Archive for the 'Legal Stuff' Category

Comments Off on It’s Easy to Accidentally Commit Mortgage Fraud

FranklinWe’ve all read the headlines about real estate scams in the recent boom years resulting in many of the foreclosures in the marketplace today.

And, we’ve all heard about mortgage fraud.

The extent of the problem has become so vast that, according to Bloomberg News, the FBI has ordered many field offices to stop investigating other financial crimes so agents can spend their energies on the sub prime mortgage crisis.

The FBI considers 12 markets rife with fraud: Arizona, California, Florida, Georgia, Illinois, Indiana, Michigan, Minnesota, Nevada, New York, and Ohio.

We’ve all heard the big stories about this; how the woman who earned $24,000 got a stated income loan where she qualified for a house she could never afford. How buyers and appraisers artificially inflated prices to receive kickbacks at closing, then never made a payment…

But I have to say, sometimes even something that seems like an innocent and logical solution to a problem is considered mortgage fraud.

What do I mean?

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Comments Off on Protect Your Twin Cities Duplex Through An LLC

CapitalOne of the concerns multi-family property investors often have is how to protect themselves in the event a tenant suffers an injury on one of their properties. Namely, how can he or she protect their real estate portfolio?

A relatively easy way to do this is to form a Limited Liability Company or LLC, and either take title or, via a quit claim deed, change the ownership of the property to the LLC.

An LLC is often suitable for single owner or smaller companies. It is a hybrid between a partnership and a corporation, except that it is often more flexible. One of the advantages of an LLC, is the owners have limited liability for the actions and debts of the company.

The process of establishing an LLC is relatively easy and inexpensive. It is created by filing the Articles of Organization with the Secretary of State, for which the state charges a filing fee. This is something you can do yourself, or if you’d rather, you can enlist the help of a real estate attorney.

If you create a unique LLC for each property in your portfolio, then each is owned by a separate company. Each should have its own checking account and bookkeeping. This helps establish a record of it truly being a separate entity.

That way, in the event someone is injured on one property, and they are successful in litigation, the only property in play is the one owned by that LLC.

 

Find Me A Deal on a Twin Cities Duplex!

said on June 4th, 2008 categorized under: Buying A Duplex, Legal Stuff

Comments Off on Find Me A Deal on a Twin Cities Duplex!

ContractPeople always ask me to call if I find a good deal on a property.

During the peak of the market (which was the valley for investors who stopped to a the numbers), they’d hear from me once every 4-6 months. And, that property was usually gone within a day.

Now it seems I get to contact people once every couple of weeks. And the property I call about is usually gone in a day or, every now and then, a week.

I found one this morning, with a huge positive cash flow. And I sent it to the people working with me.

Contrary to popular belief, Realtors don’t always save the “best deals” for themselves. Especially now. I do, however, save them for the people who have commited to working only with me by signing a buyer’s exclusive representation agreement.

What’s that? Well, in the simplest terms,  an exclusive representation agreement states that you’ll work only with me in the process of locating and purchasing a property.  It runs a specific length of time and can be cancelled, in writing.

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Little to BigYou may have heard of a 1031 Exchange. Sometimes it’s called a Starker or a Like Kind Exchange. And, you may also have heard a lot of things about it that aren’t true.

Let me explain what it is as simply as I can. Pretend you purchased an income property in 2000 for $100,000. Even in today’s market, it’s now worth $175,000, and you have a full price offer. After the expenses of selling it and the cost of improving it over the last eight years, you are set to realize a profit of $50,000. If you choose to pocket this money at closing, you will pay capital gains taxes on it.

But wait, there’s more. Remember all of that wonderful depreciation that helped so much on your taxes? If you’re going to cash out, the government would like it back (called depreciation recapture). Unless…instead of pocketing the money, you choose to reinvest. This can help you avoid not only the capital gains tax, but the depreciation recapture as well.

A 1031 Exchange allows you, at closing, to assign the proceeds of the sale to someone called a qualified intermediary. For a small fee, this company or entity holds the money until you pick out a replacement property. When you close on that property, you tell the intermediary to send your $50,000 to the closing as your down payment.

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The 24 Hour Myth

said on May 16th, 2008 categorized under: Legal Stuff, Selling A Duplex

Comments Off on The 24 Hour Myth

Door KnockIt’s commonly believed tenants must receive a 24 hour notice before the landlord enters their unit. There’s just one problem with that: it’s not true.

In Minnesota, a landlord must make a good faith effort to notify the tenant he/she will be entering. Reasonable notice may be a knock on the door, 24 hours, 48 hours — the definition of reasonable notice is open for interpretation.

The landlord, however, must have a reasonable business purpose for doing this. Valid reasons include:

  1. Showing the unit (for sale or lease)
  2. Doing maintenance
  3. Inspections
  4. Tenant disturbance coming from within the unit
  5. A reasonable belief that a tenant is violating the lease. (I.E. a barking dog inside a unit in a no pet building)
  6. Reasonable belief of unauthorized occupancy
  7. Belief that the tenant vacated the premises
  8. Pre-arranged housekeeping in a senior housing property
  9. Well-check (to make sure a tenant is still alive and well if there is reason to believe otherwise)

If a landlord enters the unit without the tenant’s knowledge or presence, he is required to leave a notice that he was there and for what purpose. Of course, once again, that purpose must be a reasonable business practice.

The only exceptions to notice requirements are to prevent injury to people or property, tenant safety, or to comply with local ordinances regarding unlawful activity.