheduled another week later to install the water heater the right way. It's 2 weeks past the deadline at this point. Re-inspection was scheduled right away after the installation of the water heaters. But the tenant did not open the door again, and the inspector couldn't get in to check. 

So here I am now. 2 weeks past the deadline and $2k over budget. Also, unit B has been vacant this entire time due to the tenant breaking the lease and leaving, and this unit is still not on the market yet. It has been more than 30 days.

I am so frustrated at this point with this property, but I am so lost at the same time. I don't know what I could do to improve my situation. I signed a contract with the PM. PM also manages contractors. What would you do if you were me?