All Forum Posts by: Robert Steele

Ah. Mystery solved.  Well thank you for all the work you do.

Now I will think of you every time I get the newsletter.

The BiggerPockets newsletter always comes from "Allison | BiggerPockets". Who the hell is this Allison? Why is there a girl's name in the from line at all?

 Money gives her the option to decide to stay at home with family instead of hospice but guess what? No money, no rent, no choice.

There is an old saying that I think applies here; Beggars can't be choosers.

Well I guess this is just too "out there" for most people here on BP to comment on. I did find this nugget of wisdom which was my first inclination and answers one of my subsequent questions should anyone dredge this thread up at a later date.

P.s. The $210K value of the property is super conservative. Comps are going as high as $295K. So there is a boat load of equity in this place.

When an acceptable offer is made for the property, the court must approve the sale price and the costs of the sale. Upon close of escrow, the proceeds of the sale are used first to pay off all loans against the property, the real estate commissions, and any other liens against the property. The court may order reimbursement out of the proceeds of the sale of the attorney’s fees and costs incurred in prosecuting the partition action. The net proceeds are then distributed to the joint owners. 

Well I did buy the 1/3rd ownership interest for a few hundred at a Sheriffs sale for a judgement against one of the owners.

Now I have a few more thoughts.

I own a third of the property but I am not responsible for the mortgage. So in the case of a sale would I receive a third of the sales price and then the other two owners would have to use their portions to pay off their mortgage. Or would we all pay off the mortgage and then divide the proceeds.

If I just sit on the title as a silent partner and wait 10 years for the other owners to sell to get my payday then can the other owners sued me for property taxes that I did not pay. Should I demand 1/3rd rent from day one and just not pursue collection so that I have something in my back pocket to counter that suit if it should arise.

Could they do a cash out refi in order to pay me off, even say at a 50% discount given that max LTV for a refi here is 80%. They may not qualify for a new mortgage given that they got themselves into this situation.

Could I sell my share back to them and take back a note. Possibly selling that note once it seasoned. At least with the note in the second position with a lot of equity I'd have recourse should they get foreclosed on. As an owner, not a lender, I have no recourse.

I'd appreciate some ideas.

Perhaps instead of calling them "inspections" you should call them "maintenance checkups". 

Most of the time if you are actively managing your properties and they are local you get to see inside when dropping in to do or assess repairs. This is usually less than every 6 months. Also, driving by the house when you happen to be in the neighborhood is another way to keep your eye on your asset.

That said I have only be been burned once within the past 16 years by not adoption an inspection policy. The rent was always exactly on time and I never got a call to come out and fix anything. I never heard a peep from the tenant and the rent just kept rolling in. Happy days! 

After about 8 months I got my first call about the tenant/property from a neighbor and found out that the tenant had been hauled off to jail and the house had been trashed over the past several months.

I might have an opportunity to buy a one third ownership in a nice single family property. The property is well maintained from the outside. It is owned by a husband and wife and another family member. Assume that I can acquire the ownership of the husband through a hostile action. Also assume that the property is worth $210K and has a $135K mortgage with all three owners on the deed of trust. Finally assume I can acquire this ownership interest for $10K. Does this sound like a good deal to you?

Some concerns that I have are.

1. Getting access to the property. Even though I am a third owner I do not have possession. I also cannot evict the other two owners.
2. Making a profit on my investment. Can I force the other owners to pay me rent? Perhaps I can get them to buy out my share (unlikely or they wouldn't have lost it to me in the first place). I can always file a suit to force a sale of the property but this opens up another can of worms. If the people living there wan't to be belligerent and not allow any showings. If they decide to trash the place. If they decide to stop paying the mortgage. All of these would be shooting themselves in the foot but whoever said people were rational.
3. Bad karma. I know this is a business butt forcing a family out of their home that have done nothing bad to me just doesn't sit well.

So $10K for a $25K stake in a house that I am not sure what to do with. Or force a sale minus legal fees, selling costs and headaches to double my money maybe. What do you think?

@Chris May I read the thread and there were a lot of different arguments made. Most of which made my head spin. But consider this simple logic.

If you had a savings account into which you were making regular deposits would you prefer to have that account pay interest on the balance daily or monthly?

The inverse of growing a savings account is paying down a loan. The same math applies. 

They've been offering mortgage products like this in Australia for decades. They are very popular because it's a smart way to optimize paying the least amount of mortgage interest that you possibly can. Think of it like your mortgage is one huge HELOC.

Unfortunately we don't have that product here but you can use the same mechanism to your advantage if your goal is to make extra payments on your mortgage.

Let's say you have spare income each month that you want to use to pay down your mortgage. Everyone agrees that this saves you interest right?

Let's also say you have a HELOC that represents 6 times this amount.

What you do is pay 6 months of extra mortgage payments using the HELOC. You then use the extra mortgage payment you were going to make to pay down the HELOC each month. Maybe you pay a fraction of it each week if you get paid weekly.

This works because of the different way that the interest is calculated. Yes they are both simple interest but the mortgage is calculated monthly and the HELOC is calculated daily. Don't believe me? Try making an extra mortgage payment the day after your mortgage payment is due. You won't save any interest until the next month. But because a HELOC is calculated daily you start saving interest from day one.

This strategy works but it is not for everyone. There is a risk that your HELOC rate could rise dramatically. So it would be prudent to have another 6 months mortgage payments in a savings account in case the worse happens and you need to pay off that HELOC immediately. However the interest savings over the life of loan are considerable.

Major red flag! Pretty much what everyone else said. But here's a twist you might not have considered.

"What? That cashiers check I sent was for $28K instead of $24K? Silly me. Never mind. Just go ahead and cash it and we can work it out later."

"Did you cash it yet? You did? Oh that's too bad. Something came up and I need the $4K difference. Please send me a Western Union money order for the $4K difference right away as I need it to cover my moving expenses".

A week or so later and that $28K check turns out to be fraudulent. The $4K you sent is now long gone.